Will Newspapers Ever Turn A Profit Online?

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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.

New Matilda

New Matilda is independent journalism at its finest. The site has been publishing intelligent coverage of Australian and international politics, media and culture since 2004.

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