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Pay for Content or Face Extinction

12 Aug 2009

News Corporation plans to charge for access to its collection of news sites, including ones that are affiliated with the Fox News Channel, New York Post and Times of London, as well as Australian media interests. The company is experiencing success attracting paying customers to its Wall Street Journal site and is looking to use that as a template


"The traditional business model (for publishing) has to change rapidly," CEO Rupert Murdoch said last week.


Murdoch's view, as reported in MediaPost News, on the issue has undergone a 180 degree turn. Before purchasing The Wall Street Journal, Murdoch said he planned to open the gates and make its site free.


Murdoch offered few specifics about the shift to a widespread pay model at News Corp, saying only that he hoped it would begin during the next year.


"Quality journalism is not cheap, and an industry that gives away its content is simply cannibalising its ability to produce good reporting," he said.


News Corp operates over 100 newspapers as well as a slew of news sites linked to its TV brands, including Murdoch said The Wall Street Journal site is profitable.


Referencing the migration of content to mobile and other distribution avenues Murdoch said, "we intend to be platform neutral but never free."


Murdoch spoke about the change in strategy when discussing News Corp's performance in the April-June quarter. Revenues fell 12 per cent to US$7.7 billion, while the company reported a loss of US$203 million after a US$1.1 billion profit in the quarter a year ago.


Peter Cox of Cox Media believes Mr Murdoch has got the right attitude.


"We're really talking about restructuring the whole industry otherwise the industry will die," he told ABC News Online.


"If they don't modernise they're going to be dinosaurs doomed to extinction."


Mr Cox says the only option is for online news to come at a cost. He says charging online users could be done in two ways - either subscription-based or on a micro-payment system, or a combination of the two.


"You might even subscribe to an aggregator that puts together the leading online newspapers," he said.


Cox says online offers a commercial advantage over newspapers because it does not carry printing and distribution costs. He also believes it will only be more bad news for the industry as sales of newspapers and magazines continue to plummet.


"Magazines have been hurt by the advertising cycle and they too are facing increasing competition online," he said.


"What they need to do is create a viable business model for having those magazines online."


He told ABC News Online, that video websites like YouTube should also look to charge users.


In The Australian, a statement from News Limited said it was actively working on a paid model after Rupert Murdoch committed the group's websites to start charging as early as this financial year.


News Limited has formed a working group to investigate the paid content issue, headed by chief executive of News Digital Media, Richard Freudenstein.


Mr Freudenstein said, "(The working group is) looking at how a paid content model would work online. How a subscription might work, how a micro-payment model might work."


"(It's also) overseeing consumer research, which is going on and looking at the editorial aspects of what our sites should look like," he added.


Fairfax is also looking at similar models.


Jack Matthews, head of Fairfax Digital, said "we're just going to keep a very open mind about it and watch developments."


"It is not a given we would follow News but it's also not a given that we wouldn't. Fast followers tend to do alright," he said. "If the News Limited papers here all lock their content behind a wall and we don't we would get significantly more traffic. More traffic is important to us."


"(But) if it's a good economic proposition to charge, we would be interested in a good economic proposition," as reported in The Australian.


Mr Matthew's said Fairfax saw "some opportunity" to charge for "deep, exclusive content", such as that of its business paper The Australian Financial Review, which already sells subscriptions to its companion website


"I'm not as optimistic about the ability to charge for general news content as (Rupert Murdoch) appears to be," said Matthews.


According to a report released yesterday accounting firm PriceWaterhouseCoopers, in its Outlook on Australia's Media Sector, is that newspaper publishers remain under pressure as advertisers go digital, however they will return to growth by 2012.


Rupert Murdochs announcement that News Limited will be charging for its content is a risky strategy in a media environment in which people have become accustomed to getting news for free online, but the PriceWaterhouseCoopers analysis offers some hope.


David Wiadrowski, a media partner at PriceWaterhouseCoopers told The Australian, "Indications are that news, sport and weather and finance are three or four sort of niche markets that people, I believe are prepared to pay for in an online environment."


He went on to say, "It certainly has some risk but to be honest, I don't think they've got too many other opportunities. At the moment, traditional revenues from traditional media are very much turning in to digital pennies, as that advertising migrates online."


Wiadrowski continued by stating he believed media companies had no choice but to charge for online content to ensure shareholders get a return on their investments. The PriceWaterhouseCoopers report praised Australian newspapers effort in adapting new technology like mobile phones and believes that similar innovations will be the key to success looking forward.


"The younger generation, the Netgeners are very used to reading it (news) online. It's only a matter of time (before more people are reading newspapers on mobile devices," said Wiadrowski.



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