Content may well be king, but the internet offers a unique
opportunity for anyone to attain royal status, something which could
finally, fatally undermine Rupert Murdoch’s place at the top of the
media food chain.
If recent figures are anything to go by, the Times is losing massive amounts of traffic since its paywall exercise began last month, with The Guardian picking up a fair amount of slack.
After a short panic, The Times have been trying a simpler subscription service, but are still lagging.
The main problem faced here is the viability of general content. Newspapers are used to operating in a classical economy defined by the scarcity of resources, but online these traditional economics disappear.
Content may well be king, but the internet offers a unique opportunity for anyone to attain royal status, something which could finally, fatally undermine Rupert Murdoch’s place at the top of the media food chain.
Murdoch has a history of taking risks that pay off.Anyone old enough will remember the amount of flack SKY took from traditional broadcasters when it launched, but as content and exclusivity improved, SKY became the economically viable beast it is today.
Unfortunately for Murdoch and other media giants, exclusivity online is a hard thing to find, original content even harder.
Despite embarking on a sudden evangelical social media quest with the purchase of MySpace, new plans for the service’s music streaming capabilities show that Newscorp are still massively misunderstanding the web economy.
Since Facebook’s rise to pre-eminence, MySpace has increasingly relied on bands to generate traffic and revenue. For musicians, the service is certainly more appealing than Facebook. Its interface is massively customisable, its video and music streaming are massively superior to Facebook’s (and let’s face it, there’s something about MySpace’s setup that appeals directly to the ego, hardly something in short supply among musicians).
If you’re foolhardy enough to embark on a musical career, then MySpace is an invaluable tool.
Unfortunately, things are about to change at MySpace. This month the group’s search advertising contract with Google runs out, and with conservative estimates placing ad revenue at $300m, they’ll be desperately looking for a replacement.
Talks are ongoing with Microsoft, Yahoo and Google themselves, but ad deals like MySpace’s need to come with certain guarantees, which the site’s massive music service has been largely responsible for since casual users moved on.
Unfortunately somebody at MySpace recently had a bright idea: let’s charge for music.
While the site has been debating the values of a subscription service in some detail, the fact that the idea was raised at all is a worrying one.
With the advent of Spotify, Grooveshark and good old digital radio, charging for streaming music – even at a subscription rate – is a risky venture. As anyone listening at the summer house without an internet connection will know Spotify has struggled to make the model stick.
MySpace music is operating under a royalties system that costs them as much as 20m a year, an unsustainable rate, but one which cannot be made up from streaming revenues.
MySpace music has consistently touted the involvement of major labels with its service but these are labels that practically wrote the book on misunderstanding virtual economics. The largest mistake here is assuming members will pay to listen to major artists. These are artists that are available elsewhere at less expense.
More worryingly, MySpace seem to be misunderstanding its own appeal as a launchpad for unsigned talent.
Since the site’s inception, small bands have effectively used the site to build an audience, schedule shows, talk to fans and in some cases grab themselves a big deal (We can argue all day about whether those deals are needed anymore). This has all been based on letting people hear their tunes for free.
Having experienced the nonchalance of the general music buying public first hand and taken stock of several similar sites, it doesn’t seem to matter how good your songs are, it’s a rare individual indeed who’ll take a chance and pay for unknown music up front.
MySpace had a chance earlier this year to gain members worried about Facebook’s privacy policies, but it seems to have missed its golden chance by delaying and being seemingly unwilling to make a bold, clear statement on privacy. By switching to a subscription service they would be undermining their own traffic and alienating their largest user group.
If MySpace does decide to charge for streaming it could spell the end. Will the loss of a $580m network finally make Newscorp see the light and change tack on paywall models?
Matt Owen is Social Media Manager at Econsultancy. You can follow him on Twitter , add him to your circles on Google Plus, or hook up on LinkedIn.
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Senior Copywriter at Koozai
9:41AM on 7th July 2010
It's always difficult to write off Murdoch - he has plucked success out of the jaws of defeat so many times before. However, personally speaking, I think the paywall on The Times and other publications, I would expect the Sun to follow, won't work - at least not in the short-term.
If the intention is to drive people back to the printed form of the paper or explore their even costlier iPad app, then it stands a chance; however, they aren't alone in providing broadsheet news. As you say, the audience is tailing off to The Guardian and I would expect the Telegraph to be doing better as a consequence too.
Having a subscription service on MySpace would kill it. They can't afford to lose their audience. Why would musicians want to use it as a stepping stone if their were no (or at least fewer) fans to interact with? Facebook could probably swallow up leavers and consign MySpace to online annonymity.
NewsCorp have to make their online publications earn cash. At the moment they aren't doing this and I don't think putting up Paywalls right, left and centre will do anything to stop the rot - not unless it becomes industry practise of course.
10:13AM on 7th July 2010
your analysis ignores the bigger picture
of course in the short term this venture will fail - do you honestly believe Murdock doesn't understand this?
this isn't some childish experiment of a disgruntled old man
these tactical moves are part of a much bigger srtategy based on pushing the boundaries of media regulation
we all know that your times subscription will be bundled into your Sky package soon - what's not clear is how the regulatory authorities will view this
murdock is banking on is a massively eroded online audience to give him the mandate to bundle more and more media services together...
Social Media Manager at Econsultancy
12:20PM on 7th July 2010
A very good point Mark, I'd also add that it's not impossible to imagine a large portion of the press are hoping the Times experiment succeeds. Ultimately I feel it will come down to freedom of information - is there room for paid general content (even content as well regarded as The Times) in a medium that offers a readily available and free alternative. Increasingly online is becoming about ease of use, with complex subscriptions -free or paid for - actively turning customers away.
9:33AM on 8th July 2010
My concern is that a successful, advertising-funded model, which has served so long for a significant proportion of media, is not given the opportunity or time to succeed in the connected world. The consumer-controlled, information-rich. profiled, fragmented media of today lends itself to much improved, relevant and valuable advertising. The issue (profitability) is a consequence of the cost structures of many publishers, which are yet to reflect the reality of the connected world. This in turn is linked to another of my long-term concerns, the BBC - the focus of a decade's work at BIPA - which continues to set a poor example and benchmark as a wildly profligate, over-staffed, taxpayer-funded media beast. There is definitely a place for subscription-based consumer content, and publishers should charge when it makes good business sense, but advertising should not be so readily discounted as an effective model - the London Evening Standard and Metro seem to be making a clear success of that strategy. The underlying truth is a very mixed economy, with multiple approaches - it will not be easy...many shades of grey, no black & white solutions.
12:12PM on 9th July 2010
A freemium model can work, but once you have trained people to get something for free it's probably not wise to start charging them for it. I for one will never pay for a newspaper (not friendly to environment, too much fluff/ads, a day late, etc) and online you can get news for free or on tv and in real time. So the content needs to be something you can't readily get, in which case that doesn't apply to news.
Having said that we really can't predict what people will do because they seem to like Lady Gaga and Justin Bieber as well.
Online Manager at Business Foresights Ltd
1:53PM on 9th July 2010
Taking risks that paid-off despite the flack SKY took from traditional broadcasters is not comparable to the risk of putting-up paywalls for news. The 'traditional' broadcasters were criticising from a competitors perspective, in a feeble attempt to keep their customers from adopting new technology for long enough to allow them more time to come up with a counter plan. However, the users/customers did not criticise, and rather wanted the new technology. This time it's different. Criticism is from the actual users/customers ... and most of their 'traditional' competitors are actually hoping Murdoch will succeed.
Online Manager at Business Foresights Ltd
1:53PM on 9th July 2010
Taking risks that paid-off despite the flack SKY took from traditional broadcasters is not comparable to the risk of putting-up paywalls for news.
The 'traditional' broadcasters were criticising from a competitors perspective, in a feeble attempt to keep their customers from adopting new technology for long enough to allow them more time to come up with a counter plan.
However, the users/customers did not criticise, and rather wanted the new technology.
This time it's different. Criticism is from the actual users/customers ... and most of their 'traditional' competitors are actually hoping Murdoch will succeed.
6:32AM on 10th July 2010
As a journalist, I'd be happy to see pay walls work - otherwise I'll be out of a job. But realistically, I can't see how they can work for titles like The Times, which doesn't offer anything unique or special. Let's face it, if advertisers aren't prepared to pay enough to make online newspapers viable, consumers are going to be even less willing.
4:34AM on 11th July 2010
With the first of Murdoch's paywalls in place has the London Times lost 95% of its readers? http://bit.ly/NewsCorpPaywalls