There have been some stories about how YouTube is preparing to work with a bunch of big movie studios to sell access to movies. It's been offering up some movies for a year or so, though it hasn't really caught on. The hope is that with big Hollywood pictures, people might care more. I'm not convinced it will be that big of a deal -- especially for folks who use Netflix -- but it's an easy enough thing to do. Except... apparently two of the major studios, Fox and Paramount, are balking at the deal, because they don't like that people can find unauthorized copies of their movies via Google's search functionality. This makes no sense. Basically they're saying they'd rather that when people search on their movies, that their only options are unauthorized versions, rather than having a legitimate version at the top of the list. This is not how you "compete" with unauthorized versions.
You know, it really wasn't that hard to predict that the brainchild of Rupert and James Murdoch -- an iPad-only news publication, called The Daily, that people would pay for -- would flop. The Murdochs (father and son) don't have a particularly good history of succeeding on the internet. In fact, they have a history that is mostly littered with failure when it comes to internet ventures. But, in an age when ubiquity, availability, access and sharing are what consumers want, coming up with a publication that was locked down, specific to a single platform, and quite limited, just seemed like a bad recipe from the start. We'd already noted that a bunch of the "big name" journalists and staffers that had been brought on to The Daily had been leaving just weeks after the publication launched.
But what about readers? While the Murdochs have been quiet, the folks over at Nieman Lab put together a nice proxy, in looking at how many people were Tweeting stories from The Daily's iPad app. I'm sure it's not a perfect correlation, but if people were really engaged with the news from The Daily -- which, increasingly, is an important aspect of news communities, you would expected to see this number continue to go up. Instead, as Joshua Benton describes, it's "decline, plateau, decline." Here's the graphical representation:
Again, this almost certainly does not represent a direct correlation to readership. We see stories that gets lots of traffic get very few tweets or comments, and stories with relatively little traffic get a ton of comments. But, on the whole, as an overall proxy, it at least suggests something not good is going on at The Daily in terms of actually getting readers engaged.
And, I think, that's the obvious problem the Murdochs always run into with their online efforts. They're good at producing content. They're dreadful at actually engaging with a community. They bought MySpace, but their failure to understand what people there wanted resulted in its rather massive decline. It seems clear, with the Daily, that engagement and interacting were an afterthought. At best, it was a "let them tweet!" sort of discussion, rather than a look at how to actually engage the community in any meaningful way.
Back in November when News Corp. released some subscription info for its paywall for The Times/Sunday Times (publications which it walled off behind a complete paywall), the details were really lacking. They claimed 105,000 "paid" digital users, but that mixed up a bunch of different kinds of users, including one-off "daily" purchases and subscribers. They did say about 50% of those were "monthly" subscribers, but there was an introductory £1 per month rate, as compared to the full £8.67 per month rate that would go into effect after the first month. So, now, with News Corp. claiming 79,000 monthly subscribers, I'm wondering how those "intro" plan subscribers are being counted. Did all of them convert to full priced? How many dropped off? Are they still counting those who dropped off in that subscriber count?
Either way, while 79,000 subscribers may sound like an impressive number, I'm still not convinced the economics works out. Assuming that they're all paying the full price, subscribers are paying almost exactly $1 million per month. That's not bad, but it's not a really huge number for an operation like News Corp. either. And if it's true that traffic to the websites dropped about 90% from about 21 million unique visitors down to less than 3 million unique visitors, ad revenue from the site really isn't bringing in that much (no matter how many times they try to spin the audience as being "more valuable.") It still seems like they almost certainly gave up significantly more in ad revenue than they're making via the paywall, and while there are still new signups, over time it's going to be tougher and tougher to sign up new users. Clearly, the paywall is not a complete disaster, like some others, but it still doesn't seem like the economics add up here.
We had warned from early on that News Corp's "iPad-only" fee-based publication, The Daily, was a disaster in the making. After a ton of hype, and launching a few weeks ago to a ton of overwrought praise, all we've been hearing is that people aren't buying. A bunch of folks checked it out early, and then it more or less disappeared off the map. And now, it appears that staffers are bailing at a rapid rate. Of course, in the run up to launch, there was all this talk about how Murdoch was hiring a ton of big name journalists and staffers away from other publications. To see a bunch of them rushing out the door, barely weeks after the launch, suggests this may be a failure of epic proportions.
You may remember, not so long ago, Rupert Murdoch was running around claiming that other publications "stole" from him. He gave a speech where he warned:
"The aggregators and plagiarists will soon have to pay a price for the co-opting of our content."
Of course, around that time, we highlighted the fact that Murdoch, himself, owned a whole bunch of aggregators, many of which acted much worse than the sites -- such as Google -- that Murdoch was complaining about.
However, over the weekend there was a nice example of how one of Murdoch's publications clearly copied a story from another publication and did not give any credit for it whatsoever. We noted earlier how Broadband Reports broke the story of AT&T deciding to put in place metered billing. Broadband Reports got a tip with a leaked email showing the new rules, and got confirmation from AT&T. Nearly every other report on the story credited Broadband Reports with breaking the story. However, when the WSJ (via Dow Jones Newswire) wrote the story, by reporter Roger Cheng, there is no mention whatsoever of Broadband Reports breaking the story.
Now, a few quick points, I don't think that every publication should necessarily have to credit who breaks a story. It's often the neighborly thing to do, and I think that many people appreciate it when it's done. But news is news, and if it's factual, then there's no proprietary nature to it. So, my complaint isn't simply that Dow Jones/WSJ didn't credit BBR. What I take issue with is when a company comes out and states, repeatedly, that it is going to crack down on other sites that copy its work -- who often do it while providing credits and links back -- and then chooses to publish without credit, that seems hypocritical. Don't say one thing and do another.
Of course, some others will (correctly) point out that Cheng appears to have contacted AT&T himself, and added a few tidbits to the story (even if it's been pointed out that he seemed to unquestionably accept AT&T's claim of congestion). So, defenders will claim this is "okay" because he did "additional independent reporting." And, again, it's great that Cheng did additional reporting. But it doesn't change that it appears BBR had the original report, and got the info out there. Even with the additional reporting, it appears that the WSJ was able to create a news report off of a lead from BBR. And this goes right back to the claims of Bill Keller last week in which he seemed to be saying when the NY Times builds off someone else's work, that's journalism. When new media sites do it, it's piracy. It's too bad that these newspapers claim that they're so against such things, but have no problem doing it themselves. Again, most of the actual actions that they do are fine... by themselves. But doing those things after claiming to be against them in others... that's hypocrisy.
The downfall in almost every case is about Murdoch focusing on using the internet as mainly a broadcast medium, rather than a communications medium. Delphi was all about community... and then News Corp. tried to turn it into a place to sell his magazines and newspapers. Fox Interactive was all about pushing content, and had little community. MySpace, of all things, which was really about community from the beginning, has completely faltered under News Corps' control, because they tried to focus on using it to sell music and stopped investing in any sort of real community features -- as services like Facebook and Twitter totally leapfrogged them on that front. It's the same story over and over again, and given that The Daily is so focused on platform, rather than users, it seems likely to be a repeat of the same mistake all over again.
In the latest example of copyright law gone mad, it appears that Twentieth Century Fox is suing a woman for $15 million, because she aggregated various scripts she found online as a resource for screenwriters (like herself) to learn from. The key issue is that apparently one of the many, many scripts she had put together was of a movie that is still in production, and Fox doesn't want anyone to see it. Apparently she was told of the lawsuit by "private investigators," who questioned her for two hours (it's not clear why she didn't throw them out or refuse to answer their questions).
Of course, those who support the current copyright regime will note that these scripts are, in fact, covered by copyright. However, it's difficult to claim that these scripts are somehow likely to act as a substitute for the actual movie for anyone. It's hard to see any losses from such a collection, frankly, but thanks to the fun of copyright law and statutory damages, actual harm doesn't much matter. All that matters is a giant Hollywood corporation has sued a struggling screenwriter for $15 million because she thought she was helping other screenwriters by aggregating example scripts she found elsewhere online for them all to learn from.
There's been lots of talk about how News Corp. is developing an iPad-only newspaper called "The Daily," but the more I read about it, the less sense it makes. The general thinking behind it seems to come from the same reasoning which explains why so many iPad publisher apps are so bad. They're approaching it as a way to bring back the old scarcities, which are now artificial scarcities. They're looking at the platform as a savior based on what it does not allow, rather than based on what it actually enables.
Creating a platform specific publication in a day and age when platforms have less and less meaning seems like a recipe for disaster. It's based on the idea that the Murdochs want to go back to an age of control, rather than embracing the age of enablement.
I spent last week at the Monaco Media Forum, which was quite an event overall. Of course, as with many such events, many of the most interesting and valuable parts happen outside of the main sessions in the conversations and meetings you have with people separate from the scheduled topics. The good thing that I took away from the event was a pretty wide sense of optimism about the vast media world that we're heading into. Having attended plenty of entertainment industry conferences lately, which seem to be surrounded by doom & gloom predictions, this event was blissfully full of a pretty optimistic viewpoint, which was refreshing and a bit encouraging. Of course, as a caveat on that, there really weren't that many actual media people at the event. Instead, there were lots of technology/infrastructure companies as well as ad and marketing firms -- and all of those have plenty of incentives to be as optimistic as possible. Perhaps it's the media folks who are depressed... but they stayed away.
One exception was James Murdoch, who was actually a "co-chair" of the event, and he gave an interview discussing a wide range of things that are happening around News Corp. The entire video is about 37 minutes, but it's quite interesting:
Having questioned many of James Murdoch's recent statements on paywalls and copyright, I have to say that my initial impression was actually to be impressed. Here's a guy who -- without much experience -- is running a huge swath of the media industry around the world, and seems to have a very strong working knowledge of what's going on across the board, and can speak knowledgeably about them all. Many people I spoke with at the event felt the same way. On top of that, I actually agreed with many of the larger points he made about innovation, and the need to make bets on innovating, rather than just protecting their businesses and milking them for cash.
However, when he got down to the specifics, I went back to questioning many of his assumptions, and thinking that his world view may, in fact, be a bit skewed by his previous success (after, it should be noted... a string of failures, not mentioned at the interview) at BSkyB, a satellite TV provider in the UK. The more the interview went on, the more I realized that Murdoch appears to view much of the media world through that lens, and seems to saying that, in the end, the media world will end up like a giant pay TV system, with a big subscription. I think this is more wishful thinking, rather than where the internet is actually heading, and treating the internet that way will almost certainly result in failure -- such as with his paywall experiments.
He talks up the various successes with pay television (satellite and cable) around the globe, including Italy, Germany and India, and again that seems to influence his views. He points out, repeatedly, that no one really thought that going into those markets would work, but News Corp. proved all the doubters wrong -- as he no doubt believes the doubters on the internet will also be proven wrong. He gets into the discussion with the following statement, which got most of the attention (and a bunch of Twitter messages of support from those in the audience):
I think there's a lot of talk about monetizing content and there was hand-wringing and for years and years... I remember in the late 90s I was in Singapore, and people were talking about mobile media and what is it going to be and what are the killer apps and all that sorta stuff... And I guess, I just look at it more simply. I think the first rule of is if you're going to monetize something is that you should probably not give it away for free.
This is at 14:25 in the video, and you really have to see the sarcastic eye rolls when he says that last line. And, you can immediately hear the laughter in the audience (which was much louder). But here's the thing: he's wrong. And he must know that he's wrong. Media businesses have made tons of money for years while giving away stuff for free. The very, very successful network television business (of which News Corp. owns one), for example, was always based on giving stuff away for free, but selling the attention of viewers. The newspaper business (which is where News Corp. originated) wasn't based on giving away stuff for "free" totally, but on subscriptions that never even covered the cost of printing and delivery.
No, this doesn't mean everything should be given away for free, but as the CEO of a large chunk of News Corp's media business, and supposedly being thought of as the guy at the company who "gets" new media and new media economics, it seems troubling that he so flippantly ignores the basic economics of non-excludable, non-rivalrous content, and how it can be utilized as part of a larger business model, by making other things more valuable and selling them.
So if you think about it and you're investing in things and you say 'I'm trying to figure out how to make money for this,' and then you give it away, it doesn't seem to work.
James might want to check out a little company called Google, which has done rather well giving away lots of things for free.
From there, he talks about "fair" pricing, and how they want to invest in content and price it fairly knowing that not everyone will consume it. But, of course, that's not really the issue. It's not about "fair" pricing. It's about market pricing. And if everyone else is offering market pricing and you're focused on "fair" pricing -- and your so-called "fair" pricing is above the market pricing, it's not that "not everyone" will consume it, but almost no one will consume it. And that's where you run into problems. Hell, I put a ton of work into this site. Let's say I think a "fair" price for anyone reading this site is a dollar a day. But, the market says otherwise, so my job, as someone running a business, is to figure out a way to get that money by offering something of value that can be priced not fairly, but competitively that the market will want to buy. That's what business is about. It's not about "fairness." It's about understanding the market.
Now, that said -- the point he makes following this is one I agree with wholeheartedly -- which is that if someone is not willing to pay, then it doesn't mean that it's the users' fault, but that as the content producer/copyright holder/etc. It's News Corp's job to innovate and convince people that there's something worth paying for. That's the whole basis of my "reason to buy" concept. But, the problem here is that simply designating a "fair price" when it's way above market price, is usually not a reason to buy, especially when your product is in a highly competitive and dynamic market, as is the case with news.
It's the next bit where you realize how much he's still focused on the pay TV business. He notes that, in Europe and Asia, 70% of the company's revenue is from subscriptions -- rather than advertising. He uses this to suggest that people online were so focused on reach and audience share, that they weren't focused on actually making money. Again... he's right on the facts, but wrong on where that leads him. It's true that many in the online world did not focus on making money, and that was a huge mistake. But that doesn't mean that putting up a paywall is a good strategy to make money. And that's where I think the major disconnect comes in.
He then makes the specific statement that the online news business will become like the cable business, with bundles and affiliate revenue. Here he's making the classic pay TV industry error of being so infatuated with the fees that are being passed around to carry channels, that they're hoping to recreate such a world online. But, this ignores the reason those setups have developed (limited competition and scarcity of access -- both of which don't apply in the online world) as well as the incredible frustration this has created with consumers, who are fleeing in droves (something Murdoch more or less tries to dismiss during the Q&A by saying many of the cord cutters in the US are doing so because the "deals" to get people to switch from analog to digital TV are up).
It's a bit amusing to hear him note that iPad apps for newspapers are much more cannibalistic than news websites. Again, I believe that point is absolutely true, but he seems to ignore the implicit other point he's making here: which is that web pages really weren't all that cannibalistic of newspapers.
Of course, the other funny thing is that you can see pretty clearly throughout the interview that one of his key talking points is this idea that "News Corp." isn't that big. Towards the beginning he starts to call it a big media company, but then corrects himself and says "mid-size." Later, he makes sure to note that Apple is ten times the size of News Corp., and that a company like BT is making much more money in the UK. The banker interviewing him mentions Amazon as a larger company. But that's all smoke and mirrors. News Corp. is the third largest media company in the world, only behind Disney and Time Warner, has over $30 billion in revenue and $54 billion in assets. Sorry, James, you're not a mid-sized business. You're a big, big business.
Towards the end, in response to an audience question about cord cutting and how it will impact News Corps.' business, Murdoch again brings up how they'll just make it like cable to some extent, and then falls back on the "but content is really expensive to make" line, by pointing out that, while other industries may find that things get cheaper thanks to technology, that's not true in content production. He pops out this lovely line:
There is no new technology that makes athletes not greedy.... And I think that's really something that the telco industry and a lot of the tech industry hasn't really understood -- that there's (chuckle) a whole economy behind this...
It gets a laugh, and afterwards I heard a lot of people say they agreed and it was a good point. But, I think it's a line that sounds good and masks that he's discussing two separate things. The first question is the cost of producing content. The other question is how do you make money. But those two are not the same question. No one has said that you don't make money. Saying that your business model has to change is not the same thing as saying you don't make any money. If your content is expensive to produce, then yes, of course, you need to figure out a way to have it make money, but that doesn't mean that simply charging for it is the way to do that. You can get away with charging for ancillary things (convenience being a big one), but it's important to recognize what people are really paying for, or you risk alienating them quite a bit, and driving them to alternative means of content consumption.
On the whole, I actually came out of this more impressed with Murdoch than when I went in. However, I still think that he's making some pretty serious mistakes in his assumptions, and it's going to come back to haunt him and News Corp. in the long run. The failure of the paywall for The Times is just the early warning sign.
Earlier this year, we noted that News Corp appeared to be testing the waters with a hot news claim against Briefing.com for copying various Dow Jones Newswire stories. The details of the case suggested there might actually be a copyright issue, in that some of the material appeared to simply be cut-and-pasted from Dow Jones (including typos). Briefing.com has now settled the case, but what's troubling is that in doing so it also admitted to violating hot news as well. This may not matter in the long run, since a settlement like this isn't precedential and doesn't say one way or the other whether or not the court agrees that "hot news" is appropriate (even if News Corp -- predictably -- claims that this is a vindication for "hot news.") It's just odd that the company would fold on the hot news claim without even testing to see if it's legit. Though, given the fact that the company did appear to cut-and-paste articles, perhaps it's for the best. I could see the hot news issues getting clouded by the company's other bad actions. Still, settlements like this will only encourage more questionable hot news claims to be brought.
