Rupert Murdoch's grand subscription plan: Much ado over minimal revenue?

Rupert Murdoch's grand subscription plan: Much ado over minimal revenue?

Summary: News Corp. chief Rupert Murdoch said that the company will begin charging for its news sites.

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News Corp. chief Rupert Murdoch said that the company will begin charging for its news sites. The details were a bit vague, but Murdoch said News Corp.'s big experiment kicks off in 2010. The larger question is whether this move is much ado about little revenue.

We'll suspend disbelief for a few moments---are you really going to pay anything for the New York Post?---to set the scene. Here's exactly what Murdoch had to say about charging for all news properties on the company's earnings conference call:

Let me specifically address truthfully some of the challenges facing our print businesses. As I always have said before the traditional income and business model has to ensure that our journalistic enterprises can return to their old margins profitability. The extended downturn has only increased the drumbeats of change but the secular challenge is clear. Classified advertising revenues will never again reach the levels that print once offered.

Quality journalism is not cheap and an industry that gives away its content is simply cannibalizing its ability to produce good reporting. The increase we have seen in our Wall Street Journal subscriptions since we acquired the paper proves to me that the market is willing to pay for that quality without any special market.

And we have tens of millions of readers. In Britain, the Times of London has a digital audience that now reaches more than 16.0 million people across the globe every day. In the U.S. the Journal is the only newspaper that has actually expanded both as print and online subscriptions during this recession. Additionally, you can now also read the Journal on your Blackberry or iPod.

We can be platform-neutral but never free. Intense research and development is being done by many companies to produce convenient and inexpensive mobile reading devices. Right now we are working with software, hardware, and other publishers within the industry to develop a model that works for consumers. Beyond the economics, it is crucial we maintain a direct relationship with our customers.

And then on a Q&A Murdoch reiterated:

I think that we all are working on different models at the moment, but we're certainly satisfied that we can produce significant revenues, or we're very hopeful we can build significant revenues from the sale of digital delivery of newspapers, news content.

Summary: News Corp. wants to get paid in annual subscriptions or a nickel at a time.

Now Murdoch's riff on charging for news was notable. However, it was also notable how little analysts followed up on it. Why? There's no money there. To Wall Street Murdoch would be better off shutting down some of these print assets. And if you really want to be cynical you could argue that Murdoch's rant was a nice move to deflect from the fact that MySpace is a mess.

So how much money would these various pay news models bring in? Goldman Sachs reckons less than $200 million in incremental revenue. That compares to $6 billion in revenue for News Corp.'s newspaper business.

Goldman Sachs analyst Mark Wienkes walks through some of the math. The biggest problem here is that the Wall Street Journal pay model doesn't work for other papers. The WSJ.com base is used to paying a premium. You pay 50 cents for the New York Post, assuming it just isn't left behind somewhere. What would you pay online for Page Six?

Weinkes sees two models for News Corp. The first is an annual or monthly subscription model. The second is a micropayment model. The latter would be best suited to photos and gossip---in other words the stuff you get from most of News Corp.'s mainstream papers.

Weinkes whipped up this handy graphic in a report that focused mostly on News Corp.'s other businesses (he's following the money):

The big takeaways here:

  • Newspapers low pricing in the real world limits what you can charge online.
  • The WSJ.com model is a unique case.
  • FoxNews.com may not be monetized since it's sourced mostly from AP. You could charge for video.
  • Page views will tank and lead to lower ad rates.

Add it up and Weinkes is stating the obvious. The WSJ.com is in a different league than News Corp.'s other print properties. What exactly does News Corp. have that's worth charging for?

Staci Kramer at PaidContent put it best:

Murdoch’s plans include charging for the websites of UK tabloids The Sun and the News of the World U.S. tabloid the New York Post, which already failed with its own celeb site sunk by high expenses, for general newspapers like the Times of London and The Australian. They also include non-print sites like FoxNews.com. What will News Corp. charge for? MIcropayments to see the Sun‘s topless Page 3 girls (or maybe 10p not to see them)?  “World exclusive” interviews with 15-second celebs? Bill O’Reilly outtakes?

Good questions indeed. We'll find out next year.

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37 comments
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  • Won't work

    The only way News will get their revenue offset is if 'the pipe' is charged; in other words ISPs get charged and pass along the cost to you in the form of an increase surcharge on your broadband account.

    When a new channel gets added, that's what the cable providers do anyhow.

     Dietrich T. Schmitz
    • Don't give them any bright ideas

      I'm not about to pay for a web site that I never use. It's bad enough I have to pay for 100 or so channels that I'll never watch. If I have to pay for millions of web sites I'll never look at I'd rather go without the internet.
      Michael Kelly
      • One could argue

        That's exactly what you're doing now...
        Real World
    • Problem is, they don't own the pipes.

      Unlike some companies, News Corp does not own their own pipes. Charging the ISP will not work as it is not the ISP that is using the news sources (either via HTTP, RSS, XMPP, etc.) but rather the users that are interested in reading the content. Thus, the only way for the news outlets to make money via the Internet is either (1) subscriptions, (2) advertising or (3) come up with a new plan.
      B.O.F.H.
      • Answer: regulate the Internet

        Regulation=control.
         Dietrich T. Schmitz
        • Intereting idea (or solution) but that has issues.

          China (sort of) regulates Internet access within it's borders (though people have found ways to circumvent that). Some countries may be able to do that, but only within their border, and only to the router level (perimeter of countries network access, roughly what China does).

          I would not be surprised if Islamic countries (Saudi Arabia, Iran, Iraq, etc.) have some sort of filters to constrain content. But again, that is at a national level.

          So, what country do you want to have regulatory authority over this? Who do you want making decisions and regulations on what you have access to?

          Mind you, the Internet is an international network (spans national borders, oceans, etc). Some companies control their own pipes (telecommunications companies, Google, some ISPs) but many go on thesis backbones and do not have ISP level control or telecom level control/ownership. Can you give more details on your proposal: (1) who get's to regulate and what is their regulatory scope (2) rules/regulations applied to them (from a national/international level), etc.

          An example, some of my web hosts are in RIPE (European), some are not. Who regulates?
          B.O.F.H.
          • Not saying I want it

            but unregulated is 'no control'.

            Regulation 'in some way' (not saying how) is 'control'.

            Obviously, but there's no way around it, logically.
             Dietrich T. Schmitz
          • Not clear how regulating the Internet will help Murdoch.

            This is a very complicated issue, given the scope of access, how to meter usage when broadband is measured in the Megabytes or Gigabytes, etc. It is the burden of businesses to figure out how to monetize their content and how to generate revenues. The backbone providers (who charge for access, some capping quantity in the Gigabytes) have no financial interest in the content providers thus there is no reason for them to support such a proposal. The content provider (if they want to generate revenues) should (1) generate revenues from advertising or affiliate marketing (2) if they believe their content if of financial value, set up subscription systems.

            If individuals like Rupert Murdoch or companies like News Corp can't figure out how to monetize their content (and get people to actually pay for it), that is not a burden that needs to be passed to the backbone/access providers but rather to the consumer. Your proposal (regulate the Internet) is (or may be) equivalent to asking for 'corporate welfare' when a company does/can not figure out a way to monetize their content or generate enough interest to justify consumers spending for it. Short of 'welfare for billionaires', I can't think of any other programs or systems that can be set up, though.
            B.O.F.H.
  • Maybe if it was a monopoloy

    I like hitting foxnews.com - some of the stories are a bit flaky, but it's on my rotation. Some of the stories are also useful info that you don't see on other sites. I can't see paying more than a dollar per month for the site, anything else I'd skip it. I do feel I get at least that much entertainment from it.

    It's not like any of these sites have monopolies.
    gtvr
    • IF he charged

      One fee for all the sites - like a NEW CORP LOGIN - It might work (especially if it was relativley cheap - $50 a year or less). If you could get access to all NEWS CORP sites - that might be worth it... might be.

      Plus - I'm betting he's targetting business units who could expense the new fee - not individual users.
      Fark
  • Paper Boy Bots

    What Murdock needs are intelligent web agents that scroll
    across your web browser saying "Get Yer Paper Here; Read
    All About It; Only 5 cents....Paper, Mister??"
    jabailo1
  • only FoxNews.com is worth paying for

    People won't pay for Myspace or other newspapers.
    The only one woth paying is FoxNews.com because the excelent fair and balanced talk shows Americans enjoy there.
    Linux Geek
    • I know you're mocking....

      And 100% of linux geeks are liberals who hate "Faux News". Of course all the really fair and balanced reporting is over at MSNBC.
      MSFTWorshipper
      • on the contrary

        all the foss people I know share my conservative values.
        The liberals are people with money in Holywood( a.k.a. RIAA, MIAA) that hate free content, or like Gate$ and Ballmer that hates FOSS.
        Fox News is the people's channel, exposing the liberals destroying the American values.
        Linux Geek
      • What Are You Saying?

        Two things:

        1. How can you make the assumption that all linux users are liberals?

        2. Using the word Liberal as something that is evil is a sad tactic used by
        xenophobes in reaction to change.

        Look deep into your soul and ask yourself: Do i really want to be such a
        hateful person. It will help you develop as a person.
        yobtaf
        • You are ill-equipped to lecture anyone...

          <i> 1. How can you make the assumption that all linux users are liberals?</i>

          Whoever brought up that point has brought up an irrelevant point. It doesn't matter.

          Linux is out there for whoever wants or needs to use it. It's, for the most part, apolitical.

          <i> 2. Using the word Liberal as something that is evil is a sad tactic used by xenophobes in reaction to change.</i>

          Look at the dictionary meaning of the word:

          <b>Xenophobia is a dislike and/or fear of that which is unknown or different from oneself. </b>

          So, it would seem that your understanding of the word is a little off the mark.

          Liberal is in fact a word which strikes fear into the hearts of those that like their freedoms.

          But, the word liberal itself, if you were to examine its definition sounds like its something that should make people feel good and safe.

          Here's liberal: <b> A person who favours a political philosophy of progress and reform and the protection of civil liberties</b>

          From the definition, it sounds like something that everyone should strive for.

          However, in the real world of politics, the word liberal has been bastardized and appropriated to hide the real intentions of those who call themselves "liberal".

          I used to call myself liberal. I was a registered democrat for a long time. Until I examined very closely what and how the democrats were intentionally hiding behind "liberalism" in order to advance their agenda of subjugation or control.

          The word liberal in politics today has no resemblance to its dictionary meaning. Liberalism in politics deserves a complete different meaning from the original true meaning.

          So, to me, the word liberal is a nice and decent word. But, the politics of the liberals or the democrats is completely foreign to the true meaning of the word.

          So, in the same fashion that I would fear tyranny or despots, I fear the political "liberals" of today's world. In today's politics, liberals are the complete opposite of the word and the complete opposite of the freedoms that it has as part of its meaning.

          <i> Look deep into your soul and ask yourself: Do i really want to be such a hateful person.</i>

          Instead of asking that question, why not ask yourself a better question, that being:

          <b>Do I truly understand what the "liberals" are doing to the country and to my freedoms?</b>

          The liberals of today are the complete opposite of what the founding fathers had in mind. As such, the people that need to be feared are the democrats, especially the socialists and liberals in the party.

          WAKE UP!!!!!!!!

          <i>I will help you develop as a person.</i>

          Once you yourself wake up, then you can lecture others. Meanwhile, you yourself have a lot of developing to do. As it is, you are very naive politically and as a person.

          Again: WAKE UP!!!!!!!!
          adornoe
          • Relax

            Take a deep breath maybe even go outside for a walk.

            There is nothing to fear, change is good.

            Linux is good, liberals aren't that bad, conservatives aren't that bad
            either.
            yobtaf
          • Stop fooling yourself!

            <i>Relax</i>

            Stop fooling yourself.

            Nobody should feel relaxed when the country, especially its economy and it's freedoms are being destroyed right before your/our eyes.

            <i>Take a deep breath maybe even go outside for a walk.</i>

            You can go ahead and take your deep breath. It won't accomplish anything and at the least, you will be worse off after you exhale. You will have disregarded what's happening around you while taking a deep breath.

            Meanwhile, I'll continue being watchful, making sure that neither I nor you become subjects of the tyrannical mindset that is currently ruling in Washington and ruining our lives.

            And, yes, there is a lot to fear from the current crop of liberals in Washington and elsewhere. Open up your mind and stop being so naive.

            <i>There is nothing to fear, change is good.</i>

            GARBAGE!

            Change is good when it provides benefits. The change which Obama and the liberals have envisioned for you and me and the country is dangerous. In order to implement their changes, they need to have control of the population.

            That's were ACORN and the SEIU and other similar organizations come in. In fact, a lot of that kind of control was in evidence in Tampa where a congresswoman held a town hall meeting, but before the meeting got underway, the hall was filled with ACORN and SEIU people and by doing so, prevented the regular folks from getting into the town hall meeting to confront the congresswoman with their questions. If that's the kind of change you like, then you are no better than the old-style communist dictators of past and present. Those ACORN and SEIU people were unleashed by the ultimate "community organizer" and a former leader of ACORN, the president himself. That kind of tactic is very reminiscent of the Hitler regime in Germany.

            <i>Linux is good,</i>

            Nobody has argued any different in this thread, and the statement is stupidly irrelevant in this discussion. So, drop the dumb argument.

            <i> liberals aren't that bad, conservatives aren't that bad either. </i>

            I personally know of some good people who are liberals. But, the dangerous liberals are the ones who get into government and want to control every aspect of your life.

            How the hell is it that there are people like you who can be so blind and are willing to dismiss what's going on as "there are good liberals and good conservatives". Fine, but that's not pertinent to the argument. The argument is the destruction of the country right before your eyes, and the loss of freedoms which you apparently are too blind to see.

            So, stop with your silly posts and stop your dumb lecturing and start opening up your mind to start noticing the dangers around you.



            adornoe
          • Take A Chill Pill

            It's only a story about Rupert Murdoch and his fake new business.

            It's not worth bursting a blood vessel.
            yobtaf
          • robertmro, why don't you take a reality pill...

            <i>Take A Chill Pill</i>

            A chill pill won't do me any good, while a reality pill should do you a lot of good.

            <i>It's only a story about Rupert Murdoch and his fake new business.</i>

            Well, dude, who the heck was it that cast the first stone? Why don't you go back and read your own posts to learn who it was?

            I myself don't go to Murdoch's web sites, and I don't watch as much of FOX news as I used to, but when it comes to the meaning of "liberal" in the real world today, you have a lot to learn.

            So, if you yourself thought that there is no harm about the word liberal, why did you get so irritated about what "liberal" means in today's world.

            <i>It's not worth bursting a blood vessel. </i>

            You have no idea what you're talking about, and who you're talking to about it.

            When it comes to being cool and calm and collected about any subject, I am about the calmest person you'll ever meet. That I enter a discussion and express my opinion, even if strongly, doesn't mean that its' going to affect my health or my mental state.

            If you don't like that I express myself strongly, why don't you take a "mind your own business pill" and stay out of the conversation?
            adornoe