The Content Crisis

As media ads dry up, phone outfits and Net providers could just slap content fees onto their bills. (Of course, this will upend the ad biz)

By Lars Bastholm

The signs are everywhere. The New York Times is close to bankruptcy. Magazines are dying in droves. The music industry is trying anything to make a buck. The TV networks are wondering if they can keep selling increasingly expensive space in return for an increasingly smaller audience that time-shifts its way out of having to watch the ads. Meanwhile, business plans that held the words "advertising funded" are being rewritten, while multitudes of newspapers and content sites are closing down because of lack of income. News Corp. (NWS) Chairman Rupert Murdoch said recently, though, that he plans to charge readers for content at all the company's Web sites. It already charges for The Wall Street Journal, but Murdoch plans to extend that model to FoxNews.com, as well as newspapers like the New York Post and The Times of London.

Maybe it's time to take a deep breath and accept that the idea that advertising can support the entire content industry is a fallacy.

But then what? The knee-jerk reaction from almost everybody in the content business is to think micropayments. I was particularly surprised by Barry Diller's recent argument in The New York Times that people would pay for content "because they always have." This is from the guy who runs IAC/InterActiveCorp (IACI) and who should know a little bit about how digital media have affected consumer behavior. This is not to single out Diller, but he's emblematic of how the content industry seems to have only two solutions to everything: advertising funded or micropayments.

Kids Won't Shell Out

Micropayments will never work. The Millennials have grown up in an age where content is mostly free. They have never become used to paying for music, movies, TV shows, and, in particular, news. Furthermore, news has become a commodity. If you're asked to pay to get it from one source, there's a wealth of alternatives out there. The exceptions to the rule are specialty sources like The Wall Street Journal—which makes some money with a subscription model because companies, not individuals, pay the subscription—and sports stats sites for the statistically inclined.

Another challenge with micropayments is that they make you feel as if you're being attacked by a horde of beggars, cups in hand. If the Internet experience becomes a series of credit-card swipes, or if visiting a site or using a service becomes a financial question, free alternatives will spring up almost immediately. It is the nature—and the culture—of the Web.

As bandwidth keeps increasing, it becomes easier to run download sites such as Sweden's Pirate Bay. (That site is still online at the time of this writing, even though its owners have just been found guilty of copyright infringement.) However, the next version of Pirate Bay will surely have its servers in countries that don't care about copyright issues. And then what happened to music will happen to TV shows and movies. It is inevitable. Fighting it is going to be just as futile as the war on drugs has been. If enough people want something, you can't stop it through legislation.

The nature of the Internet makes this a global issue. And it needs a global solution. This is especially true for huge American exports like movies and TV, where non-U.S. revenue is increasingly essential.

What we need is a payment model that rewards the content creators and feels free for consumers. It sounds incompatible, but maybe there's a way that makes this work out for both parties.

Finding the Fee

In Britain and in my native Denmark, the national TV stations are funded through a license. All households with a TV and/or a radio pay an annual fee.

Business Exchange

Track and share business topics across the Web.