OPINION: Internet paywalls – Murdoch makes his move, but will it make him King?

Whichever way you spin it,
the paywalled consortium is a big throw of the dice by Murdoch.

Some people are wondering why Rupert Murdoch wants to buy out the rest of BSkyB, thus ensuring that Sky salespeople will no longer be able to use the ‘he’s only a minority shareholder’ bollocks when flogging live footie to those who can’t stand him.

The Slog is not in any doubt about the strategy, however. As always with Roop, it’s a bold stroke (of the kind that still terrifies his institutional shareholders) but it does make sense if you accept Murdoch’s ethics. That is, use shareholder money (not his) to buy the remaining old BSB bit of Sky and therefrom release cash flow and capital (also not his) in order to fund the old boy’s creation of Internet Zag against most other people’s Zig (and thus make the internet infotainment sector his).

Newscorp has been on the acquisition trail for a while now, scooping up Skiff (it develops technologies to sell digital publications useable by a range of gadgets) and Journalism Online, a startup aiming to help online publishers collect reader revenue. In short, pay-per-use, subscription and paywalls are still the future as Murdoch sees it. (The rest of his family were not available for comment).

The ageing News Corp Chairman and CEO also recently licked Steve Jobs all over in order to become a Apple tablet app. And bit by bit, he’s been unveiling the online multivariate portal we’ve been foretelling for some time.

The Slog did, however, miss the obvious here: because it transpires that this will be an online news consortium, aggregating publishers under one roof behind a paywall. In the future, the service will have the technology to incorporate entertainment offerings alongside news.

While we did foresee that – and did point out that most of Murdoch’s titles lack the creativity to justify a paywall or pay-up approach – it’s unlike Rupert Murdoch to cooperate with rivals: usually he uses shareholder value to buy them. (Ask any Newscorp shareholder, and they will tell you with some ire that their shares should be worth a lot more).

This desire to share for once may simply reflect the degree of desperation in Murdoch’s position. His pressmen may talk gaily of ‘cash mountains’, but Newscorp remains overdependent on sports income – and on the verge of a major gamble in going the paywall route.

Either way, BSkyB has rejected the initial Newscorp offer of 700 pence per share. So this might get very expensive for the Sino-American Digger. Is it worth it?

‘Never write Rupert Murdoch off’ is as good a life-maxim as any. But as every month passes, I become increasingly certain that subscription is only viable outside the newsnet’s mainstream – and paywalls will never be secure. In short, Murdoch’s shareholders will lose out on the gamble in the long run.

Nobody is going to subscribe to the Times titles, because they’re largely generic and badly written cobblers. Some will to the Wall Street Journal, and many will non-Newscorp titles like the FT – I for one already have. But the majority of net users will pay for movies, sports and one-off assorted events here and there. The money the mainstream pays Newscorp to watch those genres is designed to replace the income Murdoch has lost from the old newspaper business model. In that future context, the gamble is merited – if the numbers work. I’m not sure they will – especially in a world staring down a very long barrel of austerity.

Finally, you can buy and build all the technology in the universe: but on the internet, people break contracts with impunity on a daily basis because it simply isn’t economic (or even physically possible) to sue all of them. Pirates will take out Sky-consortium payment policies and then reproduce them either as a loss-leader on traffic, or sold on at a discount. On the internet, there is no longer any such thing as an exclusive beyond a few minutes – or even seconds. News travels differently now: by the end of a newsday, almost no untutored Twitter, Facebook, Telegraph, BBC or Huffington Post user will know where the hell that day’s big story surfaced first.

The news outfits who started on the internet have grasped this. They don’t just find news any more – they swap it with other sites, and use every social intercourse medium on the planet to big it up to a level never before seen – on a timescale whose speed boggles the mind. This drives readers, tweeters, sharers and everyone the advertisers are after in multivariate directions: where (with the help of better and better digital ad agencies) the brand will be found – persuading, attracting or simply being where it ought to be.

Rupert Murdoch hopes to use a niche business strategy to drive a mass market. It’s a clever idea: but in essence, it’s a case of building walls while the world is going open-plan. I don’t see how it can succeed.