Tuesday, December 8, 2009

Friedman Meets Murdoch

Economist Milton Friedman famously said (or is supposed to have said) "there's no free lunch." Media mogul Rupert Murdoch says something very similar, in a slightly different context, in today's Wall Street Journal. The implications of this seemingly simple message are profound not just for the economy at large, but for a media industry transitioning from old paradigm to new. The future face of blogs like this might hang on the issue.

Murdoch is bullish on the future of journalism, at a time when many are scribbling its obituary. That's encouraging. But the success of the new media won't rest on advertising revenues, as the traditional model did. The new model will require readers to pay for what they now get "free" on the Internet. That's where the lunch thing comes in.

Murdoch says the new media will have to work harder to give news consumers the content they really want. But that’s only half the bargain. Here's the other half, in Murdoch's words:

"My second point follows from my first: Quality content is not free. In the future, good journalism will depend on the ability of a news organization to attract customers by providing news and information they are willing to pay for.

The old business model based mainly on advertising is dead. Let's face it: A business model that relies primarily on online advertising cannot sustain newspapers over the long term. The reason is simple arithmetic. Though online advertising is increasing, that increase is only a fraction of what is being lost with print advertising.

That's not going to change, even in a boom. The reason is that the old model was founded on quasimonopolies such as classified advertising, which has been decimated by new and cheaper competitors such as Craigslist, Monster.com, and so on.

In the new business model, we will be charging consumers for the news we provide on our Internet sites. The critics say people won't pay. I believe they will, but only if we give them something of good and useful value. Our customers are smart enough to know that you don't get something for nothing.

That goes for some of our friends online too. And yet there are those who think they have a right to take our news content and use it for their own purposes without contributing a penny to its production. Some rewrite, at times without attribution, the news stories of expensive and distinguished journalists who invested days, weeks or even months in their stories—all under the tattered veil of "fair use."

These people are not investing in journalism. They are feeding off the hard-earned efforts and investments of others. And their almost wholesale misappropriation of our stories is not "fair use." To be impolite, it's theft.

Right now content creators bear all the costs, while aggregators enjoy many of the benefits. In the long term, this is untenable. We are open to different pay models. But the principle is clear: To paraphrase a famous economist, there's no such thing as a free news story, and we are going to ensure that we get a fair but modest price for the value we provide."

Will spoiled news consumers agree to pay news producers for what they now get, and replicate, for virtually nothing? That's unknown until media companies move aggressively to restrict content to paying customers only. Some of this is done on a small scale now, but most content is still out there for the taking. Already-shaky media companies are reluctant to throw up toll gates on the "information highway" when the competition is giving it all away. Everyone sees that the freebies must end. But all the major players are standing on the edge of the pool, wondering who’s going to jump first.

Murdoch's new paradigm, if it gains ground, also has the potential to dramatically change the so-called blogosphere, given how many blogs and websites depend on re-posting mainstream media material. I frequently link to news stories in this blog, and sometimes re-publish verbatim excerpts as reference points (as I'm doing in this post). This is arguably a benefit to the originating news source, if people click back through the links. But it also raises copyright questions that can’t be ignored.

We in the blogosphere tend to think of it as borrowing, but Murdoch calls it “theft.” And I think many of the points he makes are well-taken.

But this presents a problem. I’m one of “these people,” one of these "friends online," Murdoch references in the piece. If I had to pay to insert a link, or republish an excerpt, or pay to access the myriad news sites I now view for nada, the cost of doing this will increase considerably, possibly making it impossible. So what Murdock is proposing would impact (and possibly ruin) this and millions of other blogs and websites, which currently serve as a sort of shadow media, dependent, for the most part, on content provided by the “old media.”

Many “new media” sites take glee in bashing, badgering and discrediting the “old media.” But that’s dangerous and self-defeating in my view, given that the old media remains the baseline that most of us still use as a common reference point.

The new media may someday become as trusted and reliable, as a source of hard news, as the old media was in its heyday. But now, in its infancy, it’s still dependent on conventional news producers. We’ve been enjoying a Golden Age of news and information exchange, made possible by a virtually “free” web, where reams of content can be accessed at the click of a mouse. But that moment of freeloading may have to end, in order to preserve the professional information gatherers otherwise known as journalists.

If they go extinct, all you’ll have left is a tower of bloggle.

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