Old and New Media- an analysis of the Murdoch view

By Neil Behrmann

Those who try and forecast the future of technology Internet and communications should go back in time. When the technology revolution began twenty years ago, who predicted that mobile phone consumption, emails and the Internet would explode and thousands of songs would be downloaded on iPods?

It is guesswork to try and forecast ahead for three, let alone ten years, so it is hardly surprising that newspaper publishers are grappling with the stress and changes of the New Media. Take Rupert Murdoch, for instance. He describes himself as a "digital immigrant" in contrast to “digital natives” who have grown up in the broadband Internet World. Nevertheless, the veteran media tycoon appreciates that he must adapt his Old Media, News Corporation newspaper empire to New Media. He regularly has brain storming sessions with youthful bright executives and communications specialists.

Despite enthusiasm for the Web, Mr Murdoch and other newspaper publishers have a problem. It is exceedingly difficult for content providers to make money out of the Net. In the UK alone, News Corporation’s Times & Sun, the Guardian, Telegraph, Independent and several other national newspapers have free online editions. All are competing for classified and banner advertising. Visitors to these sites have surged, but circulation of print editions is either declining or are at best growing at a miniscule rate. Internet advertising is expanding fast, but it is insufficient to compensate for any decline in Old Media revenue. In the UK, for example, Website advertising is still only 6 per cent of the total advertising cake and the proportion is also low in the US and elsewhere.

Growing numbers of media companies are attempting Net users to pay for subscriptions. With an information overload from free online publications and wires and growing numbers of bloggers, it is tough to achieve success with the subscription model. Dow Jones, offering a combination of the Wall Street Journal and the weekly financial magazine, Barrons has a successful website based on a sizeable paid subscription base. But this success has been at the expense of the Journal’s struggling European and Asian print editions. In contrast, following several years of losses and sliding circulation, the Financial Times is struggling to break even. It offers free articles on its online edition to attract advertisers and paid subscriptions for comment columns and in depth pieces. But revenue from its online edition will have to rise substantially to recover capital costs of £100 million to £200 million (S$400 million) to build and maintain its website. Reporting a 41 percent decline in profits in the fourth quarter last year, in the face of an increase in advertising, the New York Times noted that circulation revenue remained under pressure.

Newspaper companies, like other media companies, are in the midst of a struggle to adapt themselves to the new ways in which readers and viewers consume news and entertainment on the Internet and digital devices, commented the Times. While advertising rates and revenue on its newspaper web sites jumped by 30 percent, that growth has not completely offset the decline in revenue and profits from newspapers and other older media.

The problems are likely to continue in the fast moving media industry. Indeed, Sir Martin Sorrell, chief executive of WPP, the global advertising company contends that excessive Internet spending by the Old newspaper industry is symptomatic of panic. Even so, it is difficult to disagree with Mr Murdoch when he says that the industry has no alternative but to adapt to the Net. According to Carnegie Corporation survey, consumers between the ages of 18 to 34 are increasingly using the web as their medium of choice for news consumption. Over 40 percent of the study’s respondents said they use a portal at least once a day for news, compared to only 19 percent who use a printed newspaper on a daily basis. People in that age group are looking for jobs on the Net and are reading other online classified advertisements at the expense of newspaper print editions.

“I’ve just had a lot of people at the Consumer Electronics Show, which is the biggest event of the year in America when everyone shows off all their new inventions and so on,” said Mr Murdoch in the Radio 5 interview. “In 20 years' time, everybody in the world will be able to get broadband and express themselves on the Internet. Conventional newspapers will continue but subscribers will be able to read every page of the paper on an electronic or battery-driven tablet or listen to the articles on an iPod, on the way to work.”

If he is proven right, will it be profitable for newspapers?

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