July 26, 2009

Media Execs Predict End Of Free Internet Content

IAC/InteractiveCorp chairman and CEO Barry Diller said the era of free Internet content is coming to an end.

Speaking at the Fortune Brainstorm conference in Pasadena, California, Diller challenged traditional Internet business models in which consumers pay for Internet access while content is provided free of charge. 

In the future, he said revenue will be generated from advertising, subscriptions and transactions.

"It is not free, and is not going to be," said Diller, adding that Web users will have to pay for the content they watch and use.

The transition will not be smooth, he said, and the years ahead will not be easy for content providers.

"We are transitioning from an old form to a new form and those things are always bloody," said the media and technology executive, who also serves as chairman of Expedia Inc. and Ticketmaster Entertainment Inc.

The Internet is still in its infancy, and while content was initially provided at no charge to the user, the goal was always to find a way in time to generate revenue, he said.

Diller's comments echo those of other media moguls, such as Liberty Media Corp.'s John Malone and Walt Disney Co. CEO Robert Iger, who say that Web users will have to pay for the content they watch and use.

Diller, 67, whose IAC/Interactive runs the Ask.com search engine and the Match.com dating service, called the view of the Internet as a system of free communications a "mythology".

He said his own news Web site, "The Daily Beast", has "done a very good early job" creating compelling content.

The site is not difficult to finance, but "it's going to have to earn its way," he said.

Burbank, California-based Disney is working on a subscription-based Internet product that the company believes will expand its opportunities in Web sales, Iger said.  The product will allow improvements in online advertising by allowing marketers to target consumers by tracking their activities and interests.

"We have ample evidence both in traditional and new media that people are willing to pay for quality, to pay for choice and to pay for convenience," said Iger, speaking at the conference on July 22.

"And they are willing to pay for what they perceive as value."

News Corp., publisher of the Wall Street Journal and owner of the Fox TV and film studios, is also looking to generate revenue through its Internet businesses by charging customers for news and entertainment, according to a Bloomberg report citing remarks from Jonathan Miller, chief executive officer of News Corp.'s Digital Media Group and News Corp.'s chief digital officer.

The Wall Street Journal already charges customers for online subscriptions.

In the future, some companies will offer content that users are willing to pay for, while others won't, said Miller, and online journalism will increasingly transition to a "paid model". 

News Corp.'s interactive revenue fell 11 percent to $187 million during the first quarter of this year, led by a 16 percent drop in advertising at sites such as MySpace.


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