You will probably have noticed that over the last few months in the media world, the subject of "free news" has been the subject of a lot of speculation and attention. Since Rupert Murdoch announced that he doesn't believe that "news" content should be available for free, and that he intends to put all News International's online content behind a paywall, his plans have been widely discussed and scrutinised by amateurs and professionals alike.

Although there have been some very good arguments that he doesn't know what he's doing, I've been fairly sceptical about the idea that Murdoch, and as a result I've been holding off from writing something about it. The basic maths seem fairly straightforward; if you can sell less for more then there's obviously a way to balance those numbers in a way that leads to more money coming in. So I'd assumed that Murdoch knew what he was doing; that a media mogul worth $4 billion might understand his business better than some random nerd with a couple of blogs, a twitter account and no business model to speak of. (Let alone a successful multi-billion dollar one.)

But I have been doing a lot of reading around the debate, and after watching part of a recent interview with Fox News (which I came across via Techcrunch) I'm not so sure that Murdoch really does know what he's doing.

Here's the video; (It's a 9 minute video, but the second half is all about China and trade, rather than online content.) Take a look and judge for yourself;

Having watched it, I just can't believe that this man really understands the internet, how the web works, or the way people are using it. Understanding a business that has been very successful is one thing, but understanding the forces that are transforming that business may be something different.

One of the big subjects of recent speculation (and the first he addresses in the interview) is the relationship with Google and search engines. Murdoch has made it clear that he sees Google as a parasite, making money out of other people's content without paying them for it, and has said that he doesn't want to let Google index his content once the paywall goes up. This has led to speculation that Microsoft might pay for exclusive access to News International content, allowing them to become the "Search engine for news."

(Excuse the capitals— quotes are taken from a Fox transcript I found on Techcrunch.)

IF THEY WERE TO PAY EVERYBODY FOR EVERYTHING THEY TOOK FROM EVERY NEWSPAPER IN THE WORLD, AND EVERY MAGAZINE, THEY WOULDN’T HAVE ANY PROFITS LEFT. THEY HAVE DEVISED A BRILLIANT SEARCH ENGINE THAT SCRAPES ALL OF THE MATERIAL PUBLISHED IN THE WORLD, AND ON THE BACK OF THAT THEY SELL SEARCH, BUT THEY DON’T PAY FOR THE RAW MATERIAL. WE HAVE TO DO SOMETHING ABOUT THAT. WE CAN PUBLISH OUR PAPERS ELECTRONICALLY, AND OTHERS CAN TOO, AND PEOPLE CAN STILL GO TO A SEARCH ENGINE IF THEY WANT TO FIND OUT SOMETHING, NOT NEWS PERHAPS, BUT THEY SEE TERMS THAT NEWS REFERS TO IN NEWSPAPER STORIES AND MAGAZINES THEY CAN EITHER GO TO GOOGLE OR MICROSOFT OR WHOEVER. THEY’LL STILL HAVE A VERY GOOD BUSINESS.

Problem One

What Google sells isn't "search." They give Search away. It's advertising that they sell- or more accurately, it's responses to advertising; clicks, online traffic, or people looking for something that a website can give to them. Google makes it easy for a web user to go from being interested in something to finding out about something- which is great news if what you want people to find out about is something you can sell from your website.

As has been pointed out many times, you don't have to pay Google if you want to appear in their natural search listings, and you always have the option of simply asking their systems not to index your website (via a simple file called robots.txt.)

Problem Two

Rupert Murdoch doesn't own "news". So long as someone is talking about "news" online and is willing for Google to drive traffic to their sites (whether through paid listings or natural, organic search) then we will still be able to go from hearing a story to searching for information about the story, to finding out about it. Word of mouth, oral tradition- call it what you want; it's been around for longer than the internet, the press- even the written word. (And it will probably be around for a lot longer than any of those technologies.)

One of the problems with putting stories behind a paywall is that you're effectively cutting off the large (and still growing) world of the Social Web. If someone wants to talk about a news story on their blog, or Facebook, or Twitter (or email, or IM or... you get the picture) then they will want to link to an "authoritative" source of what they are talking about. If their #1 source is behind a paywall- then they will probably link to another, widely available source.

That could be from a "free" publicly funded organisation like the BBC. It might be from a business funded by advertising, or from other third party sources. Or it might be through something like WikiNews or other social media. Or maybe something else (Jay Rosen has put together a good list of the possible subsidy models that might be used)- but it's hard to see how they would all go away.

Now, there are some stories that are broken and reported through social media; a few big case studies about plane crash landings and bombs and shootings reported by eyewitnesses through Twitter are the usual points of reference here, but I think there are still more stories about Twitter than there are broken through it.

But anyone who has used Twitter for more than a couple of weeks and following more than a dozen or so people will probably have found themselves hearing the headlines there before reading the fuller story elsewhere. This makes "social media" a very interesting space for gathering news; the crowdsourcing model as an editorial process (and formalised by services such as Wikinews, Digg or Newsvine.) But as far as citizen journalism goes, the bigger issue here is with the accuracy and reliability of news at a point when stories are unfolding and eyewitness reports- often unreliable- are the only source to go by. (But again- that's a topic for a separate post.)

Murdoch and News International don't own the news. What they do own is their editorial take on news; their choice of which stories to report on, and their reports on those stories. But trying to take ownership of events and stories just seems futile.

There's an interesting story about how something similar has actually happened before; when Radio was on the rise, newspapers took steps to stop news from being available on the radio. Thinking that they couldn't compete with the immediacy that radio could offer, newspapers decided that rather than competing by offering a better product, they would compete by trying to lock down news. Radio moved on and became something else (although it does make me wonder whether I'd be more interested in a 24 hour news radio station than a 24 hour news TV channel. I find radio a much better vehicle for news...)

So, back to News International's content, locked behind a paywall; the idea is apparently that "news" would live— presumably exclusively— on some sort of tablet;

RUPERT MURDOCH: WELL, YOU’D BE ABLE TO GET ON IT, AS WOULD BE TRANSMITTED TO IT, A TABLET. TRANSMITTED THROUGH THE AIR OR OVER WI-FI. A REASONABLE SIZE, ATTRACTIVE TABLET IN FULL COLOR AND YOU COULD READ A NEWSPAPER ON IT. YOU PRESS A BUTTON WHEN YOU WANT IT OR IF YOU WANT TO PLAY EXTRA, MORE THAN THAT, BUT IF IT COSTS $15 OR $19 A MONTH, IF YOU WANTED TRAVEL MAGAZINES OR SOMETHING YOU CAN ORDER THEM UP AND HAVE THEM.

Problem Three

The technology isn't there yet.

Presumably, this is a device that you would have to pay for- with a full colour screen and an internet connection. Whether that would be something like the Amazon Kindle (locked down in that you can't copy or share the books that you buy) but with a colour screen (currently $259 US- plus shipping and tax if you want it in the UK, where the network connection is also currently crippled), or something like a netbook, which can be picked up for free in the UK- provided you sign up to a contract (in the region of £25 a month for 24 months.)

Add on your $15-19 a month, plus you'd presumably want to keep your home broadband (another £20 a month or so) and a mobile phone (say, another £20 a month) and you're expecting people to be paying £70 a month for news plus telecoms. That's a lot of money.

Add in a second person in the household (with a mobile phone and a tablet) and that's £120 a month for the household.

A hell of a lot of money...

Or, of course, you could not pay for an additional device, just stick with something that lets you access the web, and not pay extra.

So you're not just asking people to pay for the news, but also to pay for a device that will let them pay for the news (that they have spent the last ten years getting used to the idea of getting for free), and to pay for a mechanism to get the news onto that device (separately from the network fees they are already paying to connect an open device like a mobile phone to the internet.)

Oh yes- and this is on a full colour tablet device. So ignoring the fact that the choice for tablets right now is either black and white, but easy to read and with a long battery life, or with a colour screen, but backlit, with a short battery life and much less comfortable to read from for long periods. Both of which sound like the kind of tradeoff that is going to keep me from buying a suitable device for a year or two at least. (And I like gadgets...)

I understand that once you've bought something like music or applications from iTunes why you would want to carry on buying Apple devices, or why you would want to buy a new Windows PC to replace an old one— you want your software to carry on working. But buying a device, purely so that you can buy the software/content that would fill it? I don't understand the logic there. Perhaps 2 years ago, there could have been an interesting opportunity to do this by partnering with Apple and making exclusive applications for the iPhone (before they opened up the App Store, when only Google had applications that lived on the iPhone.) Perhaps with the mythical Apple Tablet on the horizon, there could be an interesting partnership in the pipeline? (I don't know anyone else with a really interesting colour tablet on the horizon.)

ALEXIS GLICK: ON THE TABLET, IF I PAY THE MAXIMUM AMOUNT I CAN HAVE ANYTHING I WANT?

RUPERT MURDOCH: ANY CONTENT. BOOKS, ANYTHING AT ALL. YOU JUST HAVE TO PAY. THAT’S THE FUTURE. IT COSTS A FORTUNE. THE NEWSPAPER INDUSTRY – THE NEWS INDUSTRY, PUT IT THAT WAY. LET’S NOT TALK ABOUT PAPER. THE NEWS INDUSTRY SPENDS A FORTUNE IN COLLECTING THE NEWS. IT NEEDS TO BE PAID FOR IT. THERE IS NOT ENOUGH ADVERTISING TO GO AROUND. IT’S ALRIGHT ON CABLE TELEVISION BECAUSE IT GETS PAID BY THE CABLE SUPPLIERS, MONEY, WHICH, OF COURSE, GETS PASSED ON TO THE PUBLIC. AS WELL AS SUPPLEMENTED BY SOME ADVERTISING AND IT HAS TO BE THE SAME WITH OTHER FORMS OF NEWS.

Problem Four

Monolithic news is too expensive.

"There's not enough advertising to go round." Sure there is. What isn't happening is the right advertising being connected with the right people at the right time. (The notable exception, of course, being Google's.) Online display advertising can get a lot better- it is, and I think it will continue to do so. Offline advertising budgets will continue to move online.

The news industry spends a fortune on collecting the news- a fortune that advertising doesn't seem to be covering. But does it have to? Aren't there cheaper ways of collecting "news"? Is this about the cost of collecting and telling stories about current events, or about the cost of running news organisations that have been profitable in an age of paper but are struggling to stay profitable in an age of pixels?

He's said that search engines don't have enough money to pay the kinds of prices that Murdoch would want them to be paying. Although the way Murdoch talks about search engines like Google as "parasites", this doesn't really sound like a point of principle— just that the price isn't right. But given that Search advertising accounts for over half of online advertising spending in the UK (where the online advertising market has a bigger share than anywhere else in the world), this seems to be saying that advertising simply isn't making News International enough money for online content.

ALEXIS GLICK: ARE YOU CONVINCED IT IS GOING TO WORK?

RUPERT MURDOCH: SURE.

ALEXIS GLICK: WHY?

RUPERT MURDOCH: WE TEST MARKETED IT AND PEOPLE I THINK UNDERSTAND THAT IT’S PERFECTLY FAIR THAT THEY ARE GOING TO PAY FOR IT. IF IT DOESN’T, THE NEWSPAPERS WILL GO OUT OF BUSINESS. ALL NEWSPAPERS. THERE IS JUST NOT ENOUGH ADVERTISING TO GO AROUND FOR ALL THE SITES ON THE INTERNET. THE NUMBER OF SITES AND AVAILABILITY OF ADVERTISING ON THE INTERNET, THE AVAILABILITY DOUBLES AND TRIPLES EVERY YEAR BUT THE AMOUNT OF REAL MONEY GOES UP 10 OR 15% A YEAR. THE PRICE OF IT KEEPS COMING DOWN.

Problem Five

There is enough advertising.

It's perfectly fair for people to pay for it- of course it is. But again, there's the point about availability of advertising on the internet. There is a problem with the amount of quality inventory available, with not enough websites creating quality advertising space, with ad networks that sell huge volumes of advertising cheaply, selling large numbers of exposures instead of reaching well targeted markets efficiently. The model that works brilliantly for pay-per-click ads isn't going to work as well for branding advertising. If you don't click on an ad the first few times you see it, then you probably aren't going to click on it. But if an advertiser doesn't want you to do something, but to notice something- to remember a message, a brand, a piece of information that will help influence your decision next time you are on the high street or in the supermarket- then they want you to see it again and again. The trick is getting those advertisers to spend online.

There is an interesting point that Murdoch doesn't see the traffic that Search generates as being particularly valuable— which I think makes sense. This article in AdAge explains it well; if you're looking for something specific online (especially "news") then you're probably interested in reading different reports of the same story. That kind of behaviour doesn't lend itself well to clicking around on anything that catches your eye and looks interesting— which is the kind of behaviour that lends itself well to successful online advertising. (That is, so long as success is being measured on clicks— which is a topic for a different post.) on the other hand, someone who visits the home page of the Times website to see what headlines catch their eye would be a much more interesting audience for advertisers.

So— perhaps— a paywall would increase the value of the advertising on each page; the CPM (cost per thousand impressions) might increase, even if the number of visitors (and therefore exposures) would decrease. In his book "Free" (still available as a free audiobook here, Chris Anderson explains that the price of a magazine subscription isn't about the money made, but increasing the value of the advertising to an interested and engaged audience.

Would paying users also expect an ad-free experience online for their money, and be less receptive to advertising though? And going back to the problem with "collecting" news; the fact is that social media not only provides people with a way to find out about stories that are interesting to other people (the ones that people want to talk about, or that they care about) is effectively providing a personalised news service. As far as I know, there isn't a news organisation out there which has yet managed to figure a way to personalise news as effectively as I can do with a little time to organise the right RSS feeds and a tool like Google Reader. Which not only collects stories from the sources I ask it to, but also now organises them by "magic" so that the most important or relevant stories to me appear at the top.

Meanwhile, News International sites are still just giving me a digital version of the one-size-fits-all newspaper. The same news in the same format, the same order and the same presentation that they give to everyone.

Perhaps the video itself gives an idea of what might be going wrong with News International's own advertising. The video has a Fox Business logo in the bottom left hand corner right the way through. About the bottom fifth of the screen is taken up by different URLs for Fox Business- URLS which you can't click on. Above that is a bar which alternates between Rupert Murdoch's name and title, and short quotes repeating what he's already said in the interview, next to a Wall Street Journal logo.

In other words, the only advertising this 9 minute video carries is pretty bad, free advertising for News Corp. properties. Seems like a missed opportunity for a business so intent on finding new ways of generating revenues...

Of course, there are other advantages to locking your content behind a paywall, where less people will come across it and Google can't see it. For example, if you feel like ripping off some content from a blog without paying, without permission, and without even telling the blog author that you are using their content... well, what are the chances that they would find out?