Interesting rundown of News Corp.’s business units in, of all places, the Wall Street Journal, and each one’s contribution to the top and botton line.
You will see that “Other” boasts revenue of over $1B with a loss of $150M. Fox Interactive Media, which serves as the umbrella of the web properties is in that unit and in 2007 is slated to do $1B in revenue… up from earlier forecasts (set in 2006) of about $500M. Clearly, things are going in the right direction for FIM, and that’s not surprising given the strength of News Corp.’s franchises and MySpace’s staggering size and continued growth.
A couple of passages are worth a second read:
Over the years, he built News Corp. from a newspaper concern into a multimedia conglomerate encompassing film, television, satellite and the Internet, but not without his share of missteps. He overpaid for TV Guide magazine. He spent years chasing satellite-TV operator DirecTV, winning control in 2003 shortly before growth began to slow sharply. Last year, he agreed to sell his DirecTV stake to Liberty Media Corp.
It will be very interesting to see if Dow Jones’s hefty premium will in hindsight prove to be more of a DirecTV or a MySpace, which seemed expensive then but now looks like a steal, which ironically is what prompted Brad Greenspan - founder of MySpace - to try and derail Murdoch’s DJ deal.
Due to the growth seen at MySpace, and the perceived or real threat by Facebook, the fast-growing #2 in social networking that Murdoch himself as openly coveted, one of the focus areas will be the Web:
Mr. Murdoch’s biggest focus, though, is likely to be the Web. He said in June that he would invest in Dow Jones’s digital operation, which includes MarketWatch, as well as the Journal’s subscription-only Web site WSJ.com. News Corp. could use these sites, along with Dow Jones Newswires, which distributes business news to media outlets and Wall Street, to develop a financial-news portal. Online financial news is a crowded field, but no one site is dominant. While 52.1 million people visited at least one financial site in June, the biggest site — Yahoo — drew just 14.9 million, according to Nielsen/NetRatings.
But if you read carefully, you realize that while Murdoch intends to invest in the web, when it comes to video, there, the focus will be TV. A look at the numbers reveals why:
As you can see, even if the Other (which includes FIM) continues to grow at a torrid rate, it will never really come close to being anywhere near what the tube represents in terms of revenue or profits. And despite all of the wheeling and dealing that Murdoch can make to move online, News Corp. will never command a Web company’s multiples, so even the revenues he generate won’t add the kind of value to News Corp.’s market valuation…
This is an important factor, because by paying a 67% premium for DJ alone, News Corp. will probably never make money on this deal… and Murdoch might be fine with that as he controls the company. But, if the company can prove to be a pillar to attack Pearson’s The Economist and GE’s CNBC, then this deal could prove to be a lot more MySpace than DirecTV.
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August 1st, 2007 at 10:42 am
For all the crap that Jim Cramer gets, I bet he’s revelling in his win here. He’s been speculating on this outcome since May http://www.stocktagger.com/2007/07/cramer-speculates-on-higher-price-for.html