For just over 3 glorious months, Rupert Murdoch, a fellow Pisces, was my boss’ boss’ boss’ boss’ boss’ boss. Yeah, we were close. Tight I tell you.
It’s funny how things change quickly.
As of January 2006, he was no longer my boss. I have always kept Mr. Murdoch’s company dear in my heart. I’m a loyal fellow, I guess. There are some things that they are doing that are fantastic, and then there are things that they are doing that are well, not so. News Corp. does, however, have the potential to be stronger than the old, new media companies (Yahoo!, Google, etc.) that Mr. Murdoch so wants to surpass. The potential is there, will the concept turn into reality?
Time will tell. A lot of the details are outlined in a Forbes article I saw today. Some interesting tidbits from the fascinating and comprehensive article from Forbes, incidentally another old world media company that has been reinvigorated online:
In 2005 Murdoch unleashed a geyser of cash into the Internet business, spending $1.3 billion or so on a handful of Web sites, most notably MySpace. Those deals seem prescient now: Rather than the digital ephemera that skeptics had predicted, MySpace has proven itself, growing from 20 million users to 105 million. Monthly traffic has exploded from 21 million visitors to 55 million in the U.S., says Nielsen NetRatings, monthly revenue from $2 million to $28 million.
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Right now Murdoch’s Internet operations don’t even rate a separate line item on News Corp.’s P&L. They’re lumped, along with billboard advertising and a rugby league, in a category called “other.” Citigroup analyst Jason Bazinet figures the company’s Internet group generated revenue of $185 million in its 2006 fiscal year, ended June 30. Chernin says that his Internet operations will break even on $500 million in revenue in the June 2007 year.
That’s still a fiscal nonevent for a company that earned $3.6 billion on $25.6 billion in revenue over the last 12 months. News Corp.’s shares have enjoyed a 41% run in the past year in large part because of the glow surrounding MySpace.
(…)
Murdoch has been let down by the promise of the Web before. Late to the game, he earmarked a reported $2.3 billion to put into Web properties–much of that was committed but never spent–in the late 1990s and let younger son James, now 34, tinker with Web sites for Fox News, Fox Sports and tv Guide.
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But in late 2004 Murdoch and Chernin, watching the resurrection of Yahoo, the rise of Google and the shift of ad dollars to the Web, jumped back in. The best way to access the power of the Internet, they decided, was by inserting yourself where users already congregate. They were heavily influenced by the success of FoxSports, a once unexceptional Web site, after it cut a deal for prominent placement on Microsoft’s msn network–and then saw traffic leap from 2.2 million to 10.4 million visitors per month. The two asked a group led by FoxSports manager Ross Levinsohn to round up a list of Web properties likely to be available. He came back with three targets: MySpace, then owned by a marketing outfit called Intermix; ign; and a site Chernin won’t identify.
MySpace, of course, has continued to expand at an astonishing pace. While older people, 35 and up, are starting to come to the site, its motley appeal remains stubbornly oblique to most anyone over 25. But that’s the point: Your kids don’t want you hanging out with them anyway. And though mainstream marketers hesitated to join the site, they are starting to step into it. Burger King, Adidas and Walt Disney, for instance, have all launched campaigns through MySpace. Any misgivings they may have had about sexual predators on the site seem to have been allayed after MySpace responded to concerns by, among other things, hiring a “safety czar.” The site is introducing software that lets parents know of any changes their kids make to their ages and names.
But MySpace is still not a magnet for most of the dollars marketers spend on kids. Though pundits have written off old media, advertisers are still there, says eMarketer, putting $283 billion into traditional U.S. channels. Roughly 40% of the $16.4 billion they shelled out last year on Internet advertising went to search ads–much of it to Google. At the highest end, advertising sells for roughly the same price: Approximately $500,000 will get you the same 20 million or so eyeballs on Yahoo’s home page as it will for Fox’s 24, says Jeff Lanctot, a vice president at Avenue A-Razorfish. But most sites, including MySpace, get less than that 2.5 cents an eyeball.
Meanwhile ign hasn’t flourished. The unit, a grab bag of sites on such topics as videogames, girls and movies, is aimed at the young men who have stopped watching traditional television. Chernin says the company expected the site’s numbers to dip as gamers stopped buying titles for their Xboxes and Sony PlayStation 2s, while saving up for the next generation of machines.
Low expectations or no, there were changes in the corner offices. In November Mark Jung–who ran ign prior to News Corp.’s purchase and had taken the number two slot in Fox Interactive Media, the new unit formed to hold Murdoch’s Web properties–abruptly left. Later that month his boss, Ross Levinsohn, who had been lionized for finding MySpace, was out as well. He has been replaced by his cousin Peter Levinsohn, who oversaw the digital media business for Fox’s tv and movie studios. Both Ross Levinsohn and his former employers describe the split as amicable.
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Murdoch and Chernin would very much like to own the next YouTube, but they are unlikely to be able to buy it. In this phase of Bubble 2.0 there are no under-the-radar Web sites and, as Murdoch ruefully acknowledges, Google, armed with its $500 shares and a $10.4 billion cash hoard, can afford to buy anything it wants. Last year News Corp. looked at YouTube when its owners were shopping it for a sum that Chernin says was well below what Google eventually paid. Even then, he says, “We couldn’t get our arms around the price.”
(…)
Murdoch could conceivably open his own store. With ign comes Direct2Drive, software compression technology designed to move big videogame files across the Internet. It can also transmit two-hour feature films.
Like his competitors, Chernin is war-gaming what cell phones can do for News Corp. Last year he bought Jamba, a mobile content publisher, for $188 million.
Read the whole thing here. And check out previous things we’ve written on News Corp. here:
:: The MySpace Sale to News Corp.: Seller’s Remorse?
:: UBS and Murdoch suggest FIM Worth More Separate than Combined
:: Disney Media Stock of 2006, News Corp. #2
:: News Corp’s FIM to Finally Leverage IGN’s Direct2Drive
:: Did Google Overpay for MySpace’s Search Business?
:: What is Myspace’s Search Business Worth Anyway?
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Posted By: Ashkan Karbasfrooshan | Jan 25th
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