Rupert Murdoch gave a speech on Tuesday that gives a few more hints as to how he sees the future of news businesses, and in particular his paywall plans.

Addressing a US Federal Trade Commission workshop, he asserted that “the future of journalism belongs to the bold”. He also made the uncompromising assertion that “the old business model based on advertising only is dead”.

Let’s face it: a business model that relies primarily on online advertising cannot sustain newspapers over the long term. The reason is simple arithmetic. Though online advertising is increasing, that increase is only a fraction of what is being lost with print advertising. That’s not going to change, even in a boom. The reason is that the old model was founded on quasi-monopolies such as classified advertising — which has been decimated by new and cheaper competitors such as Craigslist, Monster.com, CareerBuilder.com, and so on. Even online display advertising is in such huge supply that its price is under constant pressure.

And for those who have been intrigued by talk of a “cool new toy” as part of News Limited’s plans to seek payment for content, Murdoch spelt it out:

Already we provide news to our readers through websites, email alerts, blogs, twitter, and podcasts. Now we are looking at e-readers. We have no intention of getting into the hardware business. But we have every intention of promoting more choice for our consumers and more competition among distributors by pursuing ways to help us deliver news and information as cheaply as possible and over as many platforms as we can.

This adds to intelligence I received lately from a traveller in South-East Asia. This traveller had been talking to a senior Samsung executive who said that the company planned to produce full-colour e-paper within two years.

He spoke very quickly and rushed away as soon as he could. I followed him outside for a private chat, and discovered he was on his way to see Rupert, who was in town for a couple of days prior to going to China for that media talk-fest in Beijing.

The shape of the News Corporation paywall plans is fundamentally clear, I think, although doubtless there will be bells and whistles and surprises further down the track. It seems the plan includes subscription packages of content, tightly targeted to the readers’ interests, bundled with an e-reader.

Some are questioning whether the “cool new toy” e-reader will be “tied” to just one content provider, rather in the manner of the early days of commercial radio, when sets were locked to just one frequency — a plan that did not last long. Apart from anything else, people soon found ways to break the lock.

News Corp could deliver television content, films, books (through  HarperCollins) as well as news to the e-reader, giving it a serious competitive advantage over smaller and less diversified media companies.

Yet who can doubt that if the e-reader is “locked” to News Corp content, every hacker on the planet is likely to regard cracking the lock as a personal challenge?

Other interesting aspects of Murdoch’s Tuesday speech include an attack on government regulation, particularly that related to cross media ownership. What he says is of most relevance to the US scene, but has clear implications for Australia as well.

He also gave a spray to the notion that news businesses should become not-for-profit or get government assistance.

The prospect of the US government becoming directly involved in commercial journalism ought to be chilling for anyone who cares about freedom of speech. The Founding Fathers put the First Amendment first for a reason: they knew that a free and independent press was vital to any self-governing people.

They also knew that the key to independence was to allow enterprises to prosper and serve as a counterweight to government power. It is precisely because newspapers make profits and do not depend on the government for their livelihood that they have the resources and wherewithal to hold the government accountable. This is also what builds the readers’ trust and confidence.

Factor this in to the debate here and in the United Kingdom about the place of public “broadcasting” (which is now so much more than broadcasting) which I have reported on previously here and here.

Peter Fray

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