The announcement comes immediately after News Corp posted a $203M loss for Q2 yesterday, mostly due to a write-down on MySpace. Although you have to have some level of economic savvy to become the 132nd-richest person in the world, it looks like News Corp is trying to defy basic principles of supply and demand. “We’re losing money here, and we’ve got some paying subscribers over there, so let’s just make everyone pay,” seems to be the rationale.
But the more you charge, the fewer people will buy something. I hope News Corp isn’t counting on keeping its already-struggling ad revenue the same with fewer pageviews once it goes to subscription-only. That struggling ad revenue may be exactly what prompted this move, but further limiting the pageviews and by extension the ad rate you can reasonably expect, News Corp may be shooting itself in the foot.
The WSJ does (appear to) have a working subscription model, but it’s somewhat of a specialty news site—business news that you might not be able to get anywhere else (though that’s debatable, too). But The Times, The Sun, The Post and hundreds of their other dailies all face tough competition in their niches, and while they do have readers online and off, they risk losing them to another paper with free ad-supported content. (And then those papers can charge more for their advertising with more pageviews. It’s a vicious cycle, I tell you!)
But can advertising really support any sites in this economy? Actually, Rupert Murdoch said on the conference call that
Advertising markets, while weak and particularly hurt by the slump in cars and finance, have shown some good signs of life. I think the worst may be behind us but there are no clear signs yet of a fast economic recovery.
But let’s not take any chances with helping that recovery, right, Rupert?
In fact, this is almost the exact story that we had back in May after they posted their disappointing Q1 results. Now Murdoch is adding a deadline—the fiscal year—for the change. The Guardian (not owned by News Corp) reports that Murdoch believes people will pay subscription (or maybe just one-time?) fees for a scoop or an exclusive in celebrity or investigative reporting.
Murdoch is right about one thing—reportage is not cheap, especially with their recent policy change to
ignore ready-made news items in embargoed press releases and waste manhours hunting down the exact same story on their own not use embargoed news as sources at the WSJ. But ensuring fewer people read your stories doesn’t sound like a good way to make that money to me.
What do you think? Can News Corp sustain itself with subscription news? Or do the laws of supply and demand tell us otherwise?