In Abu Dhabi, rulers grill tech and media gurus on monetization

March 10, 2010: 6:17 AM ET

News Corp. Chairman Rupert Murdoch is pushing officials in Abu Dhabi to open up, encourage creativity, and allow outside media companies to gain more of a foothold. Photo: Jon Fortt

ABU DHABI – News Corp. CEO Rupert Murdoch told government officials and financiers here Tuesday that the best way to grow a thriving media economy in the Middle East is to take risks. That, he said, will mean limiting censorship and opening up to foreign competition – even when it hurts.

Sure, the message was a little self-serving; Murdoch wants to expand his media empire in the burgeoning Middle East market, and the blessing of Abu Dhabi's rulers would help. But he's not the only media baron paying attention to the region. His comments opened the inaugural Abu Dhabi Media Summit, a tech and content confab that has drawn the likes of Google (GOOG) CEO Eric Schmidt, AOL CEO Tim Armstrong, and Barry Meyer, CEO of Warner Bros -- which, like Fortune, is owned by Time Warner (TWX).

Why are they here? For one, oil-rich Abu Dhabi, capital of the United Arab Emirates, is arguably the most influential city in the high-growth Middle East economy. For another, the rulers here have been aggressively diversifying their portfolio beyond oil and gas and into areas including global finance, aerospace, technology and media. (Not just local media, either – Abu Dhabi was one of the biggest backers of Vevo, the YouTube spinoff that streams music videos from three of the four major record labels.)

The setting itself, on Abu Dhabi's Yas Island, is a constant reminder that the hosts are well stocked in both ambition and capital. The summit is in the Yas Hotel, a gleaming new development that's cloaked in a veil of glass and LED lights and ringed by a Formula 1 race track. Yachts drop anchor in the marina just outside. Nearby, workers are busily building Ferrari World Abu Dhabi – an indoor theme park that will house more than 20 rides, a Ferrari museum and a driving school.

Inside the summit, the buzz is all about how technology continues to rock the media landscape. During the first panel, Asus Chairman Jonney Shih and AMD (AMD) CEO Dirk Meyer said that as consumers begin pulling more content onto smartphones, netbooks and tablet computers, carriers and media companies may have to rethink their business models. (Carriers might one day decide to offer subsidized TVs with a long-term home videoconferencing contract, for example.) Korea Telecom CEO Suk-Chae Lee said that even as his company offers some of the fastest wireless broadband speeds in the world, people are still figuring out ways to use it all – which suggests that new networks won't be enough to satisfy the consumer's media appetite.

The looming question is whether media companies will be able to convince consumers to pay for all that digital content. The answer is – well, there's no simple answer. In the U.S., services like Apple's (AAPL) iTunes have begun to get consumers used to the idea that media costs money. Other markets will prove tougher to crack. Kai-Fu Lee, formerly an executive at Microsoft (MSFT) and Google, said that in China, folks have just gotten used to the idea that technology and content ought to be free.

No surprise that monetization is a big issue here: the powers that be in Abu Dhabi might have plenty of money to spread around, but they'd like a return on their media investment. After all, they're already building another luxury island development not far from here. And tomorrow's yacht-filled marinas and Ferrari Worlds won't pay for themselves.

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