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News Corp builds the wrong pay-wall

Adrian Drury | June 8, 2010
Revenues and traffic will fall early and swiftly, and News Corp is likely to have to rethink its dogmatic approach.

It has been a big fortnight for news and magazine publishing. The iPad has hit the 2 million unit mark in eight weeks (the same time it took the iPhone to reach 1 million units), raising the probability that Apple has a hit device on its hands. Simultaneously, News Corp has unwrapped its pay-wall: the most significant event in the commercial history of The Times and Sunday Times since its acquisition by Rupert Murdoch.

These apparently distinct events are both elements of a wider, single strategic equation for news and magazine publishers as they look to improve their terms of trade with browser-delivered audiences and exploit new digital distribution platforms. News Corp is running a multi-channel strategy its £9.99 iPad app is available for download today but its strategy for browser-delivered audiences is distorted. News Corp is running counter to all of the received wisdom of how to market paid news online.

A product of dogma rather than a sign of the times

News Corps pay-wall program for the The Times and Sunday Times looks like a product of dogma. Firstly, lets consider the product itself. Free of the constraints of search engine optimization (SEO), the site has been designed to look like a broadsheet. While the site is attractive, and News Corps management team has conducted extensive testing, its possible they may have fallen into the classic research trap: to recycle the Henry Ford cliché, if I had asked people what they wanted, they would have said faster horses.

Secondly, consider what News Corp is asking its audience to pay for (at £1 per day or £2 per week). The lessons from its own Wall Street Journal, which has demonstrated one of the more successful pay-wall strategies from the last 18 months, are that niche content for niche audiences bears a price that can sustain a subscription model. News Corps gamble is its belief that The Times brand and roster of bylines delivers sufficient product differentiation from its competitors to justify audience spend. News Corp will find itself in the uncomfortable position of auditing the value of its content against basic price elasticity when its audience is asked to run a query for the same news at zero cost via Google, or pay to access a random un-contextualized library of content.

News Corp will learn the brutal mathematics of e-commerce

Thirdly, News Corp must face the question of traffic volume. The basic mathematics of online media are that in the brutal fight for browser audiences, revenues are a function of audience, audience spending power, and dwell time. This is true not only for pure advertising models, but also for models where the audience pays. Converting users to a paid relationship requires the publisher to draw in an audience and then upsell a premium service once they hit the pay-wall. The inherent risk in The Times strategy is that stops becoming a destination for web audiences, costing News Corp a critical marketing channel. Others have made the mistake of placing their most popular content behind the pay-wall and have seen traffic to their sites (and hence their ability to convert users to a paid relationship) collapse. Unlike the Financial Times, The Times has no meter on its pay-wall. The FT has used this tool to draw users deep into its content domain and then upsell subscription packages.


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