Has Murdoch Found the Magic Formula for Paid Online Content?

What’s the path to profit in the digital age? Publishing companies, particularly those in the newspaper and magazine business, have been wrestling with that question for at least the past decade.

Rupert Murdoch, chairman of the media conglomerate News Corp., thinks getting readers to pay for online content is at least a partial answer — and on Monday, News Corp. sealed two deals that could help in executing a paid-content strategy.

Mobile Devices and Web Portals

News Corp., which owns major newspapers such as The Wall Street Journal and the New York Post, announced plans to purchase Skiff, a fledgling company that has developed technology for delivering newspaper and magazine content to e-readers and other mobile devices such as smartphones and tablet PCs. Skiff also has been working on its own e-reading device, but News Corp. reportedly is not interested in buying that part of the business.

In a separate deal, News Corp. agreed to invest an undisclosed amount of money into Journalism Online, a startup company that’s building a Web portal through which newspaper and magazine publishers would be able to collect fees for giving readers access to selected articles from their publications.

“These deals make a lot of sense for News Corp.,” Krishna Srinivasan, president of Frost & Sullivan, told the E-Commerce Times. “Murdoch has publicly stated the desire to serve online content via various online channels, as well as the intent to monetize this next-generation content. These platforms give him a vehicle to serve the content to multiple device types.”

Possible Case Study

If successful, this venture also could serve as a case study for how media companies can successfully transition from print to electronic publishing. Companies with roots in the print media have been struggling as readers — and more importantly advertisers — increasingly have shown a preference for online media.

Print Advertising revenue dropped 28.6 percent to US$24.82 billion in 2009, according to the Newspaper Association of America. Meanwhile, the online ad business, which accounted for $24.2 billion in 2009, is poised to expand to $34.4 billion by 2014, according to a report released Tuesday by PricewaterhouseCoopers.

Print publishers have reacted to these numbers by moving their properties online. In doing that, most publishers have given readers free access to online content, in hopes of attracting new revenue streams as advertisers followed readers to the Web. In most cases, however, online revenues have not been as healthy as the publishers would like, which is why News Corp. and others are now exploring the paid-content model.

A Good Customer Experience

There is some evidence that readers are willing to pay for certain types of content — the question is whether they’re willing to pay enough for publishers to make a profit. American consumers have said they are willing to pay roughly $3 per month for content that is “unique and timely,” according to a survey conducted in November 2009 by the Boston Consulting Group.

Consumers’ willingness to pay for content grows when they can get it on the mobile device of their choice, according to James Brehm, senior consultant Frost & Sullivan.

“What people really are willing to pay for is a good customer experience,” Brehm told the E-Commerce Times. “That means the content they want on the device they want.”

Users’ desire to select the devices on which they receive content is why it didn’t make sense for News Corp. to buy the Skiff e-reader, Brehm argued.

“It’s fairly easy to find a contract manufacturer in Asia to build a device cheap, if you’re looking to get into the device market,” he noted. “What’s hard is putting together a platform to serve content to multiple devices, and putting together the relationships to deliver content that consumers are willing to pay for. With 2 million eyeballs viewing full color content on the iPad, Amazon readying a color Kindle, and companies like Dell entering the tablet fray, who wants another black and white e-reader?”

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