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Murdoch Warns That Without eTablets, "Newspapers Will Go Out Of Business."

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Old habits die hard. Rupert Murdoch believes that the future of the newspaper business is subscriptions—electronic subscriptions. He’s done with giving away his news for free on the Web and to search engines like Google. Instead thinks that Kindle-like tablet computers can save the media industry. It’s a notion that’s been floated before: an entire newsstand in a color tablet which delivers electronic versions of any newspaper or magazine you want for a monthly subscription of $15 to $19 a month.

It’s got to work, otherwise, he warns from his soapbox, “Newspapers will go out of business. All newspapers.” In an interview on his own Fox Business (embedded below), he explains his thinking:

ALEXIS GLICK: ARE YOU CONVINCED IT IS GOING TO WORK?

RUPERT MURDOCH: SURE.

ALEXIS GLICK: WHY?

RUPERT MURDOCH: WE TEST MARKETED IT AND PEOPLE I THINK UNDERSTAND THAT IT’S PERFECTLY FAIR THAT THEY ARE GOING TO PAY FOR IT. IF IT DOESN’T, THE NEWSPAPERS WILL GO OUT OF BUSINESS. ALL NEWSPAPERS. THERE IS JUST NOT ENOUGH ADVERTISING TO GO AROUND FOR ALL THE SITES ON THE INTERNET. THE NUMBER OF SITES AND AVAILABILITY OF ADVERTISING ON THE INTERNET, THE AVAILABILITY DOUBLES AND TRIPLES EVERY YEAR BUT THE AMOUNT OF REAL MONEY GOES UP 10 OR 15% A YEAR. THE PRICE OF IT KEEPS COMING DOWN.

Forget for a moment that news websites will be perfectly readable on these newfangled tablets everyone keeps talking about. So Murdoch still has the problem of “leading” all of his media competitors into the promised land of subscription tablets by walling off their websites from readers. And also set aside the fact that newspapers and magazines are already available for paid download on Amazon’s Kindle, and that those subscription revenues are still miniscule. A full-color tablet with access to an entire newsstand’s worth of magazines and newspapers for a single bundled price would be a better deal and better experience than buying subscriptions a la carté from the Kindle.

But in the face of free content readable via a browser, the subscription model will be challenged. Even setting aside competition from newer media sites and blogs with lower cost structures and lean staffs, there is no way to completely wall off news from every traditional news organization. At the very least, the weakest newspapers and magazines with the lowest readership and share of attention will find that they are better off remaining free and selling Web ads than taking crumbs from the new electronic subscrtiption pie. (Presumably the subscription revenue will be divvied up based on demand, with the most popular titles getting the largest portion).

Apparently, Murdoch also has no interest in simply playing Bing off of Google and making the search engines pay for the right to index his news either. Asked whether he was “moving towards an exclusive deal” with the “aggregators and the Googles of the world” to make them “pay for News Corp. content,” Murdoch replied:

NO, NO, NO. I DON’T KNOW THAT THEY CAN AFFORD TO DO THAT. IF THEY WERE TO PAY EVERYBODY FOR EVERYTHING THEY TOOK FROM EVERY NEWSPAPER IN THE WORLD, AND EVERY MAGAZINE, THEY WOULDN’T HAVE ANY PROFITS LEFT.

You got that? Even if he were to sell his news to Google, which he is not, Google doesn’t have enough money to buy it. Either that, or Murdoch is negotiating in public as Google’s search deal with MySpace comes up for renewal.

Video and partial transcript below:

Watch the latest business video at FOXBusiness.com

Transcript excerpt via Fox Business News

ALEXIS GLICK: YOU HAVE MADE A LOT OF NEWS ABOUT AGGREGATORS AND GOOGLES OF THE WORLD AND WHETHER THEY SHOULD PAY FOR NEWS CORP. CONTENT. ARE YOU MOVING TOWARD EXCLUSIVE DEAL WITH THEM?

RUPERT MURDOCH: NO, NO, NO. I DON’T KNOW THAT THEY CAN AFFORD TO DO THAT. IF THEY WERE TO PAY EVERYBODY FOR EVERYTHING THEY TOOK FROM EVERY NEWSPAPER IN THE WORLD, AND EVERY MAGAZINE, THEY WOULDN’T HAVE ANY PROFITS LEFT. THEY HAVE DEVISED A BRILLIANT SEARCH ENGINE THAT SCRAPES ALL OF THE MATERIAL PUBLISHED IN THE WORLD, AND ON THE BACK OF THAT THEY SELL SEARCH, BUT THEY DON’T PAY FOR THE RAW MATERIAL. WE HAVE TO DO SOMETHING ABOUT THAT. WE CAN PUBLISH OUR PAPERS ELECTRONICALLY, AND OTHERS CAN TOO, AND PEOPLE CAN STILL GO TO A SEARCH ENGINE IF THEY WANT TO FIND OUT SOMETHING, NOT NEWS PERHAPS, BUT THEY SEE TERMS THAT NEWS REFERS TO IN NEWSPAPER STORIES AND MAGAZINES THEY CAN EITHER GO TO GOOGLE OR MICROSOFT OR WHOEVER. THEY’LL STILL HAVE A VERY GOOD BUSINESS.

ALEXIS GLICK: YOU ENVISION A WORLD THEN WITH A TABLET, A HANDHELD DEVICE OR SOMETHING OF THAT NATURE WHERE YOU CAN OFFER A FINANCIAL MARKETPLACE OR A SUPERMARKET FULL OF MEDIA CONTENT AND DATA ON A MULTI-TIERED SYSTEM?

RUPERT MURDOCH: YES.

ALEXIS GLICK: HOW DOES THAT WORK?

RUPERT MURDOCH: WELL, YOU’D BE ABLE TO GET ON IT, AS WOULD BE TRANSMITTED TO IT, A TABLET. TRANSMITTED THROUGH THE AIR OR OVER WI-FI. A REASONABLE SIZE, ATTRACTIVE TABLET IN FULL COLOR AND YOU COULD READ A NEWSPAPER ON IT. YOU PRESS A BUTTON WHEN YOU WANT IT OR IF YOU WANT TO PLAY EXTRA, MORE THAN THAT, BUT IF IT COSTS $15 OR $19 A MONTH, IF YOU WANTED TRAVEL MAGAZINES OR SOMETHING YOU CAN ORDER THEM UP AND HAVE THEM.

ALEXIS GLICK: ON THE TABLET, IF I PAY THE MAXIMUM AMOUNT I CAN HAVE ANYTHING I WANT?

RUPERT MURDOCH: ANY CONTENT. BOOKS, ANYTHING AT ALL. YOU JUST HAVE TO PAY. THAT’S THE FUTURE. IT COSTS A FORTUNE. THE NEWSPAPER INDUSTRY – THE NEWS INDUSTRY, PUT IT THAT WAY. LET’S NOT TALK ABOUT PAPER. THE NEWS INDUSTRY SPENDS A FORTUNE IN COLLECTING THE NEWS. IT NEEDS TO BE PAID FOR IT. THERE IS NOT ENOUGH ADVERTISING TO GO AROUND. IT’S ALRIGHT ON CABLE TELEVISION BECAUSE IT GETS PAID BY THE CABLE SUPPLIERS, MONEY, WHICH, OF COURSE, GETS PASSED ON TO THE PUBLIC. AS WELL AS SUPPLEMENTED BY SOME ADVERTISING AND IT HAS TO BE THE SAME WITH OTHER FORMS OF NEWS.

ALEXIS GLICK: ARE YOU CONVINCED IT IS GOING TO WORK?

RUPERT MURDOCH: SURE.

ALEXIS GLICK: WHY?

RUPERT MURDOCH: WE TEST MARKETED IT AND PEOPLE I THINK UNDERSTAND THAT IT’S PERFECTLY FAIR THAT THEY ARE GOING TO PAY FOR IT. IF IT DOESN’T, THE NEWSPAPERS WILL GO OUT OF BUSINESS. ALL NEWSPAPERS. THERE IS JUST NOT ENOUGH ADVERTISING TO GO AROUND FOR ALL THE SITES ON THE INTERNET. THE NUMBER OF SITES AND AVAILABILITY OF ADVERTISING ON THE INTERNET, THE AVAILABILITY DOUBLES AND TRIPLES EVERY YEAR BUT THE AMOUNT OF REAL MONEY GOES UP 10 OR 15% A YEAR. THE PRICE OF IT KEEPS COMING DOWN.

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