[opendtv] Different Times, Different Culture?
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 17 Aug 2005 06:57:02 -0400
Newscorp appears to be moving rapidly to develop an enhanced presence
on the Internet, as the company seeks to leverage the increasing
adoption and higher speeds of broadband connections here in the U.S.
The following Business week story provides some interesting
statistics and insights about the News Corp strategy. This makes one
wonder what is different this time around. The fallout from the
failed AOL/Time Warner merger has finally settled, with THAT company
apparently trying to distance itself from the notion that television
assets can be repurposed for the Internet.
Perhaps the times have changed enough to justify News Corps move to
broadband, or perhaps Murdoch has better control over his troops, and
can put their energy to positive use, as opposed to the civil war
that broke out when AOL tried to influence the Time Warner culture.
This should be interesting to watch.
Regards
Craig
http://www.businessweek.com/technology/content/aug2005/tc20050816_5029_tc024.htm
NEWS ANALYSIS
By Steve Rosenbush
The Birth of Murdoch.com
The MySpace acquisition shows the News Corp. mogul aims to create "an
original type of portal." That could be bad news for Yahoo! and AOL
Rupert Murdoch stunned the broadcasting industry in 1994 when News
Corp. (NWS ) outbid rival CBS (VIA.B ) for the right to televise the
NFL's National Conference games. The deal established News Corp.'s
young Fox Network as powerful rival to establishment players CBS, ABC
(DIS ) and NBC (GE ).
And that was just the beginning. Fox News went on to usurp the
dominance of CNN (TWX ) in the cable news market. And thanks to
popular TV shows like American Idol, Fox ranked number-one last year
among 18- to 49-year-old TV viewers.
MYSPACE AT RUPERT'S PLACE. Now the 74-year-old media mogul is
looking to make a similar mark on the Internet. That became apparent
during the last few weeks, when News Corp. announced it would spend
$580 million to acquire Intermix (MIX ), the parent of wildly popular
MySpace. The social-networking site is popular among younger users,
who use home pages to create extended networks of friends. It has a
particularly strong following among fans of independent and rock
music (see BW Online, 6/13/05, "Hey, Come To This Site Often?"). News
Corp. also recently announced the acquisition of Scout, a leading
college sports site.
Murdoch drove the point home during a conference call with investors
on Aug. 10. He used most of his quarterly earnings commentary to lay
out his thoughts on the strategic role that the Internet will play in
the future of the company.
"There is no greater priority for the company today than to
meaningfully and profitably expand its Internet presence and to
properly position ourselves for the explosion in broadband usage that
we're now starting to see," Murdoch said.
BROADBAND'S IMPACT. The highly adaptable patriarch of the family
empire always has been willing to embrace new technology. First he
forged into the world of cable-TV, and then satellite, buying DirecTV.
Now his empire is at a critical juncture. The world is changing and
Murdoch is ready to change with it. The younger viewers at the core
of the company's audience are drifting away from TV, spending more
time online. They're using the Web to socialize and communicate,
downloading songs, listening to Internet radio and podcasts, and
playing online games. It won't be long before they turn to the Web
for longer-form video and TV, thanks to the rise of broadband. About
35% of the U.S. population has broadband, which is getting faster and
cheaper every year.
And advertising dollars are shifting from TV and print to the Web.
Worldwide, online advertising is expected to soar 50% this year, to
$13 billion, from $9.6 billion in 2004, according to Ken Marlin,
managing partner of Marlin & Associates, an investment bank and
advisor to media companies. Most TV and print categories are growing
at single-digit rates. "Murdoch has shown a remarkable ability to
adjust and adapt his company to the moment. He's a smart guy. He's
got to be looking around, saying, 'There's an opportunity to be a
major player on the Web, and it's closing,'" Marlin said.
GOODBYE, PORTALS. In the last few weeks, Murdoch has consolidated
Internet operations throughout the News Corp. empire. He created Fox
Interactive Media, now run by president Ross Levinsohn, 42. The
former general manager of Fox Sports Interactive also has worked at
CBS Sportsline and HBO. He's responsible for a stand-alone,
profit-making business unit, which also will make acquisitions,
building on the MySpace and Scout deals.
The Internet business, known as FIM, is big for a startup. Once the
Intermix deal closes, News Corp. Web sites will have an aggregate 50
million unique visitors a month, the sixth-largest audience on the
Web. And it has the resources of a massive corporation behind it.
With a market cap of $51 billion, News Corp. is just slightly larger
than Yahoo! (YHOO ) or Google (GOOG ). But its revenues of $23
billion a year are nearly six times as large as either rival.
During his conference call with investors, Murdoch explained his
desire to create "an original type of portal." As technology improves
and users become more sophisticated, they won't need portals such as
AOL, MSN (MSFT ), or Yahoo to navigate the Web. Already, they're able
to find their own way around, using increasingly powerful search
engines to locate what they want. The key will be allowing users to
customize their experience of the Web, drawing on the vast resources
of News Corp. and the Internet at large.
BROAD VISION. "Our strategy is quite simple," Murdoch said. "News
Corp. at its core is about content. The Web at its core is about
personal choice. What we are aiming to do is combine the two, and in
the process redefine the meaning of [an] Internet vertical."
The company's presence in such "verticals" as sports, news, and
entertainment creates an enormous amount of content. Over the next
few years, users will be able to customize it by using tools from
acquisitions such as Scout and MySpace. Scout will enable so-called
citizen journalists to file and share reports on things that are
important to them, such as local high-school sports games.
Murdoch suggested the company will acquire additional tools in the
areas of advanced search, e-mail, customization, accessibility, or
even voice communications. "Users will be able to personalize their
experience to take advantage of the vastness of the Internet as a
whole," he said.
NEXT ACQUISITION? The next piece of the puzzle is about to fall into
place. Murdoch said News Corp. was in "advanced talks" to acquire a
search company. He said investors wouldn't consider the price
significant, a sign that News Corp. wants to buy a relatively small
outfit.
It now appears that a deal isn't that close. News Corp. has had
merger talks with Blinkx, an audio and video search company that has
obvious relevance for a media empire with TV and movie holdings. "We
have had discussions with them and others but are not near a deal at
this point," said one person familiar with the negotiations. Blinkx
declined comment. If News Corp. and Blinkx can't come to terms, there
are plenty of other potential targets in the search market, including
icerocket.com, mama.com, snap.com, miva.com, looksmart.com, and
lycos.com.
Murdoch has even taken a look at Internet phone upstart skype.com,
which allows users to place free phone calls from one Skype-enabled
PC to another. But he said reports that News Corp. had made a $3
billion offer for the company were wrong, and that Skype said it
wasn't for sale. It appears that an IPO is more likely for Skype,
because few buyers are willing to pay $3 billion or more for the
company (see BW Online, 8/10/05, "Skype: On The Block"). Murdoch also
hinted that the company will expand its presence into several other
"verticals." Given its youthful audience's affinity for edgy
programming, those verticals might include hot areas such as gaming
and music. Marlin, the investment banker, thinks that gaming site
ign.com would be a good fit.
"TIMELY AND INEVITABLE." Problem is, IGN recently filed for an IPO,
and with an expected valuation of $1 billion it could be expensive.
And the Intermix acquisition already gives News Corp. access to
hundreds of games, in addition to MySpace. Marlin believes News Corp.
eventually may beef up its music offerings by acquiring a
peer-to-peer network such as grokster.com, which would help
distribute music and video to users.
Over time, News Corp. could help reshape the power structure on the
Web. Until now, big media companies have relied on portals such as
Yahoo and MSN to distribute their goods. News Corp. is trying to
bypass the existing portals, at least in part. "What News Corp. is
trying to do is both timely and inevitable," says Leo Hindery Jr.,
managing partner of InterMedia Partners, a private investment firm.
He is formerly CEO of the YES Network and CEO of TCI and its
successor AT&T Broadband.
"Until recently, there was always a sense that someone needed to
stand in the middle between the content provider and consumers, but
that is not necessary if the content provider has aggregated large
amounts of diverse and compelling content," says Hindery.
HARD ROAD. Other media companies have tried this approach, without
real success. Disney failed to turn its "Go" network into a major
presence on the Web, although its espn.com has been a huge hit. Time
Warner reached for the stars by acquiring AOL, but the combination
has never quite worked, and there's speculation that AOL could be
spun off if its new identity as a free portal fails to work.
And if the big media companies have largely failed to create their
own portals, the big portals don't own their own content. Yahoo, MSN,
AOL, and Google distribute goods that are produced by others.
News Corp. wants to merge the content of a big media company with
its own portal. It won't be easy. Time Warner still struggles to make
its AOL deal work. But Murdoch may just succeed, just as he succeeded
in upending the TV business in the 80s and 90s.
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