This originally appeared on Business Spectator with the headline ‘What Murdoch is getting wrong’.
If you read the digital media trade press it would be easy to assume that Rupert Murdoch is nothing but a dinosaur. A dinosaur lost in a new media world driven by digital, a proprietor of dull media brands all destined to slowly pass away due to irrelevance. Google ‘Rupert Murdoch Dinosaur’ in Google and 91,600 results come up.
Now, hating on Murdoch has been a pastime for many in media for decades. The phenomenon is nothing new. Murdoch gives as good as he gets and as an onlooker it seems like he relishes the role of being the outsider. It’s where he operates the best. Where he feels the most comfortable.
Murdoch was vocal in 2009. He and his Newscorp troops talked up online pay walls, they talked about the curse of the aggregators and accused them of being the tapeworms of the Internet. He felt strongly that paid content could work – a notion many digital natives strongly disagree with … and of the minority that did agree that there was potential in paid content, many of them believed that Murdoch’s content wasn’t worth paying for. He was a figure in the biggest media debate of the year – but still seemingly the outsider whose views were discounted as a mix of naivety and almost Grampa Simpson like senility.
Personally, I am a big fan of Murdoch. I enjoy his bluster, the fact his knowledge of technology is limited and admire the self belief he possesses to constant agitate and challenge. Most of all I admire him for being a media man, with ink almost running through his veins and a real commitment to providing his audience content that they will enjoy reading, watching and listening to. In this way, he is indeed almost a dying breed.
It would have been hard to wipe the smile of Murdoch’s face when Newscorp released their results for the December quarter yesterday. The results were solid. Very solid. Beating analysts projections and defying wider predictions of doom around broadcast media’s viability.
Revenue was at $8.7b – an increase of just over 10% on the same period in 2008; with operating income at $1.2b – 20% more than most analysts expected. The movie arm played a key role in these better than expected results, with the success of blockbusters such as Avatar and Alvin and the Chipmunks 2 contributing greatly as well as franchise sales around X-Men and Ice Age. It was pointed out that Avatar and ‘Alvin’ are still bringing in revenue so expect to see these titles contribute in the following quarter.
The strong results for the Movie arm were expected due to Avatar, however other areas of the business dramatically outperformed expectations.
It was expected the Newspaper arm would report $197m in operating income. It smashed that – reporting $259m – a 31% jump on predictions and a 29% jump from the same period in 2008. Murdoch commented that advertising is returning to Newspapers, with the Wall Street Journal and operational cost cutting contributing to the positive results.
Cable TV division was also up, with $604m in operating income, up 35%. Expectations are cable will continue to improve with new retransmission deals with the cable carriers in place for 2010 and beyond adding incremental revenue.
The general sentiment was that the advertising market was picking up – especially around TV and newspapers – although the market has ‘shortened’ over the past 18 months in what is a major shift for most major advertisers to more tactical allocations of ad investment over longer term strategic initiatives. The results are resoundingly positive – News is seeing growth in its core businesses. The businesses many digital zealots are predicting the imminent death of. Murdoch is indeed defying his critics.
Well, in most ways. Not within digital. Digital is still a problem for News. A bigger problem than Murdoch wants it to be, and no doubt the source of a lot of frustration considering many of the groups digital experiments are over a decade old and still not profitable. For the December quarter digital earnings were down $32m, resulting in a $29m loss for the quarter. It’s not a massive surprise. Myspace is struggling – losing its position as the social network of choice and trying to move to being an entertainment destination. Murdoch claims myspace traffic is stablising, but there was no comment around revenues nor around operating costs. It’s a very real possibility that Myspace Music is the last gasp for the social network.
In addition, acquisitions such as Photobucket have proven difficult to monetise, and questions remain about the purchase of the IGN Network back in 2005 and it’s role within the wider longer term strategy of News. In all honesty, Newscorp’s digital efforts now aren’t much more than a messy collection of trial and error businesses with the company looking to see what might provide an upside.
Still, Murdoch is upbeat about digital. Incredibly so – considering the results. “Content is not just king, it’s the emperor of all things electronic” he said. “Without content, these genius mobile products would be lifeless.”
These genius mobile devices he refers to are products like the iPhone and iPad. Portable, connected devices that look to change the way we consume electronic content. Murdoch explained the company is speaking to relevant parties around content deals for these and similar devices and continued his sentiment that consumers will be willing to pay for quality content in a digital sense. He believes these pieces of technology are powered by content. Clearly Murdoch is excited by these devices. Primarily, they seem to offer him a distribution channel that doesn’t involve a web browser. News’s efforts within the browser aren’t successful, and possibly never will be. There’s too much competition and even an expectation that content within the web browser should be free.
What the tablets and touch screen phones offer is a new marketplace, and new methods of distribution and also presentation. This would excite Murdoch. As mediums they can bring media to life much more than the laptop. They can truly change the game in his eyes.
Right now Murdoch would be upbeat. And with good reason. Newscorp had a terrific quarter revenue wise, and Murdoch is right where he wants to be – in the middle of the most important media debate in decades, playing a pivotal role in defining how content will be subsidised moving forward. The results for Newscorp’s December quarter are a triumph – with the apparently dying, tired, old media of TV, cable and newspapers showing they are in good health and far from dead or dying.
With that in mind, this dinosaurs role in hypothesising and defining the new commercial media model is more important than ever.