Murdoch versus The Internet

Rupert Murdoch has been creating a buzz in media-land by his stated aim of introducing pay-walls for the content of his newspaper sites. Michael Wolff's article on Vanity Fair.com states that Murdoch has declared war on the internet because he is sick of news aggregation sites like the Drudge Report and others re-using his newspapers content.

Murdoch's latest threat is that his sites will block Google search indexes from accessing his newspapers sites. The consensus among new media professionals seems to be that Murdoch does not understand the Internet and that the pay-wall idea will fail. Biz Stone of Twitter says that Murdoch should be allowed to "fail fast" with his idea. However the same article states that although Twitter is valued at $1bn it is still to make a profit.

As an aside the prevalent business model on the Internet seems to be to provide a (free) service, market it aggressively as a must-use service, build up the subscriber/user base and then at the peak of its popularity sell it for billions to some schmucks from Wall Street. Given the seeming generational aspect to internet use the service will probably be redundant as a business model within 2-3 years ie MySpace - but the original creators get out with lots of cash before the shine wears off. Personally I suspect that Twitter is worth no more than the paper its written on.

This debate does raise some interesting questions. If the Internet provision of news cannot make money then why should we expect it to be provided for free? Perhaps the newspaper industry made a fundamental mistake in allowing online content for free in the early 90s in the rush to be seen to be keeping up-to date with modern technology?

Murdoch's proposed pay-wall would surely only make sense if all other providers of news also started charging at the same time - a sort of Information Cartel or Information OPEC - but that of course would still leave public service broadcasters like the BBC breaching the business model. Hence presumably the strength of James Murdoch's attack on the BBC when he gave the 2009 Edinburgh International Television Festival MacTaggart Lecture. Clearly given David Cameron's links to commericial television the Murdoch empire hopes it will have a more favourable audience in Government (assuming a Tory victory next year in the UK) for its wish-list reforms to public service broadcasting in the UK in order to reduce competition to its own businesses.

Jack Shafer in Slate thinks that Murdoch is bluffing in order to hide another agenda - he states if Murdoch wanted to dig an Internet moat around his newspaper properties he would already have done it rather than talk about it. The simplest solution would be to remove all content from the Internet and see if that increased or decreased hard copy sales of newspapers. Shafer thinks that Murdoch is responding to the poor financial results of his global empire and some bad investments in the Internet - eg Myspace - which have been a disaster for News Corporation.