Murdoch vs. Schmidt = Old Media vs. New Media
December 4, 2009 by Pablo Palatnik
If you look at todays industry sector in our economy, although manufacturing of goods sector has had a great decline over the years, todays world of Media is changing more than ever and the effects are truly seen as many newspapers across the nation are going out of business. Why? It’s simple. The internet. Online has changed the world, and if you ask anyone under the age of 60, I guarantee over 90% would say they get their news online.
Nevertheless, many newspapers can blame much of their demise on Google. The largest search engine in the world that indexes billions of pages and has advertising models in place that bring incredible revenue. Though they can be blame for their demise, I would think Google is another channel to these news sources.
Eric Schmidt from Google (Left) and Ruper Murdoch from Newscorp (Right)
The SeattlePi blog reports, “Google CEO Eric Schmidt must be having a tough year. Media organizations, especially News Corp. CEO Rupert Murdoch, have been picking on Google for destroying their business. They blame the Internet giant for giving away their content for free and stealing their ad revenue.
The blame game came to a head last week when reports surfaced that Microsoft was in talks about giving Bing the exclusive indexing rights to News Corp. content. That would yank News Corp. content, including that from The Wall Street Journal, off of Google News – which Murdoch also has threatened to do on his own.
More reports revealed that Microsoft was in talks with The Associated Press and other publishers, at least on the topic of news on Bing, but was unlikely to pay for exclusive indexing rights. Since then, Microsoft has said it currently has “no real intent” to pay off publishers.
Well, Schmidt has responded with a column in The Wall Street Journal. The gist of his column? “Shut the @%!# up!”
From Schmidt’s column:
With dwindling revenue and diminished resources, frustrated newspaper executives are looking for someone to blame. Much of their anger is currently directed at Google, whom many executives view as getting all the benefit from the business relationship without giving much in return. The facts, I believe, suggest otherwise.
Google is a great source of promotion. We send online news publishers a billion clicks a month from Google News and more than three billion extra visits from our other services, such as Web Search and iGoogle. That is 100,000 opportunities a minute to win loyal readers and generate revenue – for free. In terms of copyright, another bone of contention, we only show a headline and a couple of lines from each story. If readers want to read on they have to click through to the newspaper’s Web site. (The exception are stories we host through a licensing agreement with news services.) And if they wish, publishers can remove their content from our search index, or from Google News.
News Corp has quite a few properties online. They own the Wall Street Journal, social giant Myspace (although not mentioned in the story above) and if a property such as the Wall Street Journal was out of the Google index, news or search (or both), the loss of traffic would be significant to the revenue stream of these properties.
When it comes to the revenue model of news sites online, it all comes down to traffic. You can capitalize on your traffic by selling ad space based on your traffic or you can sell subscription. For the most part, the subscription base model is a tough competitive market due to the fact that there is so much news content out there, you have to have a very loyal following to have people pay for your content. News sources such as the Wall Street Journal or the New York Times are free. Why? Because the revenue model that fit best was free-for-all equals a lot more traffic equals a lot more money based on selling ad space.
In the comment by the story reported by SeattlePi, a reader comments, “It’s worth reiterating: It is extraordinarily easy for a website owner to lock out Google from indexing the site’s contents. Rupert Murdoch could do it right now if he wanted to…He doesn’t. Murdoch knows that Google is his butter.”
Two words, VERY TRUE. No matter the issues at hand as media companies may clash, Google is the main highway of traffic right now and last thing you want to do is block your exit as the possibilities of traffic are endless AND the amount of money Google generates (and traffic) for News Corp online properties are too big to just drop. That’s reality.
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