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Creeping toward ubiquity

by Richard Morgan  |  Published February 19, 2010 at 12:55 PM

022210 back Murdoch BW .jpgWill 2010 be the year that traditional media companies disabuse consumers that information wants to be free? Maybe not, but it's off to a good start.

Consider January's introduction of the iPad -- not as a Kindle killer but as an IP protector that extends one-click ordering to newspapers and magazines. That is, think of it not just as another aggregator piggybacking off other people's content but as a mechanism to pay for that content.

The mechanism itself doesn't have to be that different from the one Apple Inc. uses with iTunes or that Amazon.com Inc. employs on Kindle. All it has to do is take the notion of pay-for-play a step or two closer to ubiquity.

Same with the New York Times Co.'s announcement last month of a "metered model" rollout in 2011. For its home delivery customers, nothing will change. They'll still have free access to NYTimes.com in addition to its dead-tree counterpart. But for online viewers without print subscriptions, the micropayment meter will start to run after a set number of freebies is perused.

The Times' first attempt at a pay wall -- a two-year effort called TimesSelect -- was abandoned in 2007 after the company realized "unfettered access to New York Times reporting and analysis best serves the interest of our readers, our brand and the long-term vitality of our journalism." But then recession rocked the Gray Lady so hard she took a cash infusion from Mexico's Carlos Slim.

This month, it's free music under attack. Spotify Ltd., the free streaming-music service believed by some to be an "iTunes killer," may be wildly successful in Europe. But don't expect Warner Music Group Corp., which licenses to Spotify in Europe, to cheer for its success here.

As WMG chairman and CEO Edgar Bronfman Jr. put it during a Feb. 9 earnings call: "Free streaming services are clearly not net positive for the industry. And as far as Warner Music's concerned will not be licensed. So this sort of get-all-the-music-you-want-for-free [model] and then maybe we can, with a few bells and whistles, move you to a premium price strategy is not the kind of approach to business that we will be supporting in the future."

Bronfman's comment couldn't have been better timed to undermine Spotify's U.S. launch. Many in the industry expect the London-based company to unveil a domestic version next month at the South by Southwest conference in Austin, Texas. But they also expect Spotify's U.S. version to be WMG-free.

Even free online video has suffered. Veoh Networks Inc., the portal held to be the only challenger to YouTube LLC, dismantled its staff this month as prelude to liquidation. Never mind that Veoh failed to develop a viable business model; founder and CEO Dmitry Shapiro laid the blame on an old-fashioned music company.

"Two years ago," he wrote on his blog, "Universal Music Group (UMG), the largest music company in the world, sued Veoh alleging copyright infringement. While we made every effort to convince them that we were not their enemy and had not infringed on their content, they pursued a relentless war of attrition against us in federal court. We eventually prevailed in a decisive summary judgment that has set an important precedent for the entire industry."

That said, however, Shapiro admitted "the distraction of the legal battles and the challenges of the broader macro-economic climate have led to our Chapter 7 bankruptcy." It's a sort of won-the-battle-but-lost-the-war excuse that will likely get used with greater frequency. And if the ad turnaround allows traditional media to go another round with their digital disrupters, the excuse will often be true.

There was no bigger adversary of digital piracy than Michael Eisner while running the Walt Disney Co. But after leaving the Mouse House and investing in Veoh, Eisner turned against the "enormous broadcast infrastructure" required by traditional media. "Veoh," he said on joining the company's board, "enables anyone with an Internet connection to distribute and receive programming in the highest quality."

The turnabout didn't please Eisner's former cohort of moguls. But it did make them so determined that, four months ago at the World Media Summit, News Corp.'s Rupert Murdoch declared, "The Philistine phase of the digital age is almost over." He then warned, "If we do not take advantage of the current movement toward paid-for content ... content kleptomaniacs will triumph."

Murdoch's assessment may not have convinced everyone, but there's no denying his message is gaining steam.

Richard Morgan covers media for The Deal.

For more, see the archives of his Backstory columns

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Tags: Amazon | Apple | iPad | iTunes | media entrepreneurs | New York Times | News Corp. | Rupert Murdoch | Spotify
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