Rupert Murdoch Admits, Once Again, He Can't Make Money Online — Begs Facebook To Just Give Him Money

Business Models

from the that's-not-a-business-model dept

There’s no denying that Rupert Murdoch built up quite a media empire over the decades — but that was almost all entirely focused on newspaper and pay TV. While he’s spent the past few decades trying to do stuff on the internet, he has an impressively long list of failures over the years. There are many stories of him buying internet properties (Delphi, MySpace, Photobucket) or starting them himself (iGuide, Fox Interactive, The Daily) and driving them into the ground (or just flopping right out of the gate). While his willingness to embrace the internet early and to try things is to be commended, his regular failures to make his internet ventures successful has pretty clearly soured him on the internet entirely over the years.

Indeed, over the past few years, Murdoch or Murdoch surrogates (frequently News Corp’s CEO Robert Thomson) have bashed the internet at every opportunity, no matter how ridiculous. Almost all of these complaints can be summed up simply: big internet companies are making money and News Corp. isn’t — and therefore the problem is with those other companies which should be forced to give News Corp. money.

A few years back, I ended up at a small media conference where Rupert’s son James Murdoch spoke at great length about his plans for News Corps’ internet business — and what struck me was that he was almost 100% focused on copying the pay TV model. This wasn’t a huge surprise — I think at the time he was running Sky TV — but it shocked me that he appeared to think through force of will he could turn the internet into a walled garden a la cable and satellite TV systems. Not surprisingly, Rupert is thinking along similar lines, and earlier this week released a bizarre and silly statement saying Facebook should start paying news sites “carriage fees” a la cable companies:

The time has come to consider a different route. If Facebook wants to recognize ?trusted? publishers then it should pay those publishers a carriage fee similar to the model adopted by cable companies. The publishers are obviously enhancing the value and integrity of Facebook through their news and content but are not being adequately rewarded for those services. Carriage payments would have a minor impact on Facebook?s profits but a major impact on the prospects for publishers and journalists.

We’ve seen this kind of thinking many times before. First the argument was used against Craigslist. Then Google. And now, apparently, Facebook. The short version is “these internet companies are making money, we news companies aren’t — ergo, the successful internet companies should be paying the failing news companies.” For someone who claims to be a died-in-the-wool free market capitalism supporter and who insists that socialism is “immoral,” I can’t help but note that this appears to be Rupert Murdoch asking for successful companies to subsidize his failing companies in the interest of “social value.”

Indeed, contrast his begging Facebook for handouts with his pro-capitalism speech from a few years ago. In it, he notes that “to succeed, you have to produce something that other people are willing to pay for.” And that’s just the thing, Rupert, the market dynamics here say that no one is willing to pay to “carry” your news. Tony Haile, the former CEO of Chartbeat and the founder of a new company Skroll that is working on media business models (and, randomly, who I met at that very same conference where James Murdoch spouted his nonsense) has laid out a pretty clear explanation for why the carriage fee model doesn’t make any sense at all on the internet. The market dynamics are totally different — the leverage and value positions of the players are different, the value to the end users is different and the market barriers to entry are totally different, meaning a totally different competitive market.

Indeed, the internet and Murdoch’s reaction to it are truly fascinating, as they strip away The Emperor’s New Clothes concerning Murdoch’s supposed support of free market capitalism. He claims to be in favor of it when it helps him to accumulate hoards of cash, but as soon as he can’t build a successful competitive business, he suddenly resorts to the “immoral” position he supposedly loathes — demanding that the other successful operations just fork over money to him because he (claims he) provides tremendous social value.

There are, of course, plenty of discussions to be had about media business models — and the power that companies like Google and Facebook hold. But to merely demand they hand over “carriage fees” just because makes no sense. It’s a weak demand from someone who failed in the market and has no desire to truly innovate or compete. It ignores, too, that such a setup would only entrench existing players and harm upstarts and competitors. The whole thing is quite silly — but also quite incredible for what it truly reveals about Murdoch’s actual feelings for a free market when he’s on the losing end of one.

Filed Under: business models, cable tv, capitalism, carriage fees, competition, free market, james murdoch, journalism, news, rupert murdoch, socialism, tony haile
Companies: facebook, news corp