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Media Titans Won't Give Away What They Can Sell

Video, Hulu, YouTube and revenue
WASHINGTON -- New media advocates have a favorite adage that in the Internet age, content wants to be free.

Here at the Cable Show, the annual conference of the National Cable and Telecommunications Association, some powerful men begged to differ.

"People are getting used to getting everything on the Net for free," said News Corp. Chairman and CEO Rupert Murdoch. "That's going to have to change."

Murdoch sat for an on-stage interview with Neil Cavuto, an anchor on the Fox Business Network, then stayed on to participate in a panel discussion with the heads of Viacom, Time Warner and Liberty Global. As fitting a cable conference thematically dominated by broadband, this afternoon's session focused on the severe disruption the Web has inflicted on traditional models of paid content.

Murdoch started with newspapers.

"Take the New York Times," he said. "They cannot get their advertising rates up because the inventory of display advertising on the Web is doubling every year."

Unlike Murdoch's Wall Street Journal, the Times ditched its subscription firewall and made all of the paper's content available for free online. With online and traditional ad revenue both in decline as the economy continues its withering slump, the Times has resorted to layoffs and executives at the paper have begun to consider starting to charge again for content on its Web site.

"They're never going to make money on an advertising model to replace the money they're losing," Murdoch said. Display advertising on the Internet is a pale substitute for its print counterpart, but the real blight on newspapers' balance sheets is classified ads, what Murdoch called "their river of gold" that is now "draining away."

The woes of newspapers have been well documented. But in their struggles, Murdoch sees the makings of a much larger battle over the business model of media content on the Web.

"The question is should we be allowing Google to steal all our copyrights?" he said, quickly adding that it's not just Google that's got him worried, but all the content aggregators on the Web. In the case of a newspaper, he floated the idea of brokering a deal with companies like Google to share a portion of the ad revenue they receive from Web users navigating to the paper's articles through a search engine. "The fact is that no one's making money with free content on the Web except search."

Premium cable content free on the Web? Dream on!

So why should all content be free? Cable operators happily did not go down the same road as the newspaper industry. Quite the opposite, big media firms have in many ways dragged their feet to keep premium content away from the Web, due in large part to their reluctance to give away something they can sell.

[cob:Special_Report]That's why Hulu debuted to such fanfare. A joint venture of Murdoch's News Corp. (NASDAQ: NWSA) and NBC Universal, the site offers premium video content for free, supported by pre-roll and mid-roll ads. The site has been busily adding content from cable and network providers other than those owned by its corporate parents.

Hulu launched a much-hyped TV ad campaign with a Super Bowl spot featuring Alec Baldwin, and has since enjoyed a considerable spike in traffic.

But great tranches of content are still absent from the site, and Hulu has at times found itself under pressure from its media partners over just how free and easy it should be for users to access the programming.

Page 2: Is there a middle ground?