Rupert’s Spaghetti Junction: News Corp now boasts four ways to sell paid digital content

Posted by Peter Kirwan on 15 June 2010 at 12:52
Tags: BSkyB, News Corp

If you needed an indication of where News Corporation is going, yesterday brought it: a £7bn+ bid for 60% of BSkyB, coupled with two smaller deals designed to make newspapers palatable to the company’s shareholders.

A spoonful of sugar makes the medicine go down; or as the Americans would say: offense and defense. It’s all very reminiscent of James Murdoch’s speech in Barcelona last year — the one in which he argued that TV is a “big opportunity” and newspapers will play a smaller role in the company’s future.

Rumours about News Corp and BSkyB have been swirling around for a long time. Buying Skiff and taking a minority holding in Journalism Online are far more obscure deals, but just as intriguing in their way.

Five or six weeks ago, after listening to Murdoch talking about “final discussions with a number of publishers”, I suggested that he might still be planning a consortium-based approach to paywall publishing.

Alliances remain possible, but yesterday’s news suggests a go-it-alone approach. In any coalition of the willing, News Corporation will be first among equals. That’s because News Corporation now owns a significant slug of the relevant technology. Indeed, Murdoch now has at least four different approaches to paid content from which to choose:

1) Skiff

Bankrolled by Hearst but now owned by News Corp, Skiff is a hugely ambitious effort to build a shared end-to-end software platform for digital publishers.

You name it, Skiff has a solution for it. This company has spent four years (and $35m of Hearst’s cash) developing industrial-strength software for publishing paid content in digital formats. Its specialities include digital content production, wireless delivery, advertising platforms and revenue collection (which is where it might be able to help with paywalls).

Those who have witnessed Skiff’s demos speak positively. When I interviewed him last year, Gil Fuchsberg, the company’s chief executive, argued that the company stood to benefit as the world’s “enormous base of print media consumption” shifts toward digital outlets.

2) Next Issue Media

A low-profile coalition of US newspaper and magazine publishers including Conde Nast, Hearst, Meredith, News Corp and Time. Occasionally described as “Hulu for magazines” (on the iPad).

Next Issue Media was formed late last year to ensure that the technology industry doesn’t dominate the transition to tablet-style devices. The consortium’s job is to select the technology that publishers will use to publish content, sell advertising and generate reader revenues on tablet-style devices and smartphones. Paywall technology is part of its remit: the consortium plans to open a “shopfront” selling apps and subscriptions that will rival iTunes.

Has News Corp become frustrated by the slow pace of development at Next Issue Media? It’s possible. Last week, Paid Content disclosed that the consortium is still looking for a boss six months after its launch. As Rafat Ali put it: “Now, who needs a third-party company, and for what?”

3) The Wall Street Journal’s digital commerce platform

Running the world’s largest subscription-based news site implies a legacy of clever software. But the Journal hasn’t been directly involved in what Rupert Murdoch recently described as his effort to rope rival publishers into “an innovative subscription model that will deliver digital content to consumers”.

Les Hinton, chief executive of Dow Jones, recently suggested that News Corp’s digital guru Jonathan Miller — who orchestrated the deals with Skiff and Journalism Online — is firmly running his own operation. “That’s a News Corp project which Robert [Thomson] and I aren’t directly involved in,” Hinton told Paid Content. “We look after our little operation with the Journal.”

Little? Hinton’s modesty is unnecessary. What the Wall Street Journal doesn’t know about paywalls, it can find out very quickly. Whether or not its technology suits other News Corporation publications, its expertise should prove valuable.

4) Journalism Online

Founded by the US magazine entrepreneur Steve Brill and former Wall Street Journal publisher Gordon Crovitz, Journalism Online is a subscriptions platform designed to be used by a vast number of paywalled publications. Customers sign up for “a single protected account” with one username and password.

Journalism Online says it will help publishers — 1,500 have signed letters of intent — to offer micropayments, time-based “micro-subscriptions”, bulk subscriptions and combined print/online subscriptions.

Here’s how the company describes its own efforts: “16 targeted strategies — such as metering, segmented content, and topic-based packages for readers — that will convert publishers’ engaged readers into paid subscribers without turning away casual visitors.”

What will News Corporation do with all of these different approaches? The executive who has been given the job of rationalising this Spaghetti Junction of software and relationships is Jon Housman, one of Jonathan Miller’s apparatchiks at News Corp’s Digital Media Group.

Housman already has fingers in a couple of relevant pies. On News Corp’s behalf, he sits on the board of Next Issue Media. In addition, Housman has strong ties with the Wall Street Journal. (He became managing director of the Wall Street Journal Europe in 2005, before Murdoch acquired it).

No doubt News Corporation will let a thousand flowers bloom (for a while at least). As Rupert The Dealmaker knows, it’s important to have options.

Yet News Corp is now deeply involved in the software business, where acquiring — and trying to merge – competing platforms usually turns out to be a nightmare. Early decisions about what to keep and what to axe can help, but even this doesn’t guarantee success. Getting all of these assets to work in concert won’t be easy.

Times Online: Supporting the big profits of pay TV

Posted by Peter Kirwan on 2 February 2010 at 23:49
Tags: BSkyB, Media, News International

So Times Newspapers has just hired Paul Gilshan from BSkyB as marketing director. Gilshan was previously head of marketing for Sky Movies and Sky Box Office. At Wapping, Media Week notes, Gilshan will be reunited with his former boss Alex Lewis, who was a director of marketing at BSkyB before moving across to Times Newspapers last year.

Another significant (and much-noted) arrival at Wapping: Gurtej Sandhu, who is joining as director of Times Digital from News Corp-owned Star TV.

Down under, the trends seem similar: Richard Freudenstein, whose CV includes a seven year stint at BSkyB, has just been made chief executive of The Australian.

The influx of pay-TV types is striking. Of course, there’s an existing line of thought which suggests that paywalls around the Times and the Sunday Times will be engineered to boost print sales as much as anything else. (Buy a newsprint subscription and get access on t’internet for free.)

But what if the cordon was thrown wider? Peter Preston may have a point when he suggests that BSkyB could be brought into equation.

Now watch closely as 12 million Sky subscribers get an offer they can’t reasonably refuse. How about beyond-the-wall access to four big British papers (plus an array of tempting other goodies) for as little as 50p extra a month? £6m a month for that is £72m – in a trice the losses on Wapping’s more upmarket offerings are turned to profit. . .

This is an interesting idea. It would certainly enhance the attractiveness of Sky for subscribers who might be lured away soon by cheaper footie elsewhere. In addition, News Corp could bolt on newspaper subscriptions for a triple-play subscription offer (Sky/newspapers/online access).

Sky has been selling consumers a triple-play of its own (broadband/telephony/pay TV) for quite a while: the executives making the switch to Wapping know all about the fiddly mechanics of maximising profits in this kind of environment.

But if News International goes down this route, what price the coalition of national newspapers that Murdoch wanted to assemble last year?

That plan is dead in the water. It’s no coincidence that Murdoch’s thinly-veiled appeals for a concerted uprising against the free web have died away.

The Guardian can’t see how the economics stack up (no surprises there, if the missing ingredient is 12m viewers). The Telegraph has all but ruled itself out. DMGT has maintained a studied silence. Trinity Mirror might follow News International, but only if convinced by results on the ground.

A subscription link between Sky and News International would be designed to limit the risks of a go-it-alone policy. Harnessing the huge popularity of Sky might well make the unpalatable idea of paid content acceptable to the general public. (And for rivals, doing deals with Virgin Media or BT Vision really wouldn’t be the same).

But 50p a month: surely that’s too little? Selling online access to the Times and the Sunday Times at something like that price would cannibalize print copy sales just as rapidly as free access on the web.

Perhaps the low price point owes something to Preston’s inspiration: Newsday, owned by the same company that sells cable TV and broadband to 75% of Long Island’s subscribers. Late last year, Newsday erected a $5-a-week paywall. But it offered free access to customers of the parent company’s cable and broadband operations.

The parallel isn’t straightforward, though. Newsday’s paywall might as well have been accompanied by a suicide note declaring that the paper had no value other than as a gimmick intended to sell something else. Times Newspapers Ltd may be losing north of £1m a week, but its position is slightly different.

Still, leveraging what you’ve got makes sense. Cross-selling TV and news subscriptions would involve giving Murdoch’s newspapers – unloved by investors – a new purpose in life: to support the profitability of pay TV.

Circle the wagons and find some new and unexpected synergy: it’s a classic media conglomerate tactic. If successful, It might even help to convince News Corp’s investors that owning both newspapers and a pay TV platform remains a sensible idea.

Forget Murdoch in Edinburgh: Let’s have a real fight about TV’s “dinosaur bosses”

Posted by Peter Kirwan on 4 September 2009 at 12:27
Tags: BBC, BSkyB, ITV, Media

Obviously, it’s a pity that Robert Peston and James Murdoch didn’t come to blows at the Edinburgh TV festival last week.

It’s also a pity that the vast murmuration caused by Murdoch’s speech overhadowed another, equally important, theme at Edinburgh: the impending clash of civilisations between the broadcast establishment and web video.

In this debate, Ashley Highfield of Microsoft (and formerly of the BBC) delivered the provocation, with his suggestion that broadcasters have just two years to create “credible, truly digital, brands” before facing what he described as an “iTunes moment”. (The parallel is with the music industry, which failed to create a digital business, leaving the way open for Apple to do it instead.)

The organisers of the Media Guardian Edinburgh International Television Festival seemed to take a different view. They chose to kick off proceedings with a feel-good survey written up by Deloitte and researched by YouGov.

Quite clearly, the first line of the accompanying press release was designed to smite the digerati: “New report reveals television advertising still packs the greatest punch”. As for the findings, well, if Lord Grade has daydreams, they presumably go something like this:

• 64% of respondents ranked TV advertising as the format “with most impact”
• Three-quarters of 18-24 year-olds ranked TV ads top for impact
• Only 12% chose search as one of their top three ad formats (again in terms of “impact”)
• 44% researched a company, product or service online in response to a TV ad.

The accompanying quotes from Howard Davies, media partner at Deloitte, left little doubt that the survey had been an exercise designed to deliver good news:

“Online advertising’s poor showing relative to television may surprise given that the former has often been portrayed as television’s nemesis.

“However, what television does best – display and brand building is what online struggles with. Online advertising is best at search, which previously newspapers, had excelled at, particularly for classified.”

At which point, it’s worth turning to marketing academic Mark Ritson’s demolition of the survey. In a blog post, Ritson — who currently teaches at the MIT Sloan Management School in Boston – modestly described Deloitte’s findings as “absolute and total crap”.

First, Ritson criticised the methodology:

“It’s not that consumers lie when asked a question like this. Rather, they simply do not know the answer. Self-reporting data has been proven to be invalid for questions as basic as estimating a consumer’s household income.”

Next, he criticised the survey’s relevance:

“For the past 15 years, no one has cared about comparing one media with another in this binary way. . . Comparing apples with oranges is an irrelevant endeavour in the age of the fruit salad.”

Finally, Ritson lambasted the idea of measuring “impact” without taking into account the cost of rival media and the “effective frequencies” required to yield an impact:

The last time I looked at a rate card, the price of a 30-second spot was wildly different from that of an outdoor ad. . . In the study, TV advertising was reported to have four times the impact of outdoor advertising. What if an out-door ad costs 20% that of a TV ad, and needs only two, rather than three, exposures to deliver its impact? It would work out to be a superior medium even with a lower reported ‘impact’ score.

The TV industry is in trouble, wrote Ritson, partly because it is “run by the kind of dinosaurs who think these kind of reports are good for business”.

Ouch. Perhaps MGEITVF should invite the good professor along to speak next year. He’d stand a better chance of inciting fisticuffs than the ever-so-polite James Murdoch.

Footnote: Mark Ritson (see comments) suggests that Tess Alps of Thinkbox has written a “completely toothless” response to his critique of Deloitte’s research. IMHO it’s anything but that.

We at Thinkbox prefer not to rely on claimed behaviour research, in fact, and instead use rigorous and impartial econometrics to prove that, pound for pound, TV advertising delivers more incremental profit than any other form of advertising, 4.5 times the investment according to PricewaterhouseCoopers.

Decide your yourself.

The good news from News Corp: Profits hold steady at Wapping and start to flow at Sky

Posted by Peter Kirwan on 6 February 2009 at 13:47
Tags: BSkyB, News Corp, News International

The coverage of today’s News Corporation results for Q408 is awash with apocalyptic intimations.

But forget about the $8.4bn write-off in asset values for a minute. That’s not a trading loss. It’s a balance sheet phenomenon, triggered by declining share prices and extruded on to the P&L by accounting rules.

Instead, focus on real profits. Here’s what happened YOY to News Corp’s operating income (profit) for the quarter ending 31^st December 2008:

• Filmed entertainment: down 72%
• Television: down 92%
• Cable & Satellite: Up 10%
• Magazines: Flat
• Newspapers & information services: Down 10%
• Books: Down 65%

The real trouble inside Murdoch’s empire isn’t yet newspapers (only down 10% in terms of profit) or books (despite the steep decline, it’s a small component of News Corp’s overall business). 

Contrary to what you might expect, the real difficulties exist in Hollywood and at Fox Broadcast Network.

News Corp’s operating profit nearly halved YOY during Q4, falling by $600m. Between them, Hollywood and Fox accounted for 85% of the real-world damage to operating profits.

Buried deep inside the release are a few more facts for which Murdoch’s UK employees might be grateful.

BSkyB — 39% owned by News Corp — is swinging emphatically from loss to profit. In 2H08, News Corporation made a profit of $109m on its investment. That’s a lot better than the $129m loss it sustained in 2H07.

Meanwhile, profits at News Corp’s UK operations during Q4 were actually flat YOY in sterling terms.

How come? Circulation revenues were up slightly. Not having to make further investments in print plants also lifted performance.

On the downside, we’re told that ad revenues declined by 10% at the Sun, News of the World, the Times and the Sunday Times.

In the current market, that’s not bad.

By comparison with Fox, where ad revenues are declining by up to 40%, News International looks like a corporate choirboy.

This won’t stop the planned job cuts. But hopefully, it might blunt their worst effects. 

Digital Britain: Gordon Brown and Lord Carter begin dance of the seven veils

Posted by Peter Kirwan on 6 January 2009 at 15:02
Tags: BSkyB, Daily Mail & General Trust, Media, News Corp, News International

Lord Carter’s Digital Britain report — due out in a few weeks’ time — appears to be moving up the political agenda rapidly.

Stealing some of Carter’s thunder at the weekend, Gordon Brown told Gaby Hinsliff of the Observer that he’d like super-fast broadband access to become the latter-day equivalent of FDR’s public works programme.

“When we talk about the roads and the bridges and the railways that were built in previous times — and those were anti-recession measures taken to help people through difficult times — you could [by comparison] talk about the digital infrastructure and that form of communications revolution at a period when we want to stimulate the economy. It’s a very important thing.”

The Observer positioned broadband as part of Brown’s plan to “ease the pain of recession” by creating “up to 100,000 new jobs”. Since then, the broadband theme has started to resonate with political commentators.

Coincidentally, the widespread deployment of fibre networks would also do a lot to secure the long-term future of media organisations. 

I pointed to this possibility back in November after reading about Lord Carter’s enthusiasm for France Numerique 2012 — the Sarkozy government’s effort to guide the creation of digital infrastructure, services and content for the greater glory of France.

In the UK, deployment of so-called super-fast broadband should enable print-based publishers to diversify aggressively into video.

Theoretically, we’re talking about the Daily Mail competing directly with ITV for ad budgets. At News Corp., those estranged cousins BSkyB and News International may find that they have a lot more in common than they thought.

More formats, more competition: it’s all positive.

Also doing the rounds is the prediction that Lord Carter will recommend a relaxation of the 2003 Communications Act. This could allow regional newspaper publishers to acquire TV and radio stations more easily.

Last year, the regional press was cowed by now-abandoned BBC plans to beef up video content on the Corporation’s local web sites.

In 2009 and beyond, the regional press may yet end up on the front foot, emboldened by relaxed cross-media ownership rules and an infrastructure shift that allows them to take the fight to Auntie.

Naturally, until we get to see Lord Carter’s report in a few weeks’ time, this is all speculation.

But interestingly, it looks as if the Tories are reacting. Today, it emerged that David Cameron is ready to offer “a review into how to give every home ultra-fast broadband within a decade”.

Of course, it would be deeply cynical of me to suggest that Brown and Cameron are vying to curry favour with news organisations whose coverage will influence the outcome of a bitterly-fought election within the next 18 months.

Deeply cynical. . .

Big Brother boss says: Kill off TV news to fund my Chirac-style folly

Posted by Peter Kirwan on 23 April 2008 at 17:18
Tags: BBC, BBC Worldwide, BSkyB, Google

Whatever happened to David Elstein?

Once upon a time, Elstein was head of programmes at Sky. As part of his job, he regularly called for the abolition of the licence fee.

In the market for ideas, Elstein’s purpose was to say the unthinkable — and get it incorporated into debate, to his employer’s advantage.

These days, Peter Bazalgette, the former public school boy responsible for a raft of trash TV, including Big Brother, seems to have taken Elstein’s place.

There’s only one slight problem. Like a lot of blokes in their mid-50s who have made lots of money from Big Media, the founder of Endemol hasn’t got much of a clue about the emerging digital universe.

At a Royal Television Society dinner last night, Bazalgette blithely called (among other things) for the government to abolish the news and current affairs obligations of both Five and Channel 4

By doing this, both channels would (presumably) become cheaper to produce and more popular.

HM Government, Bazalgette suggested, could then cream off some of the resulting expansion in profits by charging both channels for their use of digital (Freeview) spectrum.

In addition, Bazalgette proposed the privatization of BBC Worldwide, BBC Radio 1 and 2 and Channel 4.

After raising £3bn+ from such ruses, Bazalgette wants the government to launch something called, er, Boggle.

What Bazalgette has in mind is a “public service distribution platform and search engine”.

And its purpose? As Bazelgette sketchily framed it, Boggle would “link the existing online offerings of museums, galleries, theatre companies, opera houses and concert halls”.

It would also give all of these venues “seedcorn monies” to “improve” their “content offerings”.

But that’s not all. Boggle would also allow the “next generation of comedy talent” to post videos. The most popular would attract “some Boggle funding”. Last but not least, Boggle would create “a search engine to market it all”.

Confronted with this dim-witted slew of half-baked concepts, it’s hard to know where to start.

“Seedcorn monies” for museums? Fine. A few hundred million wouldn’t go amiss. But do we need a new quango to distribute it? What does the Arts Council do for a living?

Hasn’t Bazalgette heard of YouTube? Remarkably enough, young comics already use it to post videos of their gags. And then there’s Google, which owns a perfectly good search engine already. . .

In his haste to embrace a broadband future that he patently doesn’t understand, Bazalgette — the free market provocateur — actually ends up sounding like former President Chirac, who decided that French taxpayers should foot the bill for a French language search engine designed for French people.

A blizzard of straight-faced reports accompanied Bazalgette’s speech. Somewhere in them, I read that Ofcom will “study” this plan for a new quangocracy whose birth requires the death of much of what remains of news and current affairs on independent television.

Toss it into the nearest litter bin, more like. If this reflects the standard of debate within the TV industry, Big Media is in more trouble than we thought it was.

Come back David Elstein; all is forgiven.

PS: According to his biography on the Royal Television Society web site, Peter Bazalgette is currently “building a portfolio of investments in digital growth companies”. On the evidence of last night’s speech, widows and orphans would be well advised to invest their money elsewhere.

Sky’s crowdsourcing experiment: not so bad

Posted by Peter Kirwan on 29 November 2007 at 12:00
Tags: BSkyB, Media

At Journalism.co.uk, Oliver Luft protests about Sky News’s efforts to crowdsource innovative RSS applications.

Sky is planning to award a prize of at least �1,000 (possibly more) to the winner of its competition. In return, Luft suggests that the company plans to “take quite a bit”. Specifically

– an exclusive royalty free worldwide license in all media in the Finalist�s Contribution for a period of 3 months from the date of the submission

and

– after that 3 month period, Sky shall have a non-exclusive royalty free worldwide license in perpetuity in all media in the Finalist�s Contribution.

Here’s how Luft sees it:

So the position is a news company owned by a billionaire is asking for someone else to design it a cutting edge technological development, for it to use for free, forever?

Well, not exactly for free. There is the prize money. And the chance of selling your genius code to other media companies after the three-month exclusivity period — with an all-important reference customer (Sky) under your belt.

Sky’s terms don’t seem too onerous if you assume that the winner is going to be a teenaged code jockey operating out of his or her bedroom in Croydon. Which is probably a fair assumption.

The way in which Sky will license the winning software leaves copyright with the original coder. This appears to follow the rules laid down by this week’s Pact framework. Two years in the making, Pact lays out a framework of rights for digital content producers who code, or content, for broadcasters.

Luft says it’s similar to the T&Cs offered by Channel 4 in a separate contest. If so, both are a lot better than the terms offered to budding geniuses by The Big What Adventure. This is an attempt at crowdsourcing creative advertising ideas staged by TBWA, the achingly hip ad agency that works for Apple amongst others.

Here are the T&Cs from that effort:

In submitting your user content you understand that TBWA and its clients will be able to use, reproduce, develop, implement, adapt, distribute and promote all user content in any form and in all media, anywhere in the world, for any purpose, without payment to you.

And as if that wasn’t enough:

All intellectual property rights in the content available on thebigwhatadventure belong to TBWA or its licensors. All rights are reserved. No such content may be reproduced without TBWA�s prior written permission.

All of which is rather hilarious given the advertising industry’s long history of plagiarizing other people’s work. In this respect, TBWA’s track record is less than spotless.

As things go, Sky’s offer ain’t so bad. Yes, they could have gussied it up by taking an open source approach to licensing. But in the end, that’s going to be a decision for the code jockey, not Sky News.

More candidates for top job at GCap

Posted by Peter Kirwan on 27 November 2007 at 10:56
Tags: BSkyB, GCAP PLC, Google, United Business Media, emap

At the Guardian, Caitlin Fitzsimmons and John Plunkett have been chatting to headhunters. They’ve come up with a few more candidates for the vacant chief executive’s role at GCap. All are very long shots.

Malcolm Wall, chief executive of Virgin Media’s content division, is one of them. Perhaps this isn�t so surprising, since Virgin Media now seems more interested in super-fast broadband provision than competing head-on with BSkyB.

But Wall looks increasingly like an almost-man. He almost succeeded Clive Hollick at United Business Media. He almost became chief executive of ITV. And he almost got the top job at EMAP when that still meant something. Too many almosts, we think.

Then there’s Shaun Gregory, the former EMAP radio exec who is now UK chief executive of pan-European free mobile operator Blyk (a long shot, given that Blyk only launched a few months ago).

They’re also suggesting Mark Howe, the country sales director at Google UK. (He’d have to be insane, right?)