Murdoch blames the BBC for his incapacity to make money out of news…

James Murdoch’s McTaggart Lecture at the Edinburgh TV Festival has caused a stir. Not least at the BBC. In brief, James Murdoch reckons that the BBC is responsible for the fact his company cannot make money online, because the BBC is unfairly using its licence base to dump high quality news content on the net, for free. He also quotes Orwell and warns sagely about the danger of state monopolies. The intellectual core of his pitch is pure Hayck:

…we have analogue attitudes in a digital age*. We have business models and a policy framework based on spectrum scarcity. We have limited choice, and we have central planning. The result is lost opportunities for enterprise, free choice and commercial investment.

* A nice crib from Mr Cameron’s attack on Gordon Brown back in 2006.

…the digital present is forcing us to make urgent choices. Second, in this rapidly changing world the boundaries between media have broken down. People consume content in a very fluid way, and that is reflected in the way we provide it. What were once separate forms of communication, or separate media, are now increasingly interconnected and exchangeable. So we no longer have a TV market, a newspaper market, a publishing market. We have, indisputably, an all-media market.

But the present is not as great as we tell ourselves. You don’t need to scratch the surface very hard to see that opportunities for media businesses are limited, investment and innovation are constrained, and
creativity is reduced. This is bad for customers and society.

Cue his well publicised attack on the BBC. There is a considerable amount of truth in what he says. Even the Guardian’s Emily Bell has made similar complaints, so although his argument to privatise the BBC is an ideological one, and one informed, no doubt, by Sky’s own commercial interest (a conspicuous beneficiary of a decidedly unDarwinian, unfree market monopoly position with regard to UK satellite provision), he has a point. Particularly in regard to the loss of a pluralism in broadcast news and current affairs perspectives presaged by the collapse of the commercial news market.

The truth is that when Murdoch’s father made his speech to the same body twenty years ago, it was NewsCorp commercial businesses which was using technological innovation to continually disrupt the news market. In an era of news scarcity, there was money to be made and lots of it. Now, the money is going elsewhere. Much of it to Google, which like one those huge European trawlers hugging the coast of Africa is hoovering up cash and disrupting the once great and nerveless disrupters themselves.

As as previously noted here on Slugger, it’s affecting the Irish market just as badly..

Mr Murdoch espouses a Hyackian belief in free networks without wanting to make himself amenable to the changing conditions he notes at the top of his speech: i.e., that news is no longer scarce. Robert Peston in his own speech at the weekend, gives the figures and the dilemma:

…the aggregate revenues of ITV, Channel 4 and Five (perhaps £2.7bn) are significantly less than the BBC’s and about half that of James Murdoch’s British Sky Broadcasting. On the broadcasting side – if classifying a section of the industry in that way makes sense in this digital world – there are a pair of giants and some minnows with loud voices, strong brands but depleted resources. All of which – to state the obvious – makes the large and protected revenue of the BBC and Sky’s monopolistic control of satellite distribution much more contentious than would be the case if the rest of the sector was booming.

But for me, here’s where Peston gets something right that Murdoch entirely misses because of the focus on defending of his own corporation’s commercial interests. In ‘the new journalism’, the corporation matters less than the individual stories and journalists who carry them:

…although individual news organisations are probably in general weaker, facing both greater financial pressures and more competition than ever, the power of individual stories – and I suppose of journalists, from time to time – has increased. When a story takes off on the internet, as they have many times in respect of the credit crunch over the past couple of years, it’s a massive worldwide explosion. But it’s not just business or economic stories.

Think about how TMZ’s disclosure of the death of Michael Jackson went from internet scoop to global TV news within minutes – or how the Telegraph’s website became the primary source on the biggest political story of the year, the revelations about MPs’ abuse of their expenses. Which brings me to the associated changes in the way that hacks like me work.

I suspect that Peston, a veritable workaholic, is probably an exception to the BBC rule he nevertheless articulates the core of what a viable new journalism is likely to look like. Something Mr Murdoch seems not have give much thought. Peston again:

The point about that Dutch team, but especially the inspirational captain, Johan Cruyff, is that all of them could more or less play in every position. And my argument is that hacks like me increasingly have to become total journalists. When I started in journalism, I wrote one or two stories a week on a clunky mechanical typewriter – it was the last century but it really wasn’t that long ago. Now I write up to five or six blogs in a single day, I broadcast on the Today programme, the Ten O’Clock News, as the broadcasting pillars of my output – and up to 20 or so other channels and programmes in a single day.

James Murdoch concludes his speech with a rally to the banner of profit as the source of all good and independence:

We must have a plurality of voices and they must be independent. Yet we have a system in which state-sponsored media – the BBC in particular – grow ever more dominant. That process has to be reversed. If we are to have that state sponsorship at all, then it is fundamental to the health of the creative industries, independent production, and professional journalism that it exists on a far, far smaller scale.

Above all we must have genuine independence in news media. Genuine independence is a rare thing. No amount of governance in the form of committees, regulators, trusts or advisory bodies is truly sufficient as a guarantor of independence. In fact, they curb speech. On the contrary, independence is characterised by the absence of the apparatus of supervision and dependency. Independence of faction, industrial or political. Independence of subsidy, gift and patronage.

Independence is sustained by true accountability – the accountability owed to customers. People who buy the newspapers, open the application, decide to take out the television subscription – people who deliberately and willingly choose a service which they value. And people value honest, fearless, and above all independent news coverage that challenges the consensus.

There is an inescapable conclusion that we must reach if we are to have a better society. The only reliable, durable, and perpetual guarantor of independence is profit.

But Peston conclusions are rather different. Informed as much as antything else by financial journalism’s general inability to counter the cosy consensus on the ongoing boom (at a time when Mr Murdoch was far from independent and quite visibly luxuriating in his privileged position in the Blairite corner):

…much of what the BBC does – especially the stuff we do online – may look like unfair competition. And as someone who worked in the private sector without a break from 1983 to 2006 – and who rather assumes that he will return to the private sector one day – I completely understand why James Murdoch has argued that the BBC’s online news service looks like state-subsidised unfair competition. Much of the private sector sees the BBC as crowding out legitimate commercial players. I feel the private sector’s pain on all this – although there is a counter argument.

With financial paternalism in its death throes, just as we are being forced to take control of our financial lives as never before, are we sure that a wholly liberalised commercial news market would ensure that everyone has access to the kind of news and financial information they need and deserve? There already appears to be a consensus that in the provision of regional news there has been a massive market failure that will require state intervention and subsidy to rectify. But is that market failure limited to regional news?

Will the new paid-for online model inform and educate on hard issues – financial matters, but also medicine, the environment, education and so on – that matter to us, or will it concentrate on the more sensationalist and titillating bangs for the buck? And even if paid-for online services do endeavour to fill the gap created by the death of financial paternalism, will millions on low incomes be excluded from access to this information? Should we be relaxed if ‘can’t pay’ means ‘can’t know’?

There is a debate here about two kinds of fairness. There is the fairness of ensuring a level playing field for players in a commercial market. And there is the fairness of the distribution of information and knowledge to all who need it, irrespective of their material circumstances. These are two different kinds of fairness. They are apples and pears of social justice. But having just lived through the greatest failure in history to distribute financial resources in an efficient and equitable way, we certainly shouldn’t assume that a commercial digital market in news will distribute information in a way that would support a healthy democracy.

Walter Bagehot – as luck would have it the greatest ever writer on banking – defined democracy as government by discussion. But you can’t have a decent chinwag without having the facts. And the big question – one which perhaps Richard Dunn would have relished – is whether the incipient structure of our new digital news industry will promote or undermine the healthy discussion that is necessary for democracy to thrive.

In the end, I am not sure that the concerns of either men will be fully realised. Independence and pluralism are already to be found both within the mainstream and amongst the new irregulars. The online news market is vast and global (the local market is in the throws of a widespread failure). The future will, as Peston suggests, rely more and more on the individual brand (as I argued in the Irish Times a few years back), and success will come to those news organisations which best engage and focus those talented individuals on the concerns and pre-occupations of those readers.

In the meantime, long term commercial success will depend on deep pockets, an almost endless commitment to innovation, and, the missing link, a viable means of making money in a time of news abundance. If you do choose to charge a subscription you’d better have something people will want to pay for.

And that will have to happen whether the looming presence of the BBC’s prodigious output is there or not; my bet (despite Murdoch’s predictable switch to the blue corner) is on the former. In the end, the readers will decide. Something the state-paid Peston seems to understand better, at this point, than young Mr Murdoch, who sounds like a man who’s lost out on the kind of ‘first mover’ advantage his old man had when when he scooped up Sky’s spectrum for what now looks like a song.

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  • Some good letters in the Guardian today on this.

    http://www.guardian.co.uk/theguardian/2009/aug/31/james-murdoch-bbc-regulation

    It seems to me if business is unable to come up with successful model which allows them to make money whilst the content of the web is free, then tough, they need to look elsewhere for profits.

    Funny how these new liberal businessmen like young Murdoch claim national boundaries are extinct; and big government is bad, yet when it suits them they are first at the governments door demanding the very same governments recreate in their interest the playing field.

    Talk about getting others to do there heavy lifting.

  • The Spectator

    I have followed Murdoch Jr’s story with something approaching dread. The idea that the government should withdraw a superior product (and let us be clear, BBC News and Current Affairs, flaws and all, is light years ahead of Sky both on and off line) in order to placate the desire of one operator to make money from people already receiving the service free at point is simply grotesque.

    We are always told how efficient and competent the market is, and how the market always does things better; when the market can’t match the supposedly inefficient incompetent state provision, it pleads poverty. Hypocrisy much?

    Here’s the rub – it’s not in the public interest to make any Murdoch richer. If he can do that by himself, fine, good luck to him; if he needs to interfere with a treasured and excellent puiblic service because he can’t sin us for enough pennies, he can f*** off.

    In the final analysis, remember always; the market is supposed to serve the consumer – Murdoch seems to think it is the job of the consumer to serve the market.

  • Itwas SammyMcNally whatdoneit

    It has been clear for some time that the BBC cannot compete on all fronts as it is currently trying to do. The BBC is better, fairer, more trusted and better value than the alternatives but unfortunately its days as the national broadcaster may be numbered as that failure to compete is gradually undermining the support it receives to maintain its revenue source in the shape of the license fee.

    Having demonstrated by decades of excellence just how the job should be done we must be fast approaching the time where the state’s role in the media is exercised via a broadcast overseer who ensures that in return for meeting specific quality targets brodcasters get the right to show their wares on TV/Internet etc.

  • Coll Ciotach

    If he really is interested in competition then let us break up his empire and allow more competition ala the now failed Setanta to rise or fall.

    I think a touch of hypocracy is eveident here

  • DerTer

    Much food for thought here. But any Murdoch claim to be producing impartial news is blown out of the water by the performance of News International’s Fox News. If you really want TV to shout at, Fox News is available for an additional £1 as a component of Sky’s ‘News and Events’ pack; it is, sad to say, highly popular with viewers in the US, and is currently engaged in a vicious crusade against Obama’s attempt at health care reform.
    Incidentally, I think Robert Peston may be wrong – or at any rate slightly misleading – about “government by discussion”. Bagehot did use the expression, but it was English political philosopher A D Lindsay who incorporated this notion into his careful defence of what we would now call liberal democracy – of which press freedom and a plurality of news sources was/is a central part.

  • willis

    “There is a debate here about two kinds of fairness. There is the fairness of ensuring a level playing field for players in a commercial market. And there is the fairness of the distribution of information and knowledge to all who need it, irrespective of their material circumstances. These are two different kinds of fairness.”

    Simple and profound. And all the better coming from someone who was recently with the Torygraph.

    “Independence is sustained by true accountability – the accountability owed to customers. People who buy the newspapers, open the application, decide to take out the television subscription – people who deliberately and willingly choose a service which they value. And people value honest, fearless, and above all independent news coverage that challenges the consensus.”

    And how does that square with the accountability due to the victims of debauched journalism?

  • Murdoch Jr knows what his dad taught him: You don’t make money in the media by beating your competitors. You make it by beating regulators. The reason we’re all discussing this speech is not that it had any original or interesting content in itself. It’s because it came from someone that politicians are frightened of.

    Murdoch has used this power consistently to coerce governments. For many years, the British government demanded and then used discretionary loopholes to let BSkyB off the obligations of the EU’s TV Without Frontier Directive. For this reason, BSkyB has a near-monopoly in the UK Pay TV market AND they invest almost nothing in the production of content – preferring to suck in US imports instead.

  • willis

    Watching Murdoch Jr is so like watching Paisley jr. Big Ian and Rupe were largely self-made fundamentalists with a sense of humour often directed at themselves. They could laugh at themselves, they knew what they wee worth.

    Maybe this Murdoch quote is apocryphal:

    “I was against monopolies until I got one ”

    Murdoch Jr

    “On the contrary, independence is characterised by the absence of the apparatus of supervision and dependency.”

    The Murdochs attack powerful competitors politically, they crush weak competitors economically.

    The UK can be thankful that the BBC is still a powerful competitor.