17 October 2009

Murdoch versus the world

At the World Media Summit, held in Beijing, Rupert Murdoch, chief executive of News Corporation, spoke (on 9 October 2009) about his vision of the future of news media
Too often the conventional media response to the internet has been inchoate. A medium once thought too powerful has often seemed impotent in the past few years. Of course there should be a price paid for quality content, and yet large media organizations have been submissive in the face of the flat-earthers who insisted that all content should be free all the time. The sun does not orbit the earth, and yet this was precisely the premise that the press passively accepted, even though there have been obvious signs that readers recognize the reality that they should pay a price.

There are many readers who believe that they are paying for content when they sign up with an internet service provider, presuming that they have bought a ticket to a content buffet. That misconception thrived on the silence of inarticulate institutions which were unable to challenge the fallacies and humbug of the e-establishment.

The value of content has been volatile in the past decade but we are entering another decisive phase in which device makers are again courting the creators of content. I have sensed that shift in recent days during my travels in Japan and South Korea where I met some of the world’s leading electronics manufacturers. These companies don’t want their customers to be served a diet of digital dross, and yet that will be the inevitable consequence if the worth of content and creativity are not appreciated.

The Philistine phase of the digital age is almost over. The aggregators and the plagiarists will soon have to pay a price for the co-opting of our content. But if we do not take advantage of the current movement toward paid-for content, it will be the content creators, the people in this hall, who will pay the ultimate price and the content kleptomaniacs will triumph.
Obviously the age of the internet does not agree with Mr Murdoch. Google is merely a short cut for consumers (whether paying or not) to locate news articles of interest based on topic. Even then, they are merely links. He would probably also want to scour Wikipedia and invoice them for every word that he perceives to have originated from his media empire. What is also galling is the fact that he was speaking in China, where there is no media freedom.

One could also describe as dross, his version of the news as it appears on Fox in the United States.

As Mr Murdoch's speech was provided in a media release, I could have quoted him in full. If it was an article in one of his online newspapers, probably not.

Meanwhile, Mark Scott, Managing Director of the publicly funded Australian Broadcasting Corporation (ABC) in a speech about the future of media, given in Melbourne on 14 October 2009, countered the Murdoch view
When you have been so powerful and dominant for so long, it is hard to believe that empire is slipping away. You want to believe you'll see the green shoots of recovery, the good times coming back when advertisers start spending again. These surviving media giants - successful and profitable for decades - are used to shaping their audiences and their worlds.

The habit of command is hard to break. And any deference to audience power seems acquired only when all other possibilities have been exhausted. The latest example is the push by newspaper proprietors, led by Murdoch, to get people to pay for their content online. After nearly 15 years where the vast majority of online news and information has been free.

When Rupert Murdoch bought The Wall Street Journal, he indicated he would look to drop the paper's paid website. But now in the saddle, he looks to transplant that paid content model to all his newspapers. And he is keen for other newspapers to fall into line. And as his son James said recently in the UK, those pesky public broadcasters, who would seek to provide quality content to the public for free should be pulled into line.

The Murdoch push is fascinating. You sense this rage at the injustice of what the online world is doing to his traditional print business model. Murdoch has always been willing to cross-subsidise his print passions. Papers like The Times of London, The New York Post and The Australian endured years of losses and survived, because he said so. And because he had The Simpsons there to soak up the red ink.

And, ironically given his current plans, one of his strategies was always to cut the price of content - to cheap and almost uneconomic levels - to put his competitors under the gun.

But now, the man who just four years ago said he wanted to "make the necessary cultural changes to meet the new demands of the digital native" says he's not going to respond to the demands of these digital natives. Instead, they - who have never in their lives paid for news online - will be asked to respond instead to his demands and start paying.

The argument seems to be that people once didn't pay to watch television but now many do. We fought against timed local calls but now make them every day on our mobiles. Some of us might pay for recorded music we might once have illegally downloaded. And because we want to read and see this great content so badly, now we will pay for that.

It strikes me as a classic play of old empire, of empire in decline. Believing that because you once controlled the world you can continue to do so, because you once set the rules, you can do so again. Acting on the assumption that you still have the power that befits the Emperor.

And while it is always dangerous to underestimate Murdoch, the assumptions that underpin the Murdoch plan seem wistful, and perhaps, wishful. Some mastheads, like the Wall Street Journal and the Financial Times, will have pricing power. They have distinctive content. That content, appropriately used, is more than entertaining and informative - it can be financially valuable. And beyond that - there will be other brands - The New York Times, The Economist, The Washington Post - who provide reporting so distinctive, so comprehensive, so authoritative, that they may have pricing power.

But what about the rest of what is on offer online? Major events have never been reported more widely. From news reports to commentary, analysis, chatrooms. Photos and video become ubiquitous. When a newspaper breaks a story, it becomes news - and everyone reports it. Unless everyone, everywhere decides they will charge - then so much content will be available free.

The pricing power comes from being an exclusive provider of services people feel they badly want. The convenience and utility of the mobile phone allowed providers to set a price for those services - and while there are differences in prices and offers - noone is offering mobile services for free. Exclusive content on pay-TV in the main has been the driver of audience take up there.

Despite the massive piracy levels for recorded music, iTunes has demonstrated again that the public is willing to pay for a service that appears to be relatively cheap, of high quality and of enduring value. A song on iTunes costs little, and lasts forever, and is built on the back of micropayments for artist royalties.

But when you want to charge customers for something that in this era is effectively generic, that has many different free substitutes and is, by its nature ephemeral - mainly used and discarded - then the challenges you face are formidable.

Anti-trust laws lie in wait for a deal to be struck between newspaper organisations around a collective approach to this. And in any event, game theory would suggest the incentive for other newspapers will be, finally, not to charge. To lock up content will be to dry up traffic.

To be a substitute that offers that content for free will drive traffic up and assist in the pricing power in setting advertising rates.

You can almost hear other proprietors urging Murdoch on, assuring him they are right behind him. And they are, pushing him through the pay wall as they then scurry away to make as much as they can for as long as they can outside it. To be free to pick up the traffic that flees the sites that now want payment for access. There will be sites that have free and premium content, as there are today. But I suspect too much attention is being given to finding a pay model rather than addressing the content questions in terms of quality and distinctiveness that will really drive audience commitment.

There will be newspapers that largely get out of online altogether, who try and hold their print franchise for as long as they can. It might work for a regional paper, for a time, but it denies the reality of those who can make the investment in content without the overheads of printing and distribution.

Much of the content, most of it, nearly all of it when you look at the totality of the web - will be free.

It will certainly be free online at the ABC. We run the most comprehensive news operation in the country, with more reporters locally, nationally and internationally than anyone else.

We report the news, break news and provide space for analysis and commentary. The public pays for the ABC to deliver distinctive, quality content to them - and if it is content we are creating and packaging for them now, they are entitled to view that content free of charge.

We are restructuring our entire operations around our ability to deliver on that commitment: redesigning the way our newsrooms operate, creating new services like our continuous news online and our internet television service, iView.

And as our content is paid for by the public and the public also currently pays for the distribution of our content through terrestrial broadcasts, we will be fighting for that content to continued to be accessed free, including through the national broadband network.

Today at the ABC we face plenty of challenges. In a way we are a media giant of our own and face very real demands in this new environment. Like how a public broadcaster created in an era of media scarcity survives in an era of media plenty - how to be heard amidst the clutter?

And standing up to critics who, in the face of their own competitive pressure, will turn against the public broadcaster. Attacking our content, our funding, our right to exist.
Brilliant view of Murdoch by Mark Scott. I could have quoted his entire speech, just like any item from ABC News online, without any problems. He also makes salient points about online content.

No comments: