Murdoch is wrong – distribution, not content, is king: Kohler

Poor News Corporation. At the frontline of one of the greatest revolutions in history, in which great opportunity wrestles daily with horrendous value destruction, and the company is cursed with a leader who was born 79 years ago, in the Great Depression.

As Rupert Murdoch admitted to the National Press Club in Washington this week: “I’m old. I like the tactile experience of a newspaper.”

His most recent biographer, Michael Wolff, reports that he doesn’t use the internet; in his press club interview session this week he said he doesn’t have a Blackberry, but he does have a computer: “A double computer screen, behind me; one with the Wallstreetjournal.com, and the other with the NYTimes.com, and I’m comparing them.” Surfing is done in water.

In the interview he displayed a frightening ignorance of how Google works, explaining that: “They’ve got this very clever business model which is – and they’ve invented – almost a new type of advertising, search advertising, and so if they just pour out tens of millions of words a day one way or another, they have key words in there which tie to advertising beside it.”

Imagine how disheartening this is for young people working for News Corp. The boss hasn’t got a clue, but he still dominates the company he built and all the managers down the line must feign loyal ignorance as well.

It’s not surprising, of course, as many 79-year-olds struggle with the internet and prefer reading a paper, and Rupert Murdoch would just be another one of them if he didn’t still run the world’s most powerful journalism organisation.

With one of the generals in the journalism army charging up the wrong hill, sword outstretched, many are following. Mind you, there is slaughter over most hills for newspaper publishers these days, so maybe it doesn’t matter, and it’s slightly unfair since newspapers only form a small fraction of News Corp’s revenues – though for many of those who are following Murdoch, they’re everything.

Nevertheless, it seems that Murdoch is leading a wave of optimism about paywalls in journalism at the moment (which is fabulous news for free publications like Business Spectator).

Steven Brill, the prolific author and “committed journalist”, as he calls himself, has launched a new service for publishers to help them convert to paid models online and has become, with Murdoch, a leading campaigner for paywalls. More than 1300 publishers have signed up for Brill’s service, and newspapers everywhere are talking about little other than paywalls and the burgeoning hope that Apple’s iPad will change the game in their favour.

The World Association of Newspapers and News Publishers has just published a report entitled New Revenue Models for Newspaper Companies, in which it “explores how to piece together a New Revenue Mosaic of multiple revenue streams.”

Some of the pieces of this revenue mosaic are tragically amusing: endowments, grants, registering as a not-for-profit, government subsidies, tax breaks, syndication and, finally, “paid content”.

Says the WANNP: “The key to charging, as this report’s research shows, is that the content being charged for is unique, and cannot be accessed anywhere else, or if it can be, time is of the essence, as with financial news.”

Correct, or rather mostly correct. And that’s the essence of the problem: in the world of newspapers, journalism was only unique and valuable because it could not be accessed anywhere else. It was supported by a distribution cartel in which the distributors – newsagents – had to be paid out of the cover price.

For a newspaper, the value proposition – the thing that the readers are actually paying for – is the delivery, not the content. They are paying for the newsagent to get out of bed and drive to their house, for the plastic wrapping to keep it dry, for the paper on which the words are printed, the wages of the printers and the building and maintenance of the factory.

Newspaper companies and their journalists are now discovering this uncomfortable fact but trying to ignore it. ‘Content’, they maintain, ‘is king’, or as Rupert Murdoch put it: “Content is not just king, it is emperor of all things electronic.”

Actually the unpleasant truth is that distribution is king – always has been. It used to be what people paid for and now it is controlled by Google, and it is free.

It’s free because Google has discovered another way to be paid: by selling ads around the free stuff that people look for. Google, and search engines generally, ‘distribute’ the internet, guiding consumers to web pages.

In order to be distributed by a search engine, the web page must have free access. If it’s not free, either Google doesn’t index it at all or the word ‘Subscription’ appears next to the search result and no one goes there.

The lingering idea that ‘content is king’ has persuaded many journalists and newspaper publishers that they can exist profitably online as they did before, without search engines. It is simply a fantasy.

Of course, you can have profitable paid content – we do it with Eureka Report – but as the WANNP says, it must be unique, not able to be accessed anywhere else.

And it also must be distributed, which is why the WANNP statement is only mostly correct. Even unique online content requires distribution and marketing, and that means search engines. And that usually means giving at least something away.

That’s why the Financial Times only starts charging after 10 story reads and why the Wall Street Journal, cited as the most successful paid content model, has ‘first click free’ – which means if you access a story via Google you get it for free, so all you have to do to read the WSJ for nothing is cut and paste headlines into Google and access them that way. It means Google indexes and presents WSJ stories without ‘Subscription’ next to the search result.

Amusingly, Rupert Murdoch complains bitterly about this, so WSJ publisher Robert Thompson obviously hasn’t told him yet that it’s a deliberate policy.

And that’s why the iPad might change the game, because Apple is distributing the stuff instead of Google, and Apple wants to be paid (30%).

That means Apple will be like the newsagents: only items with a cover price will be distributed through the iTunes system, starting with music and moving to books and – everyone hopes – newspapers and magazines.

There are two problems, however: first, the publishers of music and books only want to be paid once, but newspaper publishers need to be paid a little bit every day, and second, whereas a piece of music or a book is unique – there is only one Lady Gaga, for example (thank goodness) – news is a commodity; it’s everywhere, and so is opinion.

And that really is the key to the paid/free online publishing debate: content is not king and never has been. That was a journalistic delusion. The uniqueness and the money in newspapers came from distribution, and now that’s free.

Apple might be able to start charging for distribution because the device is wonderful and might share some of that money with the content producers. Maybe. But distribution – or rather Steve Jobs – is the king, not Rupert.

This article first appeared on Business Spectator.