9 Apr 2010

Paywalls: It's payback time

It's payback time for consumers of free online newspaper content as the paywalls come down.  

LexisNexis - once thought to be the one stop shop for news aggregation and search - has begun sending out letters warning of the withdrawal of some of its titles. Guess which ones?

The Times newspapers announced that the paywalls would come down in June.   The long march away from free content starts now.   Mr Murdoch's appearance at the National Press Club (in the USA) saw him argue that people would pay when there was nowhere else left to go.   No, he's not going mad.   But it does underline my earlier thesis that he views the BBC (and Google) as competition.   Why?

The answer is this.   If you are building a system of paywalls you will obviously lose ad revenue.   The BBC can't benefit from ad revenue as it cannot carry advertisements but it may well benefit from an audience uplift to it's network of (very good) websites.   So, what can Mr Murdoch do?  

Ranting aside, Murdoch can recast his newspaper empire as an adjunct to his broadcast/film interests.   In this way he can create a synergetic cross-media whole from what currently seems a disparate grouping of media entities.   Then, fasten the bonds with a 'club' of some sort (Times+) where you get free tickets or reduced subscriptions to other Murdoch owned or sponsored initiatives . . . .

What you now have is a self-sustaining model predicated less on expensive consumer acquisition and more on customer retention (cheaper and more profitable in the long run).   It's the oldest and simplest rule of marketing.   In this way Murdoch can manage the decline in ad revenues from the print editions, which the uplift in online ad revenues has in no way plugged I might add, and thus stem the flow of cusomers away from his products.   Finally, he can upsell advertisements across platforms in a way that the BBC cannot commercially (though it does effectively with it's content).   Oh - and of course his customes are paying customers so are also likely be seen as more attractive by advertisers.

One big problem.   Few, if any, of Murdoch's competitors in the UK show any sign of going down either the paywall route or withdrawing their content from Google and other search engines.   The BBC is also very much alive.   There is little or no proof that audiences will pay for conent they think they can get free elsewhere.

The painful truth may well turn out to be as Thomas Jefferson put it:

"I read no newspaper now but Ritchie's, and in that chiefly the advertisements, for they contain the only truths to be relied on in a newspaper."

Thomas Jefferson, Letter to Nathaniel Macon, January 12, 1819

With the plethora of news and comment available to us, do we really need newspapers as we once did?   Is a managed decline actually the only way forward?   Has Mr Murdoch in fact hit on a way of managing that decline as profitably as he can within a short timeframe?   I think he might have.

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