Murdoch Ramps Up Attack on Internet Freeloaders

When Rupert Murdoch agreed to deliver a speech at a Washington policy forum on the future of journalism in the digital age, one might have fairly expected the News Corp. chief to continue rattling his saber about the imperatives of charging readers for news on the Internet, and clamping down on aggregation sites that gather and freely serve up other publishers’ content.

One would not have been disappointed.

“Quality content is not free,” Murdoch told his audience this morning at the Federal Trade Commission. “In the new business model, we will be charging consumers for the news we provide on our Internet sites.”

The jewel of Murdoch’s newspaper business, the Wall Street Journal, already restricts access to its online content behind a pay wall, and now counts more than 1 million paid subscribers. Murdoch reiterated his plans to bring that pay model to the rest of the papers in the News Corp. portfolio, which includes the British paper The Times and the New York Post, as well as more than two dozen news and information services in Australia.

Murdoch also continued his war of words with aggregation Web sites, of which Google News may be the most prominent, but really span the long tail of the Internet, ranging from unapologetic summary-and-link sites like to niche blogs that quote and excerpt liberally from original news sources.

“There are those that think they have a right to take our news content and use it for their own purpose without contributing a penny to its creation,” Murdoch said.

This method of recycling content thrives “under the tattered veil of fair use,” he said, referring to the provision of copyright law that allows for the copying and republication of snippets of content.

But for Murdoch, who has previously hinted at plans to mount a legal challenge against current interpretations of fair use, the manner in which online aggregators operate goes well beyond the spirit of the law.

“Almost wholesale misappropriation of our stories is not fair use. To be impolite, it’s theft,” he said.

Murdoch spoke for many in the current debate over journalism when he pointed out the fundamental economic imbalance of the high costs of producing quality, original reporting, only to see those stories summarized or reduced to a choice quote on another site.

“Right now, we have a situation where content creators bear all the costs while aggregators enjoy many of the benefits,” Murdoch said. “In the long term, this is untenable.”

Murdoch said he would be open to a variety of licensing and distribution models with online aggregators, seeming to step back from an earlier promise to pull his newspaper sites’ content from Google’s index.

Google (NASDAQ: GOOG), for its part, has maintained throughout the industry-wide existential crisis facing the news business that it is actually a boon to newspapers as they reinvent themselves on the Web. By presenting only very brief snippets and links on Google News, the firm claims that it broadens the sites’ distribution to hundreds of millions of Web users everyday, driving traffic to their sites that translates into advertising revenue for the publishers.

The well-worn problem is, or course, that online advertising — particularly of the display variety found on newspapers’ sites — yields scant returns when compared to its print counterpart.

Later in the morning at the FTC event, Mark Contreras, senior vice president of newspapers at E.W. Scripps, estimated that his company’s papers net about $500 in annual ad revenue from each print reader, compared to just $75 for the online reader.

Indeed, advertising has traditionally accounted for somewhere around 80 percent of newspapers’ revenues, though that figure has been dropping considerably in recent years.

Those shifting economics led Murdoch to declare that the era of ad-supported news media is “dead.”

“The reason is simple arithmetic,” he said. “Producing journalism is expensive.”

Murdoch also advised that the media organizations that will thrive in the digital era will be those that produce and package news the way their consumers are coming to expect it, which is, in essence, instantly and across a variety of platforms.

He talked up News Corp.’s investments in the mobile space, and spoke enthusiastically about the emerging e-reader market, but only to a point.

“We have no intention of getting into the hardware business,” he said, defusing speculation that his company is looking to develop its own device. Instead, he hinted that News Corp. is actively pursuing licensing and distribution deals with other companies in the e-reader sector.

While Murdoch was flush with opinions about the future of the news business, his prescriptions predictably advised against any of the policy proposals circulating that would see government take a bigger role in the industry.

The FTC’s summit will give voice to many of those, which include greater funding for public media, antitrust exemptions and a revision of tax law to clarify newspapers’ eligibility for nonprofit status.

But FTC Chairman Jon Leibowitz said that the current proceeding is more of a fact-finding mission, and that the agency is planning another forum in the spring to explore in more detail policy recommendations that it might deliver to Congress.

Events such as the session the FTC is holding this week on journalism in the Internet age invariably trot out veterans of the news industry who recount instances when in-depth, investigative reporting has exposed government corruption, led to reforms of harmful business practices, or saved lives by shining a light on a community health hazard or dysfunctional social program.

Those stories are often the work of multiple reporters, editors and researchers, and can take months or even years to produce. In short, not the sort of reporting that is likely to originate from an operation like, or even a dedicated hyper-local blogger.

That concern has elevated the question of Internet journalism to a policy issue, with some lawmakers and regulators beginning to wonder if the onset of things like Craigslist and — as great as they are — has decimated the advertising economy to the point of market failure.

“For journalism, the concern is that creative destruction brought by the Internet will destroy more than it creates,” Leibowitz said.

But, seemingly anticipating the reflexive protests that will run along talking points like “newspaper bailout,” “state-run media” and “regulating the Internet,” Leibowitz promised restraint with whatever recommendations the FTC issues next spring.

“We are not going to undo the profound changes brought by the Internet, nor do we want to,” he said.

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