Rupert Murdoch’s last resort

Sales and marketing experts are fond of saying that you should never discount, because it makes it almost impossible to raise your prices later on. Just don’t tell Rupert Murdoch, chairman and chief executive of News Corporation, who has announced that News Corp will charge for content on the previously free websites such as The Australian, the Herald-Sun and The Daily Telegraph.

Rupert had decided he has to make a stand. He argues that quality journalism costs money and allowing hundreds of millions of people around the world to read your content for nothing is unsustainable – the advertising revenue simply isn’t big enough to make the combined newspaper/website operations profitable.

Rupert’s right – he has no choice but to try the strategy of charging for content online. His newspapers are losing big dollars and if he doesn’t start looking for alternative revenue streams, News is going to have to start shutting newspapers, sacking journalists and closing some websites.

But will it really work? That’s another question entirely.

Murdoch believes so, and points to the success of the Wall Street Journal, a premium financial newspaper which has had success selling online subscriptions.

Fair enough, the model can work – indeed, it seems to work best with business and financial publications, for some reason.

But getting people to pay for the Wall Street Journal is very different from getting them to pay for an online subscription to The Australian or the Herald Sun. While these are high quality publications, they are hardly producing niche information like the Wall Street Journal does.

Surely online consumers looking for general news will simply switch to free news sources, such as Government-owned content providers like the ABC.

Murdoch acknowledged this fact overnight, citing the BBC as a big threat. But he claims News will be able to highlight its quality reporting so as to differentiate itself from free news sites.

This sounds great in theory, but it won’t be easy in practice. Essentially, what Murdoch needs to do is retrain hundreds of millions of online consumers to pay for something that has been free since the dawn of the internet.

And he’s got to do this in an environment where thousands of free news sites, blogs, online newsletters and even Twitter streams are being launched every year.

So while Murdoch has no choice other than to change strategy, he’s stuck between the proverbial rock and a hard place.

The fact that everything is free on the net means he can’t make money giving his content away. But the fact that everything is free also means he’s going to have a very hard time making money by charging for content.