Rupert Murdoch conceded defeat this week in his battle with Google and the Internet, an adversary even more powerful than the British government. Murdoch, uniquely among the world’s media magnates, decided two years ago to create a “paywall” for the London Times that could not be penetrated by Google and other “parasitic” search engines. In effect, the paper was cut off completely from the public Internet. As one of Murdoch’s newspaper managers later described this strategy: “Rupert didn’t just build a paywall; he circled it with barbed wire, dug a moat around it and put crocodiles in the moat.”
On Monday Murdoch relented. Times articles started reappearing in Google searches, although anyone wanting to read them still has to pay £1 for one day’s paper or £2 per week. Coincidentally, News Corp, Murdoch’s holding company, announced the departure of its chief digital officer, Jonathan Miller. And Murdoch himself stood down as chairman of Times Newspapers, the News Corp subsidiary that controls his upmarket British papers.
Murdoch’s U-turn sends two interesting signals. The first, already much discussed, is about the disappointing results of this paywall experiment – just 131,000 subscribers after two years. The second is about Murdoch’s global empire and the future ownership of the Times. Having spent 20 years at the Times before leaving it six months ago, these signals sound to me like an SOS.
Murdoch’s papers, and the Times especially, are now caught in a perfect storm. Like all papers the world over, they are buffeted by technological transformation and recession. But they also face a third threat unique to News Corporation– the fallout from the phone-hacking scandal that has led to the arrest of several of Murdoch’s top British executives.
The hacking scandal has been hugely embarrassing and expensive, with legal costs estimated at $224 million in News Corp’s latest accounts. But much more important for the Murdoch papers not implicated, including the Times and the Wall Street Journal, is the scandal’s impact on News Corp’s business strategy – and its rationale for owning newspapers at all.