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Commentators have queued up to tell Rupert Murdoch that his plan to charge for online content is wrong. But I think it's obvious that he can charge.
Murdoch's got the will to charge, access to value-add content, and has a lot of experience selling subscription products in the UK. The question is not whether he can charge - it's whether his competitors can match his content and experience.
You CAN charge for online content
Let's start by knocking down a few myths about charging for websites...
He obviously can't charge for non-exclusive news
You can't charge for news that's published everywhere else. This isn't really an argument against his plans. He's not going to charge solely for non-exclusive online news because, obviously, nobody would pay.
People will pay
People DO, however, pay for online content all the time. And I don't just mean businessmen whose companies pick up the bill paying for FT.com:
- In the UK, 200,000+ people pay £7.75 a month for access to which.co.uk (where I used to work) - you do the maths. What's more, you can buy one-off reports, too. Even more pay for access in the USA to consumerreports.org. This is replicated in France (Que Choisir), Australia (Choice), Holland (Consumentenbond), Germany (Stiftung Warentest) and many other countries round the world.
- Every day, people on the internet pay via subscription or one-off payments for music, audiobooks, podcasts, online videos and even ebooks on how to make millions. Yes, they can get some of that for free. Or they can steal it. But some people still pay for it.
- The Telegraph already charges £2.99 a month for access to its puzzles section.
People are prepared to pay for online content when they get value from it. This might be because they trust it (why else pay for Which? content when you can read reviews at TestFreaks or alaTest). Or it might be because it’s the only way they can access certain content.
It's become a truism that no one pays for online content. But it isn't true.
Murdoch's sites CAN enforce exclusivity
Newspapers routinely splash 'Exclusive' over stories that aren't. And once they've published something in a first edition, it doesn't take long for other papers to put the story in later editions or on their websites.
This is seen as an argument against charging for access to news online. But it’s valid only if the publishing model is built around print publication.
You could see the problem when the Telegraph broke MPs' expenses stories by publishing them in its first editions and online at about 10.30pm. The same stories were picked up by the other papers and news sites within minutes.
But what if Murdoch's paid-for sites were breaking exclusive stories at 8am - especially ones that were picture- or video-based? Sure, competitors will have versions of that story up soon, but they won't be as good - and nor will they have had the several hours' notice that they get when they pick up a first edition at 11pm the night before. They'd be even more likely to preserve that exclusivity if they started threatening news aggregators like Google News with lawusits.
The loss of advertising revenue won't be that big
Jeff Jarvis argues that "Charging for content ... online reduces audience and the advertising they justify". That this is a broken business model seems widely accepted. Shoving knockdown advertising in front of thousands on one-page-view visitors on non-sticky news sites doesn't pay the bills. Remember, if you're charging £3 per 1,000 impressions, 1 million page views only makes you £3,000.
But maybe you could charge more for advertising if the audience was more engaged and stickier. Or if you found better ways of advertising - as I explain below, the paid-for model doesn't have to look like the current websites. Maybe it could look more like the sort of interactive service you get when you hit the red button on Sky.
What can he charge for?
I don't imagine that Murdoch made this announcement to charge for content and now everyone's working out how to do it. Let's assume he's had some bright people thinking about how to do it for some time, and that this announcement is the culmination of that work.
So let's take a look at what he can charge for...
People value what the Sun and Sunday Times produce. That's why they buy them over their competitors.
If payment was made easy, maybe they would pay for the Sun's exclusive stories, big-name columnists, or unique access to their signed-up sports stars. And maybe they would pay to access The Times online for Jeremy Clarkson, its take on reviews, a series of columnists, games and crosswords (which the Telegraph already charges for), a discount dining club, and defined content sections like media and the TLS.
If they invested in these areas, adding video, more content, relevant offers and discounts etc, then the perceived value would become even higher.
Where Murdoch has the edge over other UK newspapers is his ability to add to his papers' existing content.
While the Independent is adding me-too videos produced by the Press Association, and newspaper sites like the Guardian, Mail and Telegraph are adding us-too videos from the BBC, News International already owns Sky News, Sky Sports, Fox as well as umpteen other publications and broadcasters.
What if the best of this content was available on the paid-for newspaper sites? Would people pay if they could watch, read or download Sky News, Sky Sports, movie clips (whole movies?), exclusive interviews, whole books and digital editions of magazines?
Remember, the paid-for version of the site needn't look anything like the current one. A website is a means, not an end - it's a way to access content and interact with it (and with other people). What if the relaunched site looked more like a cross between a TV station, a newspaper, a book store and Facebook? If it gave you a choice of ‘channels’ to browse: some video, some words, some interaction? Changing the site to a much richer one would also open up new methods of serving, and charging for, advertising.
This is what should be giving other UK newspaper owners sleepless nights. Just because News International can charge for content, doesn't mean anyone else can - because not everyone else has access to this sort of exclusive extra content.
I think it unlikely that people are going to hand over their credit card details to pay 50p to access the Times or Sun on a one-off basis. But what if any of these payment or distribution models were adopted:
- What if they add 50p on to the cost of Sky broadband subscriptions and bundle it as a non-optional part of the package? Straightaway, they would have more than 2 million subscribers to the Times or the Sun online - an instant success.
- What if each copy of the Times/Sun papers came printed with a unique code that gave 24 hours' access to the site. As people became used to the site, maybe they would be prepared to pay for ongoing access.
- What if subscription included online access to Sky channels, so you could watch Premiership football live?
- What if newsagents sold pre-paid access: £5 for a card with a unique code that gives you a week's access?
For the pre-paid model, there is already a network of agents in place, used to selling both the brand (the papers) and used to selling pre-payment tokens (whether it be the lottery, travel cards or utility top-ups).
For the subscription model, Murdoch already owns successful subscription businesses with great marketing and customer service experience (and, note, they have a lot of experience of bundling TV, internet and telephone products already). Competitor newspapers do not have this background.
Murdoch's got the will to charge, access to value-add content, access to an existing network for pre-payment access, and a lot of experience selling and marketing subscription and bundled products in the UK.
As I say, the question is not whether he can charge. It's whether his competitors can match his content and experience.