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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?
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“I think there’s a middle ground,” said Philippe Dauman, Viacom’s (NYSE: VIA) president and CEO. “We put out a lot of content online. We do follow various windowing principles, which has always been a part of the entertainment industry,” he added, referring to the gaps between a maiden broadcast and a rerun. In the case of the Daily Show, which airs on Viacom’s Comedy Central, Dauman said his company opted for a short window when it decided to put the program on Hulu to keep it timely.
Dauman said that the Daily Show is one of the programs in Viacom’s lineup viewed most often online, yet its revenues continue to rise sharply. “You do get incremental monetization if you do it right,” he said.
It is worth noting that Dauman’s company is embroiled in the granddaddy of the new-media litigation battles — Viacom’s $1 billion copyright-infringement suit against Google and its video-sharing site YouTube.
Still, the panelists generally agreed with Dauman that online video has not sapped people’s appetite for watching TV the old-fashioned way.
“American people are in love with their television,” Murdoch said. “Broadband only adds to that if we do it properly.”
A model like Hulu might make sense for basic cable channels and shows on the networks, but what about premium channels?
“It wouldn’t make a lot of sense to give away a pay channel and try to make it up with advertising,” said Jeffery Bewkes, chairman and CEO of Time Warner (NYSE: TWX).
Bewkes took the opportunity to plug his company’s HBO on demand service, which allows any paying subscriber to the TV channel to view its content online.
“We don’t have to charge people extra,” Bewkes said. “We’re not trying to make the Internet not free. We’re just trying to say if you use it for free, you ought to get what you’ve got in your home.”
He added, “Put if on the Hulus and YouTubes if you need to, but only if people are subscribing to the video.”
The cable kingpins gave the impression that they are warming up to the idea of seeding their content on the Web, with the important caveat that under no calculus should online content by necessity be free content. Today’s speakers also seemed on board with Dauman’s idea of the window, delaying the appearance of a program online to ensure that the television broadcast still had a unique value.
Except, perhaps, for Rupert Murdoch.
When Bewkes asked whether he would be willing to put Bill O’Reilly’s program online the same day it aired on Fox News’ cable station, Murdoch grinned and replied, “We’ve got a pretty deep bench. We’ve got other people.”
