media
24 Sep 2009
Will Newspapers Ever Turn A Profit Online?
Everybody's talking about content monetisation. David Howe looks at two proposals on the table from Google and Microsoft
Murdoch’s announcement that the free ride is over has certainly generated some debate. What this signals is a substantial shift in thinking about the price of content on the internet. What was missing from Murdoch’s announcement — and others like Fairfax Media chief Brian McCarthy’s statement that "monetisation will have to happen" — is just how newspapers will make the transition online.
The current dire situations in which newspapers and their owners find themselves have two common bases: firstly, the digitisation of data and its distribution via the internet has rendered newspaper obsolete, and secondly, the ongoing requirement for these businesses to return a profit. These are the obvious problems that Murdoch and other media owners must address.
The idea that the newspapers can more aggressively monetise their assets with a mixture of paywalls, subscriptions and advertising is uncontroversial.The question of whether such an approach will return the newspapers to levels of profitability they once enjoyed is less straightforward. There are certainly precedents which suggest that people can be convinced to pay for content when it is freely available elsewhere. After all, people pay Microsoft for new software every few years despite the abundance of free alternatives. The very existence of pay TV and ISPs imply that consumers are prepared to pay for content.
Earlier this year, industry leaders asked the Newspaper Association of America (NAA) to profile companies successfully offering paid content online as part of a process to develop models to monetize newspaper content. The NAA in turn issued a request for information to a number of major corporate players — including Google, Microsoft, Oracle and IBM — asking them for input about content monetisation.
Two of the proposals in the final report, Platforms for Monetizing Digital Content (which, unfortunately is available only to NAA subscribers), warrant particular attention. The great differences between the scenarios proposed by digital heavyweights Google and Microsoft reveal the extent to which ideas about online content diverge.
The Google proposal doesn’t depart significantly from the current Google model. Users sign-on to their Google account, through which content is accessed and purchased by means of a micropayment system not dissimilar to Google Checkout. Under this arrangement, details about the content that a person buys from a news site — perhaps a News Ltd site — are used to inform targeted advertising to that person, another means of revenue generation.
In addition, Google’s news aggregator service, Fastflip, could be tailored to offer users a range of services either by subscription or one-off purchase. The business model is based on Google’s receipt of a percentage of advertising revenue — which would leave subscriptions and micropayment revenue intact for content providers.
The Google model looks simple and easy to implement, more so because most of the changes will occur behind the scenes. In fact, Google claims that apart from calibrations of the micropayment system, everything else is already in use. While this model does raise privacy issues due to that way it collects information about a user’s browsing history, those issues are not fundamentally different to or greater than those which users currently face.
Microsoft’s proposal for content monetisation takes an altogether different tack.
In typical Microsoft fashion, the company declares their vision of "The Next Generation Newspaper". It is an information hub which aggregates content from different sources and offers it to a user according to the details of that user’s profile, preferences and context. It is accessible from any device. Content is sold to the audience and the audience is "sold" to the advertisers. Unlike Google, Microsoft admits they do not have a turnkey solution that fits the description of a content monetisation platform but they do stress the suite of Microsoft web products currently on the market. No surprises there.
Essentially the Microsoft proposal uses the "Trust us, we’re Microsoft" line. Worryingly, it hints at a software solution that will require both the user and the content provider adopt a Microsoft product. This kind of end-to-end solution would help drive a Microsoft internet renaissance where businesses could leverage the Bing search engine in conjunction with a Microsoft content platform and totally exclude Google. Instead of a relatively open Google-style internet platform, Microsoft’s model would restrict access to those who use Microsoft software — as well as those who have the capacity to pay.
These two proposals draw attention to an issue that has been swamped in the flurry of discussion about online news, namely the privatisation and centralisation of our media consumption and the consequent implications of a system that will individualise media choices based on chosen preferences or a public profile.
For example, I might be offered certain news items according to my profile while you are presented with an entirely different set of choice — and the person on the other side country another set again. It’s unlikely to happen overnight but there is plenty of potential for an external agency to tailor and select your news content for you, regardless of whether that’s Google or Microsoft.
You might well think this is the ultimate in customer satisfaction. At the heart of the notion of the fourth estate, however, is this thing called the public sphere where news about government and other powerful institutions is shared in a common environment. Since it is common and shared, we are all theoretically exposed to the same ideas and are able to discuss the ideas with other members of the public. Public opinion is thus formed. Newspapers and broadcast media support this concept in a weak sense by distributing a common product, be it the daily newspaper or the evening news. Not only is such distribution completely obsolete on the internet but the consumption of news itself is becoming highly fragmented and has to compete with a host of alternatives.
Since news and journalism are so closely aligned with the existing media players, their combined futures are mutually dependent but we should keep in mind that the internet as a medium is in its infancy. The financial problems plaguing legacy media are real — but a greater threat is posed by emerging alternatives that threaten to undermine the authority and relevance of newspapers.
Newspapers are an expression of the social need to create agendas, foster debate and aggregate relevant information which they do through the printed medium. The monopoly they once held in this regard is being challenged by alternatives that better utilise the fundamentally free and open nature of the new medium, the internet, to deliver a viable product in the marketplace of ideas. In this context, the Google solution continues to foster innovation whereas the Microsoft philosophy simply propagates an old world model of control — something the newspapers started losing when the first ARPANET nodes went live.
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People forget how canny Rupert is about this stuff. In 1993 I was editing the Packer trade weekly, PC Week and interviewed a Doctor of history specialising in the impact of the Gutenberg Press on the medieval economy who had been given a full time job by News Corporation to analyse the company’s preparedness for what we then called “convergence”.
While Larry Ellison and Bill Gates were blathering on about Video on Demand and the end of paper Murdoch pronounced that the software companies of the future would deal in content and that he was going to start acquiring technology companies that held the same view. At the time he was building his pay television empire and had just missed acquiring Time Warner.
I hung a front page of PC Week with his picture and Bill Gates in the foyer of ACP at 54 Park St, which was duly taken down when Richard Walsh pointed out that it is pointless to promote your competitors.
Less than a year later, Jamie Packer, guided by Daniel Petre went into partnership with Microsoft to form Nine MSN. We are all sixteen years older now, but I’m still keeping something in reserve to bet on Rupert. Whenever he makes his move.
What prevents media providers from charging for access is that there is so much choice that one can always avoid pay-for sites. It is a completely different world to the newspaper where one, in Australia these days, is extremely limited to Murdoch’s rags in the main but usually only has a choice of one per State. The money has never been made from selling the papers but from advertising. The success of free community newspapers is ongoing because people are tired of the generically extruded nature of most newspapers.
But back to the net. Murdoch does not provide through any of his newspapers anything so valuable that one would pay for it. They are simply not that good. There is far better journalism to be found elsewhere and a wealth of alternative sites which one can support.
Murdoch may well find a way to make his online offerings pay but it will not be through user-access. If he tried he would quickly find out that his offerings are generally held in such poor regard that while a few may look at them, none would ever pay for it.
I would like to ask what is the ‘real’ difference between online and offline media:
1. Newspapers make their money from sales and advertisements; A percentage of which pays for production and provisioning of content…the rest (if any)is profit. The other form of revenue raising comes from sponsored advertisement.
2. The production of paper for newsprint, not just the harm of tree removal, is an incredible ecological cost to the environmen; not only in manufacture waste disposal, but also in landfill. If business were truly costed for this insanity then the viability and sustained growth of print media may change.
3. To address the intellectual content of electronic media with aggressive dilligence and award for such news content, individual ‘paper’ may open up greater content acquisition and enrichment of their user base. This would reflect in advertisement dollars with the paper’s strike rate - no real difference! Ask the Trading Post.
4. The internet is here to stay. It is only a problem for those who wish to dominate or control the content that people read and what they think.
This is my main point. The main players in information control are in threat of losing effective government persuasivity if they cannot regulate internet content into this country…
but wait, YES, THAT IS WHAT THEY ARE TRYING TO DO RIGHT NOW!
I’ve never bought newspapers because I’ve always got my news from the TV & I won’t be buying online media either.
Murdoch knows the risks of business & that the newspapers are just the same as any other, as long as there is a market for the product, there will be a need for the specific service. Once the market shifts to other niches the business has to move with the times & like the music industry, which now goes out to live audiences & put’s the show to the mainstream public in order for the performer to make money because the CD market has become a low profit management which has basically swallowed the likes of Sony, makes the news market an example.
The corporate business sector should be ashamed of it’s tactics of attempting to extort money by false & misleading circumstances. This is not creating new markets but trying to divert it’s lost market to another source & by means of misleading information, as usual.
Robert D Kaplan notes: “The fact that Doha, Qatar’s capital, is not the headquarters of a great power liberates [it] to focus equally on the four corners of the Earth rather than on just the flash points of any imperial or post-imperial interest. Outlets such as CNN and the BBC don’t cover foreign news so much as they cover the foreign extensions of Washington’s or London’s collective obsessions. And [it], rather than spotlighting people who are loaded with credentials but often have little to say, has the knack of getting people on air who have interesting things to say, like the brilliant, no-name Russian analyst I heard explaining why both Russia and China need the current North Korean regime because it provides a buffer state against free and democratic South Korea.”
The free to air channels in Australia constantly run foreign news from the same locations. A hell of a lot from the ME, and very little from Central Asia (apart from Afghanistan), Eastern Europe, Latin America or Africa. The Internet offers a much more varied diet.
[it] of course is Al Jazeera.
http://www.theatlantic.com/doc/200910/al-jazeera
If your saying that our media is quite one sided Ian Mac, I’m inclined to agree. Thanks for the link to English version of the Arabic news channel, it’s always good to get both sides of a story. That’s how democracy’s coexist.