In my Money Week column this week, I've been discussing why charging for The Times website won't work. Here's a taster....
There are a small group of businessmen in the world you wouldn’t want to bet against. Warren Buffett, and George Soros are two of them. From a younger generation, Steve Jobs of Apple, and the hedge fund manager John Paulson, who made a fortune from betting against the sub-prime bubble. And one man would certainly top your list: Rupert Murdoch.
Over at least four decades the Australian media tycoon has consistently taken on the 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.
That said, 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. The decision is a decade too late, the content isn’t right, and, in truth, the newspaper is itself too elderly a technology to survive in a digital era.
Naturally, nobody involved in journalism or the media can fail to be impressed by Murdoch’s determination to recreate the economics of the newspaper industry – and save it from oblivion.
The newspapers are losing money heavily. The Times is reported to be losing around £70 million a year right now. The Guardian and The Independent are losing around £30 million and £12 million 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. 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 comfortable with.
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 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.
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 the grim truth is that Murdoch’s gamble won’t pay off. There are three reasons for that.
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 spent enough time concentrating on accuracy – after all, what’s the point of news that isn’t true? They haven’t focussed on making news comprehensible – why allow political and business coverage to be dominated by anonymous quotes, which 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 worrying about whether they are creating a product that people want. Many of the blogs are now more reliable, and more comprehensible than the newspapers. If they aren’t, other bloggers instantly correct them. The newspapers should learn from that, and think more about whether they are 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 such as this one, rather than go to The Times for rather ordinary coverage of the subjects that interest them.
Imagine if EMI tried to sell us CDs with their selection of new music – some classical, some jazz, some pop. It wouldn’t work. The customers would just 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. So we will. Now that the genie has come out of the bottle, it will be impossible to put it back.
People will pay for news. They always have done. But they probably won’t pay for a traditional newspaper online. In anther decade or so, it is hard to believe that they will pay for the printed version any more either. Murdoch’s stand is heroic. It is probably better than doing nothing – after all, giving the product away for free hasn’t worked either. But it is impossible to believe it has any chance of working, or any chance of turning back a tide that now looks unstoppable.