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What Murdoch Still Doesn't Get About the Internet


Rupert Murdoch knows who's winning the war between big media and the Internet. Unsurprisingly, it's Rupert Murdoch. "Without content, the ever-larger and flatter screens, the tablets, the e-readers, and the increasingly sophisticated mobile phones would be lifeless," he proclaimed when News Corp. (NWS) posted unexpectedly strong fiscal 2010 second-quarter earnings. "Devices and platforms are proliferating, but this clever technology is merely an empty vessel without any great content. "

Murdoch danced a lively jig for investors as he bragged about his company's ability to thrive in the media tumult caused by the Internet. I'm not buying it. News Corp. may be getting a big lift from Avatar right now, but like any big media company, it still has a lot of learning, experimenting, and failing to do before it can really start to monetize the Web. The arrival of the iPad and other tablet devices may, in time, make that easier. But first they will make it much harder by speeding up the process of adaptation.

The most difficult thing about the disruption facing the media industry hasn't been the certain sense that business models are changing—it's that nobody is sure how they're changing. But one important idea is starting to become clear: Content isn't a product anymore, it's a service. Because for consumers, content is less and less a thing they buy and more a thing they experience.

What They're Paying For

The notion emerged a couple of years ago, with the likes of Kevin Kelly alleging that the Internet is essentially a copy machine and asking what can be sold that isn't easily copied. Others took it even further, to the notion of content as a service. Over at his O'Reilly blog, Andrew Savikas wrote:

"Whether they realize it or not, media companies are in the service business, not the content business. Look at iTunes: If people paid for content, it would follow that better content would cost more money. But every song costs the same. Why would people pay the same price for goods of (often vastly) different quality? Because they're not paying for the goods, they're paying Apple for the service of providing a selection of convenient options easy to pay for and easy to download. "

It's no accident that Apple has been thriving in this chaos. And it's no surprise that the iPad was designed to enhance the experience of Web media in ways that are more immersive and intuitive than either laptops or smartphones. In fact, the iPad seems to be built on the blunt assertion that content is now something to be experienced rather than possessed. Selling content—whether it's news, music, books, or something else—as a product on a tablet is setting yourself up for disappointment.

Thinking Like the Startups

This evolution in content is clearer in music, which was the first to feel significant disruption from the Internet. Twenty years ago, buying music meant purchasing a CD after you heard a song on commercial radio (or, for the adventurous, college radio) or read a review in a magazine. Today, music is becoming an experience that begins with discovery sites such as Pandora or social network sites such as Twitter and end up in a cloud-based service like Spotify or Grooveshark. Significantly, these companies are startups and not traditional media giants.

In short, the old media giants need to think like startups—that is, look at the iPad with the eyes of any other app developer and imagine what it can do that hasn't been done before. How will a tablet change the experience of books, news, music, and so on? And why will we consumers be willing to pay for that new experience? These are the questions to start with, rather than asking how to shovel the same old content products onto devices that radically transform what content is.

Murdoch is right that those devices are lifeless without content, but he neglects to mention that it's a symbiotic relationship. "Content is not just king, it is the emperor of all things electronic!" he crowed. Maybe, but this emperor is wearing the service uniform of a burger flipper. When do we get fries with that content?

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