News Corp is at it again. Earlier this week Rupert Murdoch’s company bought the Skiff e-reader software – but not the company’s hardware.

As Paul Bradshaw at the Online Journalism Blog says; it’s a sensible move for a company trying to pull value from the news delivery chain.

Murdoch has a mixed record when it comes to buying tech companies and products. MySpace was a disaster.

Skiff gives News Corp control of an important part of the delivery chain. And, just as important, bypasses attempts by Apple and others to clip the ticket as news moves between publishers and their customers.

News Corp absorbed the lessons from pay TV where integration is essential; where hardware and software form part of the deal.

Murdoch’s plans to make readers pay for online news content still seem fragmented and confused at the moment. But a vertically integrated distribution chain could yet pull those fragments together.

It is no longer brave, rash or insightful to suggest printed newspapers will play less of a role in the future. But it counts for something when the scion the world's largest newspaper company says so.

James Murdoch talks about being in "the business of ideas" and says journalism plays a role (phew!) but it won't be on the scale of News Corp's broadcasting and entertainment operations.

James Murdoch sees smaller role for newspapers.

Double standards from News Corp. on paid content battle? write Mark Fletcher at the excellent Australian Newsagency Blog. Fletcher says while Murdoch is busy making noises about paid content online, railing against free news on the net and fighting Google, he isn't ready to charge an economic cover price on the print editions of his papers.

This, says, Fletcher, means newsagents distribute News Corporation publications at a loss.

Not only did Australia's two main print news media organisations reject Amazon's Kindle book reader, both made their rejection public.

Fairfax went overboard, publishing versions of the story in The Sydney Morning Herald, The Age and on its youth-focused site, The Vine. It didn't run in The Australian Financial Review.

News Corporation has been less vocal, although Rupert Murdoch did mention his dissatisfaction with the reader in comments after his company's annual results.

As this story in The Sydney Morning Herald explains, the problem is Amazon wants to clip the ticket by too much. Some reports suggest the company takes as much as 70 percent of the price of ebook sales and is seeking similar high margins from newspaper subscriptions.

Sony and Apple are possible alternatives. One aspect of this story is the assumption people will want to read online newspapers via a special reader and not with a PC or smartphone.

Kindle Rejected By Australian Newspapers | Fairfax Media, News Corporation.

Sport could be the secret weapon as newspapers campaign to get readers to pay for online content.

Like business, sport is a media niche where people already expect to pay for coverage.

It has already worked for television. Here in New Zealand there is almost no live sport on free to air television other than international netball. Rugby, cricket, rugby league, soccer, golf and tennis are only shown live on pay TV.

In other words, if Kiwis wants to watch TV sport, they have to pay – and it isn't cheap.

People seem willing to pay a premium to watch sport on TV more than other forms of entertainment. That's partly because of the nature of the beast – a game with an unknown result is exciting. Watching it the next day, or a few hours later, when the score is known just isn't the same.

Newspapers can't compete directly with TV when it comes to capturing that drama, but I suspect people would pay to have access to first class analysis, high quality games stats and live blog or Twitter style coverage of key matches.

An example of how this can work is the way the BBC runs live, online ball-by-ball coverage of cricket test matches. Until ESPN acquired Cricnfo, the site ran similar coverage and managed to sell a number of value-added extras to subscribers.

It wouldn't be hard to stick sports journalism behind a pay wall.

Sports writing operates along slightly different lines to other types of journalism. Sports codes and the big clubs jealously guard access to personalities for interviews, photos and other matters. Publications who don't, er, play ball, can find themselves on the outer. Some types of coverage are not welcomed and many sports have control over coverage.

A sports governing body could easily license exclusive coverage to one or more newspaper group – clubs could do the same. In fact, News Corporation already has interests in a number of sporting codes and clubs.

This idea has one major drawback. Moving sport from free-to-air to pay-TV damages some games at a grass-roots level – sticking online media coverage behind a pay wall may only make matters worse. But that's another issue..

The Bulletin's last front cover

When Lachlan Murdoch says the Internet is having an effect on classified advertising, it's time to believe some of the hype from an industry that's never short of a boast. The chairman and CEO of News Ltd was reported expressing this view following his company's annual general meeting last month.

He followed these comments by saying that his organisation is focused on the matter. This is probably an understatement. Murdoch's News Interactive division is one of Australia's leading Internet content providers and already has a substantial on-line advertising operation.

News Interactive may not be making money at this stage, but for now staking out turf in cyberspace is more important. Even so online success for News is hard to define. There are reports that the organisation's on-line Information Technology recruitment advertising is stealing copy sales from Tuesday's Australian. That may be desirable in the long term, right now it's a problem.

While Murdoch argues that television stations have more to fear, there is evidence newspapers will find the going tough. In mid-October, Mark Webber, vice-president of classified marketing groups at the Minneapolis Star Tribune described his paper's performance to delegates at the Pacific Area Newspaper Publishers Association. He said his paper's classified revenue grew 20% in 1997. In 1998, this growth was just 1%. When asked why the growth stopped, Mr Webber gestured at Harold Levy, CEO of TMP Australia and said the cause was TMP's online recruitment service, The Monster Board.

More chilling is the fate of the San Jose Mercury. Based in Silicon Valley, the Mercury is America's top newspaper for computer industry recruitment. Last year, the paper suffered a 40% fall in classified recruitment advertising revenue. Given that Australia is about a year behind US in Internet advertising trends, from New Ltd's point of view, the worst may be yet to come. Or is it?

Australian publisher profits online

At least one Australian publisher has profited through the transition from print to electronic publishing. Roderick Mcallery is a director of Commercial Dynamics, which publishes the Trading Post group of papers. Mcallery said, "the Trading Post site succeeds because it offers better utility than other classified web sites. Our base content is better. Suppose you want to find a Mazda 323. Search other sites and you might find ads that feature 20 cars from a single dealer, where only one is a Mazda 323. With our car ads, the rule is one advertisement, one car. Which means the same search on Trading Post will only deliver Mazda 323s."

He said another advantage is that Trading Post ads are costed by the word, while big papers charge by the line. This means his advertisers tend to use fewer confusing abbreviations, making the entries easier to understand. At the same time, the Trading Post insists that advertisers indicate location and price information. The result Mcallery said is a content delivery system designed for speed and to ease the search process.

In other words, Trading Post works because it has approached classified advertising from the customer's perspective. In this case customers are advertisers and potential buyers.

Industry gossip says Commercial Dynamics is the only company currently earning substantial revenues from Internet classifieds. The truth of this statement depends on how you define Internet classifieds.

Australia's Most Successful Websites

According to Marc Phillips, author of 'Australia's Most Successful Websites', the key to profitable Internet publishing is to discard conventional publishing business models. Phillips is a director of APT Strategies an Internet monitoring organisation that publishes Australia's online readership survey.

He said, "Traditional newspapers make their money from a single revenue stream. The cover price barely pays for printing and distribution; the real money is in advertising. On the Internet, where distribution costs are lower, companies make their money from multiple revenue sources."

Phillips offers the traffic deal between travel.com.au and Yahoo!, the popular site directory, as an example. Like all such deals, the specifics are confidential, but generally traffic deals involve paying a percentage of the final transaction or a fee per visitor delivered to the site. He said, "These guys are all leveraging their eyeballs off to get e-commerce revenue".

And there's the rub. While the Trading Post's content lies in information rich advertising, other media organisations like News Ltd, Fairfax and Kerry Packer's PBL have to find leverage from other content assets. And it appears that, in some cases at least, they are already getting the message. In PBL's case, leverage works across traditional and online media. A television viewer watching say, Channel Nine's Getaway program, can be delivered to the Getaway pages on the NineMSN website. Once there, they don't just view travel advertisements, they can actually book and pay for their trip. There's imply no equivalent of this process in traditional media.

So, this Internet sales model works thus: publishers offer worthwhile content to attract visitors. Once they reach the site, they are offered a variety of ways of generating revenue. This variety is important. Phillips says his online readership survey found that 28% of people browse online, but purchase offline. They might use the Web to compare prices or product specifications. Only 21% had actually purchased online.

Marcello Silva, national interactive manager for TMP Worldwide agrees that content is the key. Silva, who has responsible for The Monster Board in Australia, describes his product as a globally branded career management operation. He says to compare the Monster Board with online classifieds misses the point. The Monster Board is a one-stop shop where recruitment advertising is just a single element in a complex mix that includes a lot of advice.

Silva said, "TMP trades on NASDAQ, its value rises and falls with the technology sector. Our vision is to become the online global hub for career management. We've tailored our service to give people a helping hand as they progress from their first job all the way to the boardroom." Clearly, TMP is a long way from newsprint linage ads, yet it is still seen as part of the online classified scene.

Melbourne-based Matthew Rockman is a director of Seek Communications, which operates a web site featuring job advertisements from some 200 recruitment companies. Seek competes with TMP, but approaches the market from a very different perspective.

Rivers of gold pour through classified advertising

Like many other Internet entrepreneurs, Rockman's sights are set on the fabled rivers of gold that pour through the classified advertising departments of Australia's major newspapers. He says that traditional publishers like News Ltd and Fairfax are in the Internet market because they have to be. "They don't want to be here, they only want to protect their profits".

While TMP is vertically integrated, Seek Communications is aiming to own a horizontal slice of online recruitment by opening a marketplace where job seekers can interact with recruiters. Rockman said with some 4800 current vacancies, his site offers the greatest range of Australian jobs. He said job seekers will be attracted to the site simply because its where the most jobs are.

Right now it seems that some Australian publishers are still grappling with basic business models. Meanwhile, a new threat to the traditional classified has appeared in the US. New sites like eBay have been described as classifieds on steroids. They let users provide their own content in a seemingly anarchic online swap meet. If they take off here, Lachlan Murdoch won't be the only media executive noticing an 'Internet effect'.

This story first appeared in The Bulletin in 1999.

Dan Conover says the newspaper publishers' campaign to charge readers for on-line news is a suicide pact.

He says while expecting readers to pay for the professionally created content is reasonable, attempts to force them to pay are "post-rational".

Conover points out flaws, including the fact consumers don't want to pay for news and previous attempts to make them pay have failed. But he says newspaper publishers no longer listen to reason and are determined to plough ahead with paid content.

I'd love to see publishers find a way to make on-line news profitable.  But it is a fantasy.

If Fairfax can only convince a handful of Australian business people to stump up cash to read the highly targeted and immensely useful Australian Financial Review on-line, what chance do other newspaper publishers have?

You need nerves of steel to bet against Rupert Murdoch, but this time, he and the other newspaper owners are going in the wrong direction – readers are not going to pay to read news. And they definitely will not do so while there are free alternatives.

Today The Australian’s Media section ran Readers not averse to paying for online content by Nick Tabakoff. As the headline suggests the story looks at an international study by PricewaterhouseCoopers which found ‘readers could be willing to pay almost as much for some high-quality online newspapers as they do for print versions, particularly in specialist news areas’.

Could this be related to the PricewaterhouseCoopers study referred to by Miriam Steffens in The Sydney Morning Herald’s Readers reluctant to pay for online news?

It is.

Now, strictly speaking there’s a thin semantic line between ‘readers being reluctant to pay’ and ‘readers not averse to paying for’. One does not directly contradict the other. But the two headlines are clearly two different interpretations of the same data.

Or as we say in the media, they each have a different spin.

Which is more plausible?

Both Rupert Murdoch’s News Corporation, the owner of The Australian and Fairfax Media, owner of the SMH have a vested interest in the story.

Murdoch has gone on the record in recent days saying he wants to charge readers for online content on News Corporation web sites. The headline on Nick Tabakoff’s story squares nicely with Murdoch’s recent statements on the issue. We all know Murdoch interferes editorially in his papers. While it’s extremely unlikely he had a hand in this particularly story, it reflects the official line now coming from News Corporation.

Fairfax is more complicated. The company’s The Australian Financial Review operates behind a content pay wall. It costs around $3 a pop to view an AFR story, though most paying customers have all-you-can-eat subscriptions. On the other hand the SMH, The Age and the company’s other online properties including New Zealand’s stuff.co.nz are all free to readers and make money from online advertising.