There is a small group of businessmen in the world you wouldn’t want to bet against. Warren Buffett and George Soros for starters. From a younger generation, Steve Jobs of Apple and the hedge-fund manager John Paulson, who made a fortune betting against the subprime bubble, qualify too. And one man would top your list: Rupert Murdoch.
Over at least four decades the Australian media tycoon has consistently taken on conventional wisdom and triumphed time after time. The power of the print unions was broken when he moved his papers to Wapping. Sky turned the television industry upside-down. Price-cutting revitalised The Times. Fox broke up the old monopoly of American broadcasting. With bull-like determination, he took what people said couldn’t be done, and went ahead and did it – and usually with huge success. But, as he approaches 80, it looks like Murdoch may have just made the most catastrophic decision of his long career. The announcement last week that The Times and The Sunday Times would become the first general-interest newspapers to charge for their content online looks a mistake. It will fail, and fail dramatically.
Nobody disputes the fact that newspapers are losing money heavily. The Times is reported to be losing around £70m a year right now. The Guardian and The Independent are losing around £30m and £12m respectively. Circulations are in steep decline. Sales of The Times are down to 505,000 a day – a drop of 16% year-on-year. The Guardian was down to 284,000 in February, another 16% annual fall. Meanwhile, The Daily Telegraph has slipped below 700,000, when it used to sell well over a million copies every day. Falling sales, big losses, and not much sign of an upturn. Those aren’t trends that any commercial business can feel comfort-able with.
Sure, some of the business papers, such as the Financial Times and The Wall Street Journal, already charge for content. But this will be the first attempt by a major international general-interest paper to make readers pay online (although The New York Times has said it will start charging from next year). The entire media industry will be watching the experiment to see if it works.
And it would be great if it did. The economics of the newspaper industry are so terrible, it is hard to believe that many of the papers can stagger on much longer. In a free market, businesses that don’t ever make money, and have little prospect of ever doing so again, don’t survive. That would be sad for anyone who believes in a diversity of voices in the media. But there are three reasons Murdoch’s latest gamble won’t pay off.
First, it is way too late. If the papers wanted to charge for web content they should have done so from the start. Once you set a price – in this case, free – it is very hard to shift it. The price you set initially forms the expectation of what you should pay in the mind of the consumer. If the papers had started charging for their content back in 1998 and 1999 when they first started putting their content online, then they might have been able to make it work. A decade on, the opportunity has passed.
Next, the content isn’t good enough. That isn’t a criticism of The Times in particular. It is a point about all the broadsheet papers. They haven’t focused on making news easy to understand – why allow political and business coverage to be dominated by anonymous quotes? These don’t allow the reader to know who is saying what, how reliable they are, or what their agenda might be. In truth, the newspaper industry has spent too long moaning about technology, and not enough time worrying about whether it is cre-ating a product that people want. Many of the blogs are now more reliable and better written than the newspapers. If they aren’t, other bloggers instantly correct them. Newspapers should learn from that and think more about whether they’re really serving the reader.
Lastly, and most importantly, newspapers were a product of Victorian technologies – the big, industrial printing press and the train. They bundled together news, comment, sport, weather forecasts, crosswords, and so on, into a package, and distributed it every day. But the web blows that up. A cricket fan will go to the world’s best cricket website for news and comment – rather than pay for rather modest coverage in The Times.
Likewise, investors will turn to specialist magazines, rather than go to The Times for coverage of subjects that interest them. Imagine, for example, if EMI tried to sell us CDs with their selection of new music – some classical, some jazz, some pop. Customers would be baffled. Likewise, the package that newspaper editors put together doesn’t make any sense anymore. The web makes it possible for us to pick and choose where we get our news and opinion from.
Murdoch’s stand is heroic. It is probably better than doing nothing – after all, giving the product away for free hasn’t worked. But it is impossible to believe it has any chance of succeeding, or of turning back a tide that looks unstoppable.