British press split in two by Wapping’s great gamble

As The Times announces a pay wall for online content, Ian Burrell looks at the implications for the rest of the newspaper industry

The British newspaper industry is on the verge of an historic schism, a fundamental split in beliefs that will set one part of the business on a collision course with the other.

Far greater than the ideological differences that have traditionally set apart the great national titles, this divergence in opinion – over whether the written word should be a free commodity or one that is charged for – will set the news industry at each other’s throats.

The battle lines became clearer last week, as Rupert Murdoch’s senior executives proclaimed from the ramparts, or at least from the luxury hotels of western Europe, their determination to erect a pay wall around the content of News Corp websites. James Harding, editor of The Times, stood up in the Radisson at Stansted airport to tell the Society of Editors conference that his site would begin charging in the spring, with subscription offers that included access for a single 24-hour period. A date had been set.

Then on Thursday, amid the contemporary sculptures of the fashionable Hotel Arts in Barcelona, James Murdoch, chief executive of News Corp Europe and Asia, held a Q&A session at the Morgan Stanley technology, media and telecoms conference, in which he described the move to charge for online content as a “huge shift” in the business model of the newspaper industry. “We are actually going to be charging a premium price,” he said. “OK, we will have a smaller audience than giving it away for free, but I think it’s the crucial step in starting to develop a wholesale market in digital journalism, which is what we are keen to do and what everyone will be keen to do over time.”

News Corp has good reason for wanting other news organisations to concur with its analysis and follow suit. As Jim Chisholm, a global newspaper consultant, says: “The reason why Murdoch is banging on about everyone having to join in is that it only takes one rogue player and the idea does not work.”

One such “rogue player” is likely to be The Guardian, which is among the most passionate advocates of free online content and has built a monthly audience of 33 million online. Emily Bell, director of digital content for Guardian News & Media, says: “It’s about whether you think your web presence should be closed or open. We’ve probably been unique in being ultra-open.”

Bell draws a distinction between an online pay wall and charging for content, pointing out that The Guardian will ask money for its forthcoming iPhone app. “People will pay for functionality and utility, stuff that gives them a good experience on a device,” she says. But websites are a different proposition, when countless other content providers, including low-cost start-ups by newly redundant professional journalists, are offering their words for free. “This is not about newspaper publishing, this is about news, content and analysis on the internet and as long as you keep making the category error that says newspaper publishers are different you won’t make any progress,” she says. “We occupy such a tiny sliver of this.”

Elsewhere in the print media industry, there is a palpable hope that various forms of pay wall – or “valuegate” – might compensate for the failure of advertising revenue to sustain the production of professional journalism.

The publisher of The Spectator and former editor of The Sunday Times, Andrew Neil, once an evangelist for putting print journalism on the web for free, admits he got it wrong. “As an industry we took a huge wrong turn,” he says. “It was a new technology and we didn’t quite understand it. We had been told that if we got the eyeballs – in the usual digital dotcom jargon – the money would follow. Well, we got the eyeballs and the money hasn’t followed.” The Spectator is now only available on subscription, though it offers free access to its distinct blog-based website Coffee House.

Mike Anderson, a former senior executive at both News Corp and at Associated Newspapers, publishers of the Daily Mail, believes it is time the print media business faced up to a series of truths. “The first truth that we have to come to terms with is that the existing model does not work and cannot continue,” he says. “The internet is no longer a new media, it has matured and is well understood. It is a real world. So what are we doing in that real space? We are spending millions and millions providing fuel for somebody else’s engine – crazy!” he says, referring to the use of content by Google and other aggregators.

Although he boasted to me, two years ago, about The Sun having an audience of 22 million across all platforms, he now believes that unique monthly user figures are “irrelevant in the commercial sense”. According to Anderson, who still advises News Corp through his consultancy Frank Business, making money from online news is not simply a question of erecting a pay wall. “We are going to have to get a lot sharper. We have to understand the web consumer and [make] them feel they are getting value. It means you are going to have to add, on top of content, tools and applications that are useful.”

He cites the success of Sky television as evidence of News Corp’s ability to adopt a “long-term” strategy in making a success of a subscription model. Some observers expect News Corp to offer subscriptions that combine elements of its various newspaper and television properties.

Anderson’s personal view is that newspapers could monetise areas of their collective output – such as travel journalism for example – by grouping it on a single website and outflanking the existing competition. He also foresees a situation where more than one of the big newspaper businesses offer their core material via the same portal, with similar principles of bundling content to those which exists in the pay television market. “That would be a very sensible place for people to get to. There could be the ‘all you can eat’ deals and the bespoke ones. I feel that’s coming.”It’s a delicate situation because of anti-cartel laws. “Nobody wants to do anything illegal,” says Anderson but he stresses that this “is a moment in time”.

Who might join News Corp in such an enterprise? Conversations are currently taking place across the industry. Earlier this month, Rupert Murdoch told reporters of the “hard work” News Corp was investing in the switch to charging. “There’s a huge amount of work going on,” he told a reporter from The Daily Telegraph. “Not just with our sites but with other people, like your company.” The Telegraph did not report this and has been secretive about its plans. Telegraph Media Group, which is believed to be opposed to pay walls, has a close relationship with Google and has avoided criticising the search engine, unlike Murdoch and his senior executives, who have dubbed it a “parasite”.

The Daily Mail & General Trust (DMGT) might be a more likely partner, although its chief finance officer Peter Williams admitted to the Barcelona conference that the Mail’s website, driven largely by celebrity photography, would struggle to monetise pictures of Britney Spears. He suggested that content around specialist issues, such as “women’s health”, offered greater opportunities. Some industry figures believe that the recent ending of the free newspaper war in London, with the closure of News Corp’s thelondonpaper and DMGT’s London Lite, is evidence of a closer relationship between two of the fiercest rivals in Fleet Street.

For Richard Desmond’s Express Newspapers, the issue of whether to charge for online content is a less pressing conundrum, given he has chosen to virtually ignore the internet while concentrating on producing his printed papers at maximum profit and minimal cost.

Simon Kelner, the managing director and editor-in-chief of The Independent, takes the view that online users will not pay for news, but may pay for “unique” elements of a newspaper’s output. “The idea that payment could be levied for a generalised news service is clearly out of date. Why would anyone pay for a service that the BBC offers for free? However, publications with a niche following have found a market for their offering, which is why The Financial Times, for instance, can be bullish about their subscription model. Newspapers may be able to follow this example to a limited degree by charging for the content that makes their publication unique – commentators, specialist correspondents, even something like horseracing tips.”

Some form of charging is inevitable, he feels. “It is difficult to see an advertising revenue-only model working for newspapers online, so there has to be a form of subscription, or of spot payments for certain articles. Everyone is grappling with the problem of how to get from here to there, but the journey has to be undertaken. Otherwise, it’s not just individual newspapers that will perish, but the very notion of journalism itself.”

The Financial Times already has 121,000 paying subscribers to its website, though many are businesses. Rob Grimshaw, the managing director of FT.com, agrees that an advertiser-only model is unsustainable. “You need 800 million-1 billion page views per month in order to make £50m a year from advertising. If you look at the UK marketplace, it’s only really the BBC and some of the portals that have that kind of scale, and if a publisher is going to create a meaningful online business with free access they’ve got to get into that territory and actually far beyond it.”

The FT will further monetise its online output next year with the introduction of a system of micro-payments for individual articles. The price level will be flexible and reflect demand, he says. “There might be a large proportion of our online audience who’d love to buy access for a period of time or for an article but wouldn’t make the commitment to a full year,” he says. “We could build in a whole extra stream of revenue.” Several British papers, including The Independent, are now available as iPhone apps and Grimshaw says a proportion of the 130,000 who have downloaded the FT’s app have since become subscribers to the website.

Another specialist business publication, The Economist, has also seen value in charging for the publication on electronic devices. American readers have made the title one of the most popular downloads on the Kindle reader, paying the equivalent of £6.29 a month. Ben Edwards, publisher of The Economist’s website, says: “That has taught us that people will have that experience using electronic media and they will pay a premium for it and we are developing The Economist weekly package for other display technologies.”

The Economist has also felt confident enough to bring forward the pay wall around its archive, so that online users can only have free access to articles up to 90 days old, rather than 12 months. From October, the current content of the magazine was made available online only to subscribers. A subscription-only online policy was also introduced last week at the trade magazine Broadcast.

Even New Media Age, which caters to the IT industry, has a “freemium” model, using the website to drive subscriptions, with many readers preferring the print edition. “It’s a real paradox in this market but they still want their paper copy,” says publisher Andy Oakes. “It surprises me every time, but they like the feel and the emotional attachment of a magazine, people will still pay for that.” Oakes says that online advertising will pick up in 2010 but warns that sophisticated media buyers, increasingly keen on behavioural targeting, will not necessarily spend vast sums on the mass audiences offered by the big players.

Local newspapers, like periodicals, might claim to have a unique and valuable offering. Kevin Ward, editor of the Worcester News, says that no other media organisation has reporters in the city’s courts and council meetings, so perhaps readers might pay for an online subscription? But Neil Benson, editorial director for Trinity Mirror’s regional titles, complains that news agencies instantly circulate the content of titles such as The Journal in Newcastle, and The Birmingham Post. “In terms of general news it would be very difficult to see a point where we can charge for it [online],” he says. “As soon as our print titles are on the street the news agencies farm our stories out to the national newspapers and magazines and all points east and west.”

And for both the national and regional press, the free presence of BBC news is a source of concern. Senior BBC figures have said to me that the corporation’s site will begin to reduce its written output, concentrating on its core video and audio content, partly in respect of growing concerns over the scale of the BBC and partly because this is what internet users most want. But Helen Boaden, head of BBC News, is adamant that text will continue to play an important role in the BBC’s online journalism. “Text is often the way you give a story context and analysis,” she says. “There are stories where there’s no audio or video but you have words, the most convenient of media.”

In America, The New York Times abandoned the pay wall around some of its star writers in 2007 and, as Emily Bell points out, there are now well-established digital businesses – such as The Huffington Post and Gawker – where “nobody thinks for two seconds that the way forward is putting up pay walls”. Others look elsewhere for the best business model, with Jim Chisholm citing the Scandinavian publisher Schibsted as “the most interesting newspaper company in the world”, with a model based on free online access to sites which combine news with the commercial offerings of various partner businesses.

But in Britain, nearly all eyes are now on one man, as Bob Satchwell, chairman of the Society of Editors, observed of his fellow conference delegates this week. “Everyone,” he says, “is hanging on the decisions of Rupert Murdoch.”

The way forward: Media industry views on charging for online news content

Simon Kelner, Managing director and editor-in-chief, The Independent

“Everyone is grappling with the idea of how to get from here to there, but the journey has to be undertaken. Otherwise, it’s not just individual newspapers that will perish but the notion of journalism itself.”

Emily Bell, Director of digital content, Guardian News & Media

“This is not about newspaper publishing, this is about news, content and analysis on the internet and as long as you keep making the category error that says newspaper publishers are different you won’t make any progress.”

Mike Anderson, Frank Business consultancy; former News Corp and Associated executive

“The internet is no longer a new media, it has matured and is well understood. It is a real world. So what are we doing in that real space? We are spending millions and millions providing fuel for somebody else’s engine – crazy!”

Helen Boaden, Director, BBC News

“The online news service the BBC provides is not free, it is paid for by the licence fee. Text is often the way you give a story context. There are stories where there’s no audio or video but you have words, the most convenient of media.”

Andrew Neil, Publisher of The Spectator; former editor of The Sunday Times

“It was a new technology and we didn’t quite understand it. We had been told that if we got the eyeballs – in the usual digital dotcom jargon – the money would follow. Well, we got the eyeballs and the money hasn’t followed.”