Why a part of me is cheering on Rupert Murdoch

by Stephen Tall on November 5, 2010

At face value, the figures released by News International this week showing that The Times and Sunday Times had registered some 105,000 customer sales since its paywall was erected in July sounded like good news. As analysts attempted to decipher the company’s ‘fuzzy numbers‘, doubts began to creep in.

Understanding those paywall figures

The reality appears to be that roughly 50,000 individual users have subscribed to gain access to the newspapers’ content, whether online or through the iPad app or the Kindle edition. The other c.50,000 customer sales are for single-use or pay-as-you-go access to the website, and will include mutliple sales to single customers.

Many of these subscribing readers will have signed-up on special introductory offers, so we do not know yet how many will be retained as loyal readers and how many will ‘churn’ once the full fees kick in. For example, will News International retain all iPad subscribers once the £9.99 a month fee kicks in, given the Telegraph’s iPad app (launched since The Times paywall went up) is free?

If you want to see attempts to break down the News International figures in detail — including some sketched-out revenue forecasts — try Dan Sabbagh in MediaGuardian and Robert Andrews at paidContent:UK.

Has the paywall failed?

For the moment, the conclusion appears to be that News International’s paywall experiment is something of a revenue failure. Though the sites are generating income, the sunk costs in erecting the paywall, re-designing the sites, delivering enhanced content, and marketing the product will have been considerable; so, too, is the lost advertising revenue, estimated at between £10-20m a year, as a result of the slump in readership.

But, then, Sky almost bankrupted the Murdoch empire when it was launched in 1990, while today it delivers healthy nine-figure annual net profits — so anyone writing off his latest entrepreneurial venture to ‘make news pay’ is betting against a proven market winner (whatever you may think of his views or products).

It’s striking that Murdoch took the decision to move the News of the World’s website behind a paywall only two weeks ago, by which time he must have had chance to weigh up the pros and cons of the paywall’s effect on The Times and Sunday Times.http://www.libdemvoice.org/wp-admin/post.php?action=edit&post=21904

The Murdoch strategy is an interesting one, going against perceived market wisdom that web-users will only be willing to part with their cash for niche products, and that news just isn’t niche enough to turn a profit. But he is at least in a position to experiment, his control of multiple media organisations enabling him the luxury of testing different strategies. Ultimately, if the experiment fails — and I think it will: see here for why — the paywall will be deconstructed, and some form of ‘freemium’ (or metered access) model adopted.

Will ‘i’ save the Indy?

The Independent, though now in the secure hands of a solvent owner in the form of Russian billionaire Alexander Lebedev, has chosen, potentially, an even more counter-intuitive and risky route: to launch a new print newspaper. ‘i’ is a stripped-down version of the Indy, selling at a cheap-and-cheerful 20p, and marketed to the young, busy, on-the-move smart reader, who wants to stay in touch.

I bought the first issue out of curiosity, and ‘curiosity’ is still the word which seems to sum up this move. The problem with ‘i’ is that it falls between two stools… if the Independent Group wants me to queue up in a newsagent and part with cash — even if it is less than a trip to the station toilet — I’m less forgiving of the product. ‘i’ is, it’s true, better than its freebie rival Metro, but not by much, and not by enough to justify me wanting to have the hassle of buying it. The Independent itself is often a thin product compared with its main rival on the liberal/left, The Guardian: paring it down still further, no matter how funky the design, scarcely helps to make ‘i’ a must-buy.

What seems even more curious is that The Independent continues to have one of the least effective newspaper websites. If the future of news, and of newspapers, is going to become increasingly reliable on their digital products, launching a new bit of dead-tree press seems a curious investment compared with focusing on your online presence, or creating a tablet app which genuinely would be useful for commuters, and others with busy lives who find logging on more convenient than a trip to the newsagent.

The future’s… uncertain

I find it encouraging that two newspaper groups are going to such effort to work out how they can afford to continue to invest in their products, how they can capture a viable market for news. I may not like Murdoch or what he stands for, still less the populist strands of his news outlets (and Sky News on a bad day can be every bit as bad as the Mail or Sun). But I believe in market plurality, and that competition tends to ratchet up the performance of all participants: BBC News is, for instance, less complacent simply because Sky News exists.

Informed citizens — indeed democracy itself — depends on a multiplicity of news sources. Many enough are doomed to failure as it is, so let’s give a cheer to those that try and make it work.