Internet/Telecom/Social Media

Does Rupert Murdoch have an Internet strategy?

As a follow-on to Dr. Denny’s post on Rupert Murdoch way back on 29 August, there have been further developments worth noting in this space. There has been a flurry of headlines the past few weeks over recent comments by Murdoch, who now is making noises about removing News Corp news stories from Google. He’s not alone, apparently—Belo is considering removing some of its stories as well, as is the owner of the Denver Post. These are all entities that have been seeing their print output hit hard by the drop in advertising over the past year or two, coupled with an outright (and possibly accelerating) decline in newspaper sales. And Murdoch’s comments (and those of other publishers) represent some frustration over the fact that Google News aggregates headlines from all news sources without any fee to the source provider. (Yahoo does something similar, I think, but I’m not sure; but no one seems to care about poor Yahoo these days). See this Bloomberg story or this New York Times story for more details. Murdoch’s plan is to block Google from access to News Corp content, and rather make it available only on Bing, Microsoft’s search engine. This is an interesting strategy—how likely is it to succeed?

Our take is that Murdoch’s strategy is not likely to be successful, although we think he has an interesting idea—gather funds at the search engine level rather than the site content level. Since Internet users have been notoriously cheap in the past and generally unwilling to pay for much of anything directly, this may in fact be the way to go. But we see several impediments here, a few of which might be significant.

1. To what extent is Murdoch’s vision here clouded by the fact that he happens to own one of the very few media publications that people are in fact willing to subscribe to (The Wall Street Journal)? Time will tell here. But most of Murdoch’s other publications just don’t have a similar readership. In fact, the only other general publication I can think of with comparable appeal to the WSJ would be The Financial Times. To ask this another way, how many readers of The Times (the London one) will be willing to fork over for an online subscription—especially if the owners of The Telegraph decide to leave online access free? This is really the interesting question here—it’s not likely that News Corp is going to be able to generate much in the way of online subscription or access fees from The Sun, or The New York Post or News of the World.

2. Technologically, it’s pretty easy to block access on Google. Murdoch could actually do it today, as Google has pointed out—why hasn’t he? So suddenly a bunch of News Corp stuff doesn’t show up on the Google News Page, or in Google searches. This will be like that store that’s been there for years, and suddenly it’s gone, and you see the empty storefront and can’t remember what was there. Will anyone notice? This seems to be a significant risk. Keep in mind that the New York Times experiment in charging for access was pretty much a disaster, and the NYT had to abandon it (although it was for columnists, not for news). Rather than pay to read the NYT’s sterling collection of op-ed columnists, people just stopped reading them entirely. Most print news organizations, by the way, do charge for access for older material.

3. This means there’s a real prisoner’s dilemma here for news organizations—do they follow Murdoch, or not, without knowing what the rest of the industry is going to do? My first thought is that if I’m the person running The Telegraph Web site, I’m praying like crazy that Murdoch will do this.

4. The whole enterprise now is going to be subsidized by Microsoft, which has been trying to grow Bing. So Microsoft will be paying News Corp for exclusive access to News Corp content. For how long? Bing has been gaining share, apparently, but I suspect it’s solely from the fact that it has become, for many organizations (like the one I work for), the default search engine. Personally, as soon as I realize I’m in Bing, I switch over to Google, which generally does a better job. In fact, part of the problem with Bing is that it generally sucks. Will adding dedicated content that you have to pay for make Bing suck less?

5. How does charging at the search engine level work? And if you already pay for something (like the WSJ), why would you go through Bing to get access? It’s a bit unclear here what exactly Microsoft will be paying for—just the index? Or access to The Times itself? If it’s the index, does this mean that you could still get access to The Times Web site—but just not the index? Will lots of people care about this? My guess here is that Murdoch will still want you going to The Times Web site rather than getting it through either Google or Bing.

Keep in mind that no one really knows what’s being talked about here, although we’ll get more in the coming weeks, I assume. Another, and related, point—the sudden escalation of the attacks by B Sky B (and Rupert himself, in fact) on the BBC makes sense only in the context of trying to eliminate free news sites. How successful this will be remains to be seen, but it has certainly captured attention. Would the Tories, if elected, try to make the BBC Web site something that you would have to pay for? That would be interesting, and a little transparent as payback to Murdoch for The Sun’s support–but that doesn’t mean the Tories wouldn’t throw the idea around a bit.

There’s an interesting collection of different points of view in the NYT‘s Opinionator column from a few weeks back. But I have to quote Cory Doctorow (who I’m not sure is completely correct, but does have a way with words):

[H]ere’s what I think it going on. Murdoch has no intention of shutting down search-engine traffic to his sites, but he’s still having lurid fantasies inspired by the momentary insanity that caused Google to pay him for the exclusive right to index MySpace (thus momentarily rendering MySpace a visionary business-move instead of a ten-minutes-behind-the-curve cash-dump).

So what he’s hoping is that a second-tier search engine like Bing or Ask (or, better yet, some search tool you’ve never heard of that just got $50MM in venture capital) will give him half a year’s operating budget in exchange for a competitive advantage over Google.

He may, in fact, get a taker. And it will be a disaster. A search engine whose sole competitive advantage is “We have Rupert Murdoch’s pages!” will not attract any substantial traffic. The search engine will either go bust or fail to renew the deal. . . .

So good luck with that, Rupert. have a delightful, Howard-Hughesian dotage, acting out a crazed, Moby-Dick dumbshow against the Internet, hoping that the world’s politics and economies will reform themselves to suit your fevered imaginings. This is how history will remember you.

To be continued, obviously.

11 replies »

  1. The one upside advertisers is that there will be more value for an audience that actually pays for content. Advertisers are already competitive for the news audience, couple that with people who are willing to pay for content and you have a juicy audience. These sites will have to most likely switch from any CPM deals to a CPC because their traffic will diminish, but they should make up for it with a higher CPC rate and subscription fees. I believe that this is their theory, but I’m not holding my breath.

  2. That wasn’t the NYT’s experience–once they started charging for access to columnists, readership dropped. And the rates that the Times could then charge get hit as well, due to the lower readership. This is one of the reasons the NYT dropped the fee-based access idea. Maybe Murdoch will have better luck–it won’t be columnists, it will be everything, presumably. We’ll see.

    • I stopped reading Krugman, Friedman, and Brooks and migrated to the WaPo commentators as a result of the stupid NYT fee structure. I’m back to reading Krugman regularly, but now still read Friedman and Brooks only infrequently.

    • I think I’m the only blogger here who reads either of them, actually.

      I got hooked on Brooks after hearing him and EJ Dionne debate/discuss on NPR for years, and I find him one of the more reasonable conservatives (Sam will disagree – vehemently) with whom I can actually agree on a number of things. I’ve found I like reading Katherine Parker more (her writing style is fun to read), but I still read Brooks.

      I’ve read Friedman for years, starting in 1991 (IIRC) and I missed his whole Iraq runup thing that turned of most of the left (it was behind the pay wall), so he never turned me off the same way. After reading “The Earth is Flat,” and after the pay wall fell, I started reading him again. Not as much, but some.

      • (Sam will disagree – vehemently)

        Yes, Sam will. Brooks is as intellectually dishonest as they come. Either that or he actually believes the bullshytt he spews – which is arguably even worse.

  3. It’s hard to think of two people who have been as consistently wrong about the world as Friedman and Brooks. Friedman, who has still never properly given an accounting of his support for the Iraq invasion, and apparently feels no need to, is now watching his World is Flat vision disappear down the drain–but remains in denial about it. And Brooks? What Sam said.

  4. How will media giant establish a billing relationship with millions of broadband customers. The lies in establishing relationship with Telecom Carriers and ISP’s, inline with what Apple and Kindle have done. Attacking Google is meaningless

  5. Oh, yes, of course he DOES have an internet strategy. Nobody really disputes that. It’s just that it will take some time for him to acknoledge it’s a failed one.

  6. I think Doctorow is right–this is all bluff, and designed to get some sucker to offset some of Murdoch’s costs. And he seems to have found one with Microsoft.