One of the best ways for a TV show to drive DVD sales is to stream old episodes online. It worked wonders for Monty Python, and after looking at the numbers, Chadwick Matlin concludes that it probably helped stem a natural decline in DVD sales for Arrested Development, too. Plus, since Arrested Development was on Hulu, there was a decent amount of ad revenue there as well.

So, naturally, Fox decided to pull Arrested Development from Hulu. Why? Fox won’t say. But my guess is that it’s all part of Rupert Murdoch’s new information-wants-to-be-paid evangelism. He’s looking all over the internet to see where he’s giving away valuable content, and then bringing down the hammer.

Does Murdoch know that he’s serving up full RSS feeds for his WSJ blogs? That’s the right thing to do, of course. But given the way he’s clearly thinking these days, I wouldn’t be at all surprised to see him trying to restrict their broad dissemination, too.

The front page of Friday’s WSJ was not its finest hour. Along the top was the headline “Bankers Face Sweeping Curbs on Pay” — something which occasioned Justin Fox to note that “in the pre-Murdoch era that would have been a 600-word story on page A24, headlined ‘Fed Mulls Pay Guidelines’.”

Underneath that headline was the biggest front-page story: “U.S. Missile U-Turn Roils Allies”. Except there was nothing in the story to indicate that any allies were roiled at all. The online story now has the headline “Allies React to U.S. Missile U-Turn”, along with a formal correction of the old headline.

Dean Starkman wants to know “whether this is part of a larger story”: of course it is. The WSJ is now being edited by a man who cut his teeth in the fiercely competitive Australian and UK markets, where front-page stories drive newsstand sales and newsstand sales drive profits. Sweeping curbs on pay and roiled allies make for great headlines, and mean that readers are that much more likely to shell out $2 for the paper. Unfortunately, they also increase readers’ mistrust in the paper — Americans aren’t used to the feeling, common in the UK, that the headline massively oversells the story.

The WSJ doesn’t need to do this, but Murdoch does: it’s in his blood. A Murdoch paper without punchy headlines which grab you by the throat is pretty much a contradiction in terms. Readers of the WSJ will have to get used to trusting the stories more than the headlines, or the implicit news judgment which governs where they’re placed. The WSJ’s journalism seems to be much less scathed than the headlines have been.

Rupert Murdoch should try selling his iPhone app for a flat $1.99 and see how that works before jumping straight in to a model where he charges that much per week.

Businessweek.com was charging $25 CPMs in 2006, and selling out 79% of its inventory. This year, its CPMs are down to less than $20, and even then it’s selling only a very weak 38% of its inventory. With CPMs down by a quarter and the sell-through rate down by a half, what has happened to total revenues? Astonishingly, they’re up by about 4.5% over the period in question, and are now running at more than $20 million a year.

The NYT sees the glass as half empty: “Though BusinessWeek.com attracts a lot of page views, 45 percent of those are from slide shows, which Web publishers consider a gimmicky way to increase hits,” writes Stephanie Clifford. “Only 16 percent of page views came from original articles for the six months ended in April.”

On the other hand, there’s another way to view these figures: BusinessWeek.com has remained profitable while capitulating to the first rule of making money from ads: that quantity matters much more than quality. The number of sites which can sell “prestige” ads or site sponsorships is tiny: while the dream of the internet circa 2003 was that you could launch narrowly-targeted sites with high-value readers and then sell them at a premium, almost nobody has successfully done that.

My dream is that we’re now entering the beginning of an era in which inventive partnerships between web publishers and advertisers will create new, high-value inventory, as advertisers realize they can’t get the exposure they need just by taking out full-page four-color ads any more.

But if and when that happens, it’s going to be natural web properties which reap most of the rewards. Slow-moving ofshoot websites of print magazines, like BusinessWeek.com, are unlikely ever to be nimble and creative enough to grasp that market, and might indeed be better off trying to monetize listicles. After all, their bright ideas for online are likely to do little more than eat insane amounts of money:

Hoping to find new revenue, BusinessWeek started a social-networking site, Business Exchange, and sank $16 million into it in 2007 and 2008. Almost two years after its introduction, the site drew just 1.5 million page views in the United States in July, according to the measurement firm comScore. That is about the same as Wikinvest.com, a start-up offering investment tips.

Last year, Business Exchange had expenses of $7.6 million, and brought in only about $600,000 in revenue.

Ouch.

As a blogger, Barry Ritholtz ought to be super-alert to one obvious consequence his proposal that newspapers charge micropayments for their content: that content will simply migrate to free blogs. One way of building a large following on a blog (I’m thinking Mark Thoma or Yves Smith, here) is to marry analytical added value with long quotes from newspapers which obviate the need to click through to the actual article. If all those articles disappear behind firewalls, I can guarantee you that thousands of new blogs will spring up featuring extremely extensive quoting from MSM sources which have now walled themselves off from the blogosphere.

Yes, the newspapers in question could try to send cease-and-desist letters to any blogger behaving in such a manner, but those letters are expensive, and time-consuming, and they don’t always work, and most importantly they only serve to antagonize bloggers and turn a relationship which is good right now into something more akin to the relationship between the music industry and teenagers.

And even if newspapers manage to solve the blog problem, they won’t solve the equally-inevitable email problem, where people will just start emailing articles to each other, or posting them on their Facebook page, or that kind of thing. Newspaper websites at the moment are unrivalled as the first best source of any given newspaper’s content. That won’t continue if they start putting up firewalls.

We’re entering a share-and-remix culture, where the idea behind micropayments — that a small sum must be paid just to read something, and republishing or remixing are pretty much barred entirely — is increasingly untenable. Newspapers have always made money not by selling content but by building a strong relationship with a large number of readers, and then monetizing that relationship — mainly by charging advertisers large amounts of money for the privilege of inserting themselves into it. If readers become resentful of their newspapers, because they have to pay for every article they read and because they can’t easily pass that article on to others, then that’s a great way of destroying a valuable relationship.

My view is that the internet has been magnificent at vastly increasing the number of readers that newspapers have, and at strengthening the relationship that print subscribers have with the newspaper brand. By rights, those relationships, in aggregate, should now be more valuable, not less valuable. But because of problems with the ad market — including the tyranny of the CPM and the fact that advertisers in general are not big fans of buying online inventory — newspapers profits have gone down even as their readership has skyrocketed.

The trick to succeeding in the internet era is to take what’s good about the present situation and monetize it. Ritholtz, by contrast, would take the one good thing which newspapers have going for them, and kill it.

Leon Wieseltier’s attack on the NYT magazine is doing the rounds of the Twitterverse today, which is understandable, since it’s always fun to watch a brutal smackdown. But the fact is that the smackdown is profoundly unfair, and that Wieseltier has picked a most peculiar target for his ire.

It’s worth remembering here that the NYT magazine is just that — a glossy magazine, produced so that the NYT has a venue suitable for the kind of expensive, high-production-value ads produced by fashion companies and the like. “I understand that The New York Times Magazine is not Mind“, Wieseltier writes, but really he doesn’t: indeed, he doesn’t seem to have grappled at all with the idea that different parts of the NYT have different sensibilities, and that the glossy magazine, by its nature, is going to be the most fashion-friendly, “Urban Modern” part of the paper.

Given that, Wieseltier should really be astonished by the depth of the magazine’s seriousness and ambition: the fact that it devoted an entire issue to the question of women’s rights, especially in the developing world; or the fact that it is regularly home to the most insightful and important financial journalism that the NYT produces, such as Joe Nocera’s investigation of value-at-risk or Paul Krugman’s 8,000-word essay on inequality.

Wieseltier might fancy himself above the mundane considerations of newspaper economics, but the editor of the NYT magazine cannot be. And every section of the NYT outside the daily news hole has to be able to pay for itself, and ideally cross-subsidize the central newsgathering operation. Wieseltier claims that there is “a mark of decadence” upon the magazine — well, yes, of course there is, glossy magazines are fundamentally decadent institutions. What’s impressive is that the NYT has taken this decadent institution and used it to commit great journalism. Good for them, and long may they continue to do so.

Lots of people have tried to make micropayments work, and all of them have failed. But now Google’s dipping its toe in the water, and it’s just possible this one might work. I’m willing to give Google my credit card details, once, and I’m willing to log in to my Google account when I’m online. If it’s then easy for me just to click a button and say “charge this to my Google account”, I might be willing to do that.

On the other hand, I will still be extremely hesitant to link to anything which requires one pay money to read it. Google says that “‘open’ need not mean free”, but the fact is that in the link ecosystem they really do mean the same thing. If you want to start charging for content, be my guest. Just don’t expect to be an integral part of the conversation that the rest of us are having.

Two of the most popular blog entries I ever wrote were on the subject of AFA press. AFA is a publisher of sleazy advertorials, targeted mainly at companies in developing markets. (In the US, they operate under the name “Summit Communications”, when producing inserts for the New York Times.) Between my original March 2006 blog entry and its July 2006 follow-up, there are now more than 50,000 words of comments from people either involved or thinking about getting involved in this business.

But finding the good stuff amidst so much volume is not easy, so it’s great that Alan Furth has now blogged his own experiences working for this kind of company.

I was in charge of the editorial for the supplements, so I had to “interview” CEO’s and key government officials on their views about the attractiveness for business of their countries and companies.

A typical “interview” was structured as a 30-minute conversation that had to strike a delicate balance between gathering information for the copy of the supplements, and most importantly, making the interviewee say the right things that would allow my accompanying colleague — invariably an attractive, sharp, aggressive saleswoman as most people in positions of power in the developing world are still men — to construct the arguments for selling him an expensive ad in the supplement…

I became totally focused on listening attentively to my interviewee’s answers, taking notes, and coming up with witty comments for sparkling the space between questions and adding flavor to the conversation. I had to pay close attention to my interlocutor’s body language to gauge his emotional state: if he was tired, bored or angry, the pressure was on. I needed to wake him up somehow, to find which buttons to press in order to put him in the right frame of mind for a sale, while still feeling he had been “interviewed” by a journalist. Seeing his mood change subtly in the right direction was exhilarating, each favorable micro-expression getting me a bit closer to signing an advertising contract, and a commission of several thousand dollars.

The problem with this kind of thing is that once the big guys have been burned once or twice, they’re unlikely to fall for the same scam again. So Furth had to go lower and lower on the food chain, looking for unpicked-over companies:

In our hunt for “virgins”, we scoured the countries searching for them, storming into office buildings, taking advantage of relaxed, unstructured, friendly local cultures to steal 30 minutes of the boss’s time, and walking out with a 25,000 USD ad contract from a small stock brokerage firm that didn’t make a million USD in yearly turnover. Or for that matter, from a truck-manufacturing company that had no exports, no international expansion plans, or any other minimally rational reason for advertising with us.

I guess that the good news here is that this business model contains all the seeds of its own demise: according to its own website, Summit Reports has published nothing since February. With luck, it’ll be a long while until such things re-emerge.

James Murdoch is slightly younger than I am, but that doesn’t stop large chunks of his MacTaggart lecture from sounding as though they’re emanating from a veritable dinosaur. In an age where pretty much everybody agrees on the importance of increased regulation in the financial sector, it seems trite at best for him to equate any such impulses with creationism:

The consensus appears to be that creationism – the belief in a managed process with an omniscient authority - is the only way to achieve successful outcomes. There is general agreement that the natural operation of the market is inadequate, and that a better outcome can be achieved through the wisdom and activity of governments and regulators.

This creationist approach is similar to the industrial planning which went out of fashion in other sectors in the 1970s. It failed then. It’s failing now.

Actually, I can’t remember a time when there was less faith in the ability of the unfettered market to create successful outcomes, either in finance, where largely-unregulated financial institutions ended up needing hundreds of billions of dollars in state bailouts, or in journalism, where media outlets in general, and newspapers in particular, are dropping like flies, helpless in the face of the onrushing digital era.

While it’s pretty obvious that in a competitive marketplace, the cost of any good will fall towards its marginal cost — which in a digital world is free — Murdoch still feels happy proclaiming, against both evidence and common sense, that “it is essential for the future of independent digital journalism that a fair price can be charged for news to people who value it”. Does he really think that if the BBC went away, that would open up the door to charging for digital journalism online?

James should cross the Atlantic a bit more often. The dream of being able to charge a fee for digital journalism is one which should by rights have died long ago, but it’s being kept alive by dint of the sheer desperation of those, like James Murdoch’s father Rupert, who have convinced themselves that it’s the only way that their media properties are going to be able to continue to make enormous amounts of money.

Weirdly, all of this silliness comes in the context of what’s actually a really sharp and perspicacious lecture. James is quite right that state-sponsored meddling in the media universe is likely to do more harm than good, especially when the state’s market share exceeds 50%. The BBC is too big, and the Corporation really is overstretching, especially when it does things like buy Lonely Planet. And the regulators, in many ways, are even worse.

On the other hand, Murdoch himself has a monopoly on pay-TV service in the UK at least as strong as the BBC has on free TV, and the existence of any monopolist is prima facie evidence of the need for a strong regulator. Yes, the BBC should be smaller. But then again, so should Sky.

Why is online advertising so cheap compared to the cost of reaching 1,000 people in any other medium? Anybody whose answer involves oversupply or excess inventory should read Jim Spanfeller:

The only medium in recent history that has had true advertising scarcity is network television, and, with this year’s upfront, one might suggest that even this is no longer true. In every other case there has been either unlimited inventory available (magazines and newspapers) or limits that have rarely, if ever, been reached (radio, cable and spot TV).

Jim’s right that web publishers, in selling off “remnant” inventory at hugely discounted rates, are shooting themselves in the foot. All they’re doing is making it easy for media buyers to get bargains, and devaluing the very idea of online advertising. Indeed, in another sharp insight, he writes:

Some buyers will point to activation levels (clicks, signups or outright sales) as indicators of the relative worth of specific inventory. This is completely understandable as a guideline. But giving it too much weight is problematic. For example, we now know that 16% of web users generate 80% of clicks and that this 16% represents the lower income and education segments of the total user base. Do we really want to be held accountable as an industry by metrics generated by the lowest common denominator and a minority of users to boot? I can’t think of too many successful models using these types of metrics.

These metrics drive the conversation and the core objectives of online advertising away from demand creation (which is basically the definition of advertising) to demand fulfillment or, put another way, direct response. There is nothing wrong with direct response; every other medium has it, and the industry drives huge value for both marketers and media. But direct response is not advertising—it is something different.

In other words, if you’re looking at your clickthrough rate, you’re not participating in the web equivalent of an advertisement, you’re participating in the web equivalent of junk mail. If publishers don’t want to be in the junk-mail business, they should be very wary about going down the clickthrough path.

The irony of Spanfeller’s column is that he’s the outgoing president and CEO of Forbes.com, which was one of the first journalistic websites to aggressively maximize its pageviews at the expense of the user experience. Auto-refresh, slideshows, cutting stories up into multiple pages — all of these tricks make reading content online that much less pleasant, and thereby cheapen the value provided to advertisers. There’s a reason that Vogue doesn’t put ads in the middle of its fashion stories — it’s presenting the best possible editorial product it can to the reader, and advertisers are happy to pay a premium for that. Online, there are very few equivalents, because of the tyranny of the CPM.

I’d love to see a world where the price of online advertising was a function how many unique visitors saw that ad unit, rather than how many times it was served. That’s much more how the print world works. Instead, we’re stuck in a junk-mail paradigm which benefits no one.