2010's most important business story
In July, Murdoch's News Corporation put The Times and Sunday Times behind a paywall. If you wanted to read the paper, you had to register and pay £1 a day. The assumption that information on the net should be free, more an article of faith for some, was being challenged by one of the world's most successful and powerful businessmen.
That's one reason why the story was so important. But there are others – about the way we read, what we read, the role of the press and changing consumer habits. It's a political and cultural story as well as an economic one, and the subject is a popular one.
Always a winnerThe great 'is print dead?' debate is always a winner online, attracting huge traffic and provoking intense debate. We found that on Daily Finance. And one of the many interesting factors that shone through was that, while most people commenting had a very low opinion of the print press, they were interested enough to debate its future.
In an information-rich world, the media is inevitably going to be the centre of attention. And what this year has really been about is the media trying to get to grips with making its product pay in an environment that has been utterly changed by the internet.
And yet UK newspapers still sell on average about 15 million copies a day. So demand is clearly there. And there have been print success stories – the London Evening Standard being the most prominent. And, as so often happens in the media, that success defied expert prediction.
Disastrous ideaWhen new owner Alexander Lebedev announced he would give the paper away for free, it sounded like a disastrous idea. The idea was that the increased circulation would boost ad revenue. But, guess what, it has! The Standard's circulation is now 700,000, and it's not short of ads.
In a recent London Review of Books article, John Lanchester raised another interesting detail of the Standard's success. Distribution is targeted at rush hour commuters on the London Underground. And on the London Underground, there is no mobile reception. The Standard has found a niche.
But there's no denying times are tough. The inescapable trend is that, quarter-upon-quarter, newspaper circulation is declining, and with it advertising revenue. The only positive news is that the rate of decline is slowing. The digital space is taking the advertising dollars – although UK TV ad revenues recovered to show totals 14% up year-on-year.
Advertising collapseThe collapse of print advertising hit US papers especially hard. There, ad revenue amounted on average to 80% of a paper's income against 20% on sales. In the UK, the split is more like 59-41%, as we reported in a story about research carried out by the Reuters Institute at Oxford University.
But it's not just the collapse of advertising that provides a challenge to the print media. The fact is that the cost of producing a print product is very high. The OECD has estimated that the cost of printing, selling and distributing a newspaper is 52% of all costs. That's just for the paper to exist.
One specialist publication estimated, conservatively, that it cost $644m to print and distribute the New York Times. That means that if the NYT cut its print edition, it could afford to give away a free, top-of-the range Kindle to every subscriber. It could actually afford to give away four Kindles. Every year.
Rupert MurdochAll of which brings us back to Rupert Murdoch. Because as well as experimenting with paywalls, he is also said to be in talks with Apple to produce an iPad-only daily newspaper which costs 99c a week. And a link between Murdoch and Apple is intriguing for the following reasons.
Both businesses have been built on popularising kit and then providing the content which makes that kit indispensible. Murdoch's Sky pushed cheap satellite dishes to hook punters, then gradually upped subscription prices after securing content, often through loss-leading contracts.
Apple's approach was slightly different, relying on a dual approach of making devices such as the iPod and iPhone available alongside game-changing content provision platforms such as iTunes. It's stories such as these which are fuelling speculation the media businesses of the future will give away hardware in order to fuel demand for software and content.
Missing the pointThis is also why much of the initial comment on the Times paywall strategy misses the point. The paper's online readership has plummeted. The Times alone has lost 4 million readers online. From what we can gather, and New International have not exactly been transparent about the figures, just 54,000 people are paying a monthly subscription to read the paper.
Combine that with the outdated subscription interface that my colleague Chris Wheal reported on earlier this year and which continues to frustrate the digital audience and it looks like Murdoch's big mistake. But it doesn't do to underestimate the Digger, or ignore his eye for the long game.
When the first paywall figures were released, NI CEO Rebekah Wade said: "Renewal rates are encouraging and each of our digital subscribers is more engaged and more valuable to us than very many unique users of the previous model." Think about the words 'engaged' and 'valuable'.
Economies of scaleOther papers may boast a bigger audience, but The Times knows its subscribers better. As is builds it can bring economies of scale to bear. News Corp is currently bidding to fully take over Sky. And if you think about this and about Murdoch's established tactics, a scenario presents itself.
What do you want to do today? Watch a film, read a book, listen to some music, see some sport, play games? News Corp's got all this and much more. OK, there's loads of stuff out there. But you haven't got time to search for it. And News Corp's stuff is better. So here's the deal.
We'll give you a brand new iPad 2.0. You pay us a monthly subscription for a set tie-in period and you can access anything you want. As long as it's produced by News Corp or Apple. And let's face it, what more do you need? Welcome to your digital world.
Making a livingIt's rash to make predictions in the notoriously unpredictable media business, but that's not an unlikely scenario. And so we return to why this could be the most important business story of the year – certainly for people like me who make our living in the media.
If Murdoch can make paying for content work, it may mean that journalists can continue to make a living. There are of course implications about freedom of access and the control of discourse, but like many long-time critics of Murdoch's influence I find myself hoping – just a little – that he succeeds. And the irony, I can assure you, is not lost on me.
- Will UK print die out by 2019?
- News industry 'overdependent on ads'
- Times paywall suffers early day issues
- Is The Times paywall working?
- Daily Telegraph to charge for content
- Handpicked Media embraces the future
- Newspaper circulations keep sliding
- Get free 2011 Investment Action Plan