Like the cranky old man on his porch yelling “get off my lawn”, Rupert Murdoch last week came out to chastise Google (NASDAQ:GOOG) for indexing News Corp (NASDAQ:NWS) content. Whether you love or hate Rupert Murdoch, you’ve got to give the guy credit; he can get an entire industry in a tizzy just by spouting off.
The latest frenzy came after Rupert bashed Google and other sites that “steal content” and subsequent rumors that Microsoft was prepared to offer News Corp a deal to provide their content exclusively to Bing, removing it from the Google index.
While the comments generated fodder for the blogs, the reality is that whether or not News Corp content remains in Google is pretty insignificant. And it does nothing to address the underlying issues confronting the news industry.
An exclusive deal with Bing might be lucrative for News Corp, particularly as a short-term way of recapturing some of the ad revenue lost during the downturn. But in the long run, I don’t think it has a huge impact on either company. For Microsoft (NASDAQ:MSFT), it could add some cache to Bing (and after spending $100M to launch the search engine, shelling out a few bucks to Murdoch & Co is not a big deal). But news is only a small piece of Google’s pie and it’s not the part that drives the big revenues. Is the overall plan for Bing to simply become a vertical search engine for news and travel?
More importantly, it does nothing to change the underlying fundamentals of the industry, notably:
- There is a massive amount of traffic generated by free news content
- But, there are multiple outlets for almost every story; no single general news source is a must-read. In fact, most readers don’t even know the brand of most of the stories they read on the web. Like it or not, news is a commodity and its getting less valuable each day.
- While there may not be enough advertising $ to support the entire newspaper industry, there is certainly enough online advertising dollars to support multiple news sites.
These last two points are why I think that these efforts to move general news content behind the pay wall are largely fruitless. (Note that I’m talking about general news content; for a handful of specialized news providers such as the FT and the WSJ, where many subscriptions are paid by companies, a paid model may be appropriate.) There is a huge demand for free online news and it will be lucrative for some providers to look to fulfill that demand by providing a quality, free product.
Suppose for a minute that all the current newspapers decided to put up a paywall on the same day (and let’s suppose they each made this decision independently, so we won’t call it collusion). For a short term, it would create a chaotic environment for consumers of online news. Some might decide to pay, while others would make do with alternative media and whatever information they could find. But very quickly, there would spring up some players to fill that void. Those players might include a handful of traditional papers (which, upon seeing 95% of their competitors remove their product from mainstream access, would quickly put their own product out there) as well as alternative media like the Huffington Post. You would also see other news media jump on the opportunity to expand their presence – CNN, MSNBC and others. We would likely see other new providers come forth, perhaps leveraging a mix of philanthropic and private capital sources for funding.
And those new providers would find a vast group of professional editorial resources available to them. Reporters who have been laid off as well as those not pleased with seeing their readership slashed as their content is moved behind the pay wall would clamor to join TheNewNewsBusiness.com.
Would the resulting product be as good as the best of our current newspapers? Certainly not at first. But over time, I have little doubt that news organizations developed from scratch today, with a deep understanding of the online world could quickly compete with the quality of traditional news organizations.
Let’s think about it for a moment. Most of the major newspaper brands were launched in the mid-nineteenth century. Their business model was born at a time when the only economical ways to reach local eyeballs was with newspapers, radio or yellow page ads. Their editorial models were developed in a world before globalization, where issues in the local community were the most important ones. It may have once made sense that each of 100 local newspaper organizations would each cover the same stories, but in today’s global world, that makes no sense. Yes, it’s important to have coverage of local events and interpretation of the local impact of global events, but that hardly justifies a full news room in every city of 100,000 population. On top of this, they all have the huge capital and labor expenses involved with printing and distributing printed newspapers.
The result is an industry with huge inefficiencies, a glut of inventory and an irrelevant business model built for a world that no longer exists. So, let them play with pay walls while they rattle their sabers. In the meantime, I’m looking forward to the formation of News 2.0.
