Democracy Inc. - bored of the USA

News Corp is losing money because no news is bad news

August 8, 2009

Last week, News Corp, owners of the Wall St Journal, New York Post, (London) Times, Sunday Times, The Sun, News of the World, the Australian, BSkyB Television, Fox, Star TV Asia and others reported a 10.7% decline in revenue to $7.67 billion (almost $800 million) and quarterly net losses of $203 million. Bad as it sounds, it is a big improvement on the previous quarter’s losses of $6.4 billion (Thus passim) which were inflated by a huge writedown on the Wall Street journal. The ‘extraordinary item’ this time is kids’ social networking site MySpace, which lost $136 million and will never recoup its 2005 acquisition cost of $580 million, much less make a profit.

In the same week, UK Commercial TV network ITV announced first half losses of £105 million and sold mums and dads’ social networking site Friends Reunited at a loss of £150 million to a subsidiary of DC Thomson, Dundee-based of the Scottish Sunday Post, People’s Friend and iconic kids’ comics such as the Beano and Dandy. Don’t snigger: Thomson is one of Europe’s most profitable publishers. Friends Reunited will be integrated with Thomson’s geneology sites. Presumably, its new owners will revive the paid-for element of the site, which ITV dropped in a pointless race for advertising eyeballs just as the recession hit.

Unlike most of the jealous, self serving pixies in the World of Journo, I have long admired Rupert Murdoch’s commercial prowess and am not afraid to say so, even though I dislike his single-minded mission to dumb down media and most, if not all of News Corp’s lazy, sleazy middlebrow, overtly skewed output (and that’s just the upmarket stuff). I agree with Murdoch’s statement: ”an industry that gives away its content is cannibalizing its ability to do good reporting,” but see it as a damning self-indictment, not as a solution to his problems.

While it is true that most of News Corp’s profitable content is the result of never knowingly underestimating the public’s need for cheap, vapid soma, the internet is full of such claptrap and thus it is difficult to see why people would pay for it online. While in the past Murdoch has proved capable of exacting a premium for lowest common denominator jibberjabber – witness BSkyB and Fox – thus it would be foolish to write off the declared intention to make folk pay, but, at the risk of stating the obvious, the web has changed everything. People who surf the web for serious news and opinion are a tiny subset (estimated at less than 1.5%) and even so, they are looking for more depth, colour and controversy than the popular press brands are accustomed to provide. The success of ‘conventional’ US online news sites such as Huffington Post and Politicos shows that there are substantial audiences, but that delivering them is not particularly profitable. The BBC, meanwhile, has built a huge online audience but does not need to worry about how to pay for it while the estimated 1.8 billion audience for blogs of all varieties (including this one) is attracted by the diversity and independence of views on offer, virtually all generated free by idiots such as myself (Thus passim).

Leaving aside e-commerce, there are highly profitable models of paid content on the web, ranging from sex sites to iTunes to The Economist Intelligence Unit, but Murdoch’s strategy, which depends on choking off all other sources of free vanilla news, will require bullying, conning or cajoling all the major commercial players, including Reuters and Bloomberg into restricting their online newsfeeds while relying on the Tories in the UK to curb the online output of the BBC (Thus passim) once elected. While not inconceivable, this still assumes that web audiences will be sufficiently motivated to pay for the bland crap that passes for output in the News Corp universe. The odds against are high: despite boasting 3.5 million unique visitors, the costs of Guardian Media Group’s massive website, which offers high quality centre-leftish news, comment, opinion and arty stuff, theoretically more suited to the countercultural webwise generation, have unquestionably contributed to last week’s reported losses of almost £83 million which in turn threatens to close down the world’s oldest English language newspaper, The Observer, which can’t turn a profit on a circulation in excess of 400,000.

Murdoch’s success, as with all the media barons of the past, has been based on the Big Lie inherent in the adage: ‘half of my advertising budget is wasted -the problem is I don’t know which half.’ Unsurprisingly, people don’t buy generalist newspapers to read the advertisements, and remote controls give them the opportunity to skim past TV commercials, but hitherto the grey area has given publishers the benefit of the doubt. In the digital universe, there is no such ambiguity. Advertisers to precisely measure who is accessing content, when and for how long, and profiling can even determine precise demographics (Thus passim). While unsophisticated advertisers may buy page impressions in the same way as old timey direct marketers sent out blanket mailshots, most advertisers buy qualified unique visitors and take context into account, placing generalist publishers at a distinct disadvantage.

While News Corp’s multi platform presence should be an advantage as digital technologies converge, when they try to aggressively charge for content, the thinness of their offering will be exposed, unless they genuinely up the ante. The Murdoch formula of sensationalist tittle-tattle, barebreasted stunnas, fantastical sports and pop rumours masquerading as fact and barely-disguised ultranationalism masquerading as comment pales by comparison with the no-holds barred porn, libellous celebrity weirdness and wild, untramelled speculation freely available on the web, thus it is difficult to see why the existing News Corp products could command a subscription premium or attract sufficient numbers to be viable as advertising moneyspinners. To an übercapitalist such as Rupert, this vindication of neo Darwinianism should be good news, but I doubt if he or his son James will see it that way.