Charging Web readers no panacea for newspapers

LONDON, UK: Two generations of Murdochs have caused a wave of excitement in the battered newspaper industry in recent weeks with a series of comments and actions suggesting that charging readers for news on the Web is the way forward.

Editors the world over, tired of their losing battle against disappearing advertising revenues, are clutching at the hope that their old rival will lead the way in making consumers pay for what they've grown used to getting for free.

No one wants to be first to start charging for Web content and face the inevitable loss of readers to still-free rivals, but any kind of agreement between publishers to charge for content runs the risk of being judged anti-competitive.

And those who see Rupert Murdoch as a potential saviour of the industry should be mindful that his News Corp media empire has unique strengths.

Murdoch businesses like UK satellite broadcaster BSkyB could quite easily charge a little extra to bundle online news with the TV and broadband packages it sells, having both premium content and a payment mechanism already in place.

Others starting from a weaker position, such as Britain's Independent -- whose websites are essentially a copy of the printed paper spiced up with video bought from agencies -- would suffer a loss of readers if they merely erected a paywall.

"There's a lot of me-too stuff going on. I'm not sure how you're going to charge for that," said Internet consultant Malcolm Coles, who has discussed the topic in blog posts. (www.malcolmcoles.co.uk/blog/charging-online-content/)

Notable exceptions are News Corp's Wall Street Journal and Pearson's Financial Times, who do charge readers for their relatively specialised, business-oriented content. Thomson Reuters charges for some content on reuters.com.

Most other mainstream news publishers may eventually conclude that charging for online content is not option, and look to boost revenues through more precisely targeted advertising or membership schemes offering add-ons, industry researchers Outsell believe.

Using alternative distribution platforms such as mobile phones -- already a successful strategy in Japan and China -- are another option.

Laggard industry

Advertising revenue in the global newspaper industry peaked in 2007 and is expected to decline by a further 15 per cent, or $18.2 billion, this year, says top media agency ZenithOptimedia, as readers migrate online where ads are far cheaper.

And whereas the rest of the information industry made 70 per cent of its revenues online in 2008, the proportion in the news industry was just 11 per cent, according to a report last month from Outsell.

"While the wheels are coming off the industry -- with six bankruptcies and massive product and job cutbacks -- it remains dependent on print revenues. The news segment still stands out as the biggest laggard in the information industry," it said.

It is perhaps this dire state of affairs that prompted a change of heart at News Corp, the world's biggest news provider since its 2007 acquisition of Dow Jones, which brought with it the Wall Street Journal.

Back then, Murdoch hinted strongly he would lift the paywall around the Journal's website, hoping to attract more ad revenue by adding more readers than the $50 million the site was making from a million subscriptions. He later reconsidered.

'Dumping'

Last month Murdoch said News Corp could charge for access to its news sites by the middle of 2010.

Two weeks later, News Corp announced the closure of its loss-making London freesheet thelondonpaper, and last weekend Murdoch's son James, who runs News Corp in Europe and Asia, attacked the BBC for "dumping free, state-sponsored news on the market."

Murdoch is not alone in noting the difficulties of competing with high-quality, ad-free BBC content. Britain's Guardian newspaper is among those who agree, despite its enlightened online strategy and award-winning website (guardian.co.uk).

"In the longer term, there may be plans to charge for some online content but not mainstream news," a spokeswoman for Guardian News and Media said.

Murdoch has begun sounding out other publishers to see whether some form of collaborative approach might be possible.

"It is very tentative at the moment in terms of trying to identify interest," said a source close to the discussions.

Jenine Hulsmann, a competition lawyer and partner at Clifford Chance, says any such move would attract scrutiny from competition authorities, at least in Britain, although there could be ways of legally collaborating.

"There has to be evidence of sharing of pricing information and pricing strategies. You can try and structure around that."

In the United States, the Senate has heard arguments that the industry's desperate state could make it a special case. News provision is also highly fragmented.

Targeting

Ken Doctor, who leads Outsell's news publishing research, says publishers need to be more imaginative about how to make money out of news. "The news industry has this myth ... that there's no money online," he says.

Doctor says online ads targeted at particular audiences, which offer better value to advertisers than traditional display ads, still have a long way to go in generating revenue.

Better intelligence about consumers' habits on the Web -- while it can be controversial to gather -- can lead to far more relevant and powerful advertising campaigns.

And rather than asking readers to pay for content, publishers should consider extra-value services like membership schemes, something the Guardian is looking at, he says.

"The smart play here is to go with human psychology and not against it, and that is convenience, access, sharing, better social networking connections," he says. "And you're forging a deeper relationship with your readers."

Doctor cites as examples of companies that learned early how to make money online Elsevier scientific publishing and Google - the bogeyman of the news industry.