Will Murdoch's Switch to Subscription-Based Web Content Work?

Rupert Murdoch has become the first media mogul to make bold changes to his company’s newspaper monetization strategy that may reshape the way people receive their news--by paying for it.

Up to this point, web publications have primarily relied on advertising alone for revenues but this has had problems because online advertising rates are so much lower than those in print. Murdoch and others in the traditional media are seeking to change that by creating a system where readers and viewers are required to pay a subscription fee as well.

There is certainly a motivation to try something different. Overall, News Corp.’s operating income dropped by over 30 percent in its latest earning report. Its cable networks are the only holdings to be driving growth this year, with Fox News’ operating income increasing by 50 percent.

Clearly, much of News Corp.’s struggles are due to the recession, but newspapers have been struggling long before the recession. With content available for free online, fewer people are paying to subscribe to newspapers and magazines.

Americans have been reluctant to pay for subscription fees for news content online, especially after having received it for free for fifteen years, so will News. Corp’s plan succeed? There are not many details as of yet on what kind of subscription plans Murdoch plans to establish, but there has been a lot of attention as of late on a plan put forth by newspaper editor-turned Silicon Valley CEO Alan Mutter. At a meeting of newspaper executives in May, Mutter talked about his new venture, ViewPass.

ViewPass, is described as a network that will give users access to content for participating newspapers and websites while providing options for increased monetization. Content-producers have the option of having subscribers pay for content on a per-article basis, a monthly basis, or on various bases of bundled articles.

This strategy may work better than a traditional pay wall.

As Mutter said on his blog, pay walls cannot be successful when competing against so many free sites.

If you suddenly put a pay wall on a website that used to be free, you are bound to lose a substantial amount of traffic representing a considerable amount of potential advertising inventory. Once customers are turned off, it will be awfully hard to get most of them back, especially as plenty of free websites will be glad to welcome them.

By getting many content-providers untied under one network, there will be less competitive pressure on those newspapers that do charge for content. It will be easy for other newspapers to experiment with a subscription model, so each won’t fear losing too many readers because other newspapers would presumably be using subscription models, as well.

In fact, the New York Times is also considering launching subscription plans, and USA Today is planning on it. Steve Brill is launching a subscription service called Journalism Online.

In order to successfully sell a subscription-based product, however, newspapers must have something unique to offer. If each newspaper offers the same bland coverage of a routine Obama economic speech, there are so many sources with that story that competition will bring the price down. This is reflected in what have been the two successful subscription models to date, the Wall Street Journal and the Financial Times, both of which offer unparalleled coverage of the economy and markets, products which you can profits off of as well, thereby making them investments.

Mutter touches on this is one blog post, saying that newspaper companies should produce “a limited number of premium-priced, niche publications," as they abandon their daily print schedules altogether.

In doing so, they would relieve themselves of 60% of the cost of producing a newspaper, which goes into production and distribution.

The shift in niche content hastened by the rise of the internet is reflected by the fact that local newspapers are doing better than national papers and losing advertising revenue at much lower rates. There are a number of reasons for that, chief among them the fact that they have less competition.

You find the same national stories in every major newspaper, with little difference in between. You can only find a story about your local community in local papers.

Media companies will always be necessary, because news and information is always necessary, but the means of distribution and the nature of the content is changing rapidly. Rupert Murdoch may be at the front of the line in changing it. Or not. After all, putting one's news products into a for-pay structure does significantly  reduce their influence and reach. Only time will tell if paid content strategies will work or not.