The Cost of Content: Murdoch's Revenue Plan
Thursday, September 17, 2009 at 11:03AM 
In my first post we discussed the decline of the newspaper. With a shift in reader consumption habits and competition from new media, newspaper revenues have fallen fast. Most major newspapers have migrated online and are actively searching for a way to monetize online content. Traditionally, advertisers provided the bulk of newspapers’ revenue. With fewer people reading newspapers and more getting their news online, much of these ad dollars have been re-directed to other media.
Online news has been free, for the most part, since it first appeared. The ubiquity of free content has conditioned readers to expect free news, therefore, deciding now to charge for content will have huge ramifications. The shift from print to internet essentially takes the reader out of the revenue equation.
In response to the increasing decline in market share of printed newspapers and the proliferation of online news, Rupert Murdoch, head of News Corporation Ltd, announced in August that he will begin charging for content on all of his news websites. The news industry has been waiting for someone to do this. Other news organizations have tried, most notably the New York Times, but most eventually pulled the plug due to poor performance. Let’s dissect Murdoch’s experiment.
The Plan and Its Flaws
Simply put, Murdoch’s plan is to charge consumers to read the news published on his websites. Currently, the only website he is doing this with is the Wall Street Journal. The Wall Street Journal is subscription-only for certain articles while other articles are free. He is intent on extending the WSJ model to his other businesses.
“Quality journalism is not cheap, and an industry that gives away its content is simply cannibalising its ability to produce good reporting,” Murdoch said in this article. “The increase we have seen in our Wall Street Journal subscription proves to me that the market is willing to pay for that quality.”
While Murdoch makes the case that journalism is expensive and that someone needs to pay for it, he fails to recognize that readers never directly paid for content. Content, in the modern age, has been paid for by advertisers and readers merely paid for the paper.
This model, on the readers end, has not changed much with the migration of news to the internet. Readers are still accustomed to receiving free content. Murdoch’s proposal to charge readers for content is seriously flawed for three reasons:
- Monopoly no more
Murdoch’s news websites do not have a monopoly on reporting news. Unlike in the past, newspapers aren’t the only viable way to get news out to the public, the present media landscape is littered with news sources. From news websites to local blogs, readers have numerous options for consuming content. Why will people pay for something that they can get elsewhere for free?
- Little incentive
Murdoch plans to make his content better by differentiating it from competitors, but isn’t this what newspapers have been trying to do all along? Once details of the price plan emerge this question will, hopefully, be answered. But, based on what we know now, there is little incentive for a reader to pay for content, especially when you consider all the similar, free content available elsewhere.
- Pricing Model Asymmetry
Murdoch’s plan to implement the Wall Street Journal pricing plan on all his news websites is unrealistic and does not take into account the differences between the WSJ and his other news websites. The pricing model works for the WSJ because it provides content that readers cannot find elsewhere. The WSJ covers a very specific segment of news and offers quality insight; it is unlikely that Murdoch’s non-specialized news sites will offer truly unique content.
All of these points ultimately come back to the exclusivity of news. The Wall Street Journal provides exclusive content, and can therefore charge for it. Until Murdoch’s other websites offer exclusive content and incentives, readers won’t pay for the right to read their news.
Reader Comments (2)
He also announced there will be a charge to read the journal on a blackberry as well.
Joe,
I didn't know that. It will be VERY interesting to see how this goes. Obviously I'm skeptical but the man is a media genius so he's got that going for him.
Something I saw today just before this was published: Yahoo is actually taking down the pay wall to some of their content, including the subscription for breaking news. The fact that two media giants are heading in opposite directions really clouds the air about what direction revenue models will move in.