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ALL THINGS DIGITAL: News Corp.'s Miller: Free "Doesn't Work"

By Scott Morrison, Of DOW JONES NEWSWIRES

CARLSBAD, Calif. -(Dow Jones)- The Internet era defined by ad-supported content that is free to consumers appears to be coming to a close because it " doesn't work," the head of News Corp.'s (NWSA) digital media unit said Wednesday.

"It's pretty clear that there has to be some recognition of value," said Jon Miller, Chief Digital Officer, Chairman and Chief Executive of News Corp.'s Digital Media Group.

Miller made his comments at the seventh All Things Digital conference, known as D7, taking place this week in Carlsbad, Calif. The conference is sponsored by the Web site All Things Digital, which - like The Wall Street Journal and this newswire - is owned by News Corp.

Miller noted that Web companies will have to figure out a way to charge consumers for content they have grown accustomed to getting for free, noting that cable television service providers learned how to charge for television shows. Miller also said he expected to see the rise of Internet micro-payments.

Miller appeared with Owen Van Natta, who last month was appointed chief executive of News Corp.'s social networking site MySpace.

Van Natta said MySpace must move quickly to recapture some of the buzz it has ceded to other sites. He said MySpace could do so by exciting its 130 million users with new products.

"We need to continue to innovate a lot more rapidly than we have been," he said.

Van Natta has been charged with jump-starting growth and recapturing some of the mindshare that MySpace once generated. The Web site, based in Beverly Hills, Calif., remains the largest social-networking property in the U.S., but rival Facebook is closing the gap quickly.

MySpace in March attracted 70.1 million unique U.S. visitors, down 3.6% from a year earlier, according to comScore. Facebook has surpassed MySpace in world- wide users, and grew 72% to 61.2 million unique U.S. visitors.

Analysts havesaid MySpace has lost its focus and become bloated and at least one has predicted Van Natta will have to make massive cuts to bring costs in line with revenue. A key problem is that MySpace still relies heavily on guaranteed revenue from its $900 million search ad deal with Google (GOOG), an agreement that is scheduled to expire next year. Observers widely believe MySpace will be unlikely to reach another deal that is as lucrative.

Van Natta acknowledged the three-year deal was important to MySpace but it did not account for the majority of its revenue. He added MySpace was working with Google to try to improve the deal.

"With these long-term deals, you need to figure out how to make them work," he said. "The most important thing is how Google is going to feel at the end of this partnership."

Miller suggested that negotiations to renew an ad deal with Google could encompass more News Corp. properties, rather than just MySpace.

-By Scott Morrison; Dow Jones Newswires; (415) 572-0491; scott.morrison@ dowjones.com

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