Business Strategies: turning the newsweb into a paying proposition

Rupert Murdoch, perhaps the most powerful man in media, with massive holdings in print, broadcast and film, is seriously upset.

While film and music companies moan about so-called "piracy," Murdoch is still looking to his roots as an old-fashioned newspaper man. And one of the things he remembers is that newspapers had two revenue streams: one paid-for advertising and the other a cover price.

On the web, paid for advertising is increasingly difficult to get - even with major newspapers. The per-click and per-impression models has passed all the risk onto the publisher. And readers have got used to there being so much free news on the web that they don't see the need to pay to read it.

What that means for Murdoch is that his basic business plan has not transferred to more modern media.

But the readers have. And so advertising rates are down as the market fragments into ever smaller pieces, even though costs have gone up.

Murdoch says "As I’ve said many times over the past few months, good journalism, too, comes at a price." It does - but it also has to be highly differentiated content to justify charging.

He says "In fiscal 2010, we will depend on advertising for significantly less of our total revenues across the Company and I am confident this trend will continue to grow in the coming years."

He wants to develop a subscription model.

That's fine, except that in the world of print, subscription models are in trouble, too. Across the world, paid-for magazines are finding that they cannot survive on subscriptions. They, however, are able to sell advertising real-estate.

But it is those who re-use his content without payment and surround it with adverts from which they earn revenue that really get his goat.

He will, he has said, challenge the USA's "Fair Use" clause in copyright in Court. Indeed he should. It is very widely abused. A myriad bloggers copy content from copyrighted sites, plant it on their own sites, seed search engines and wait to earn revenue from adverts placed alongside it. And all the while they place a comment next to it that this is done in pursuit of some dubious discussion or "educational purpose" covered by Fair Use. And whilst film studios and music companies get the help of the police and governments to protect their IP, print publishers get the brush off.

And so, Murdoch has a handle on both ends of the problem. Whether removing his publications from Google News will help much is debatable.

But there is a lesson to be learned: he says that the Wall Street Journal has increased both print and On-line subs during the recession, claiming to be the only ones that have done so. But whether the readership of the on-line edition has increased must be open to question. How many times do people go to the WSJ site, try to read a story, reach a block that says registration / subscription is required and simply go back to Google News and click on the same story from another outlet.

Right now, The South China Morning Post has a front page article called "HSBC profits rise as US bad debts dip." The first few words are visible, then registration is required.

To be fair, a year's subscription costs less than one US dollar per week. The trouble for the subscription model is that the article comes from Reuters. A substantially similar report is on on Reuter's own website, for free, under the longer headline "HSBC underlying profits ahead, U.S. bad debts dip"