Rupert Murdoch's News Corporation has reported a $203 million loss on the back of writedowns and plunging advertising revenues. Look at the numbers in these accounts, they are truly ugly. They are mainly due to impairment charges for Fox Interactive Media, the unit that houses the MySpace social network. Net earnings for the June quarter of 2008 was $1.13 billion. On an operating basis, earnings fell to $948 million from $1.353 billion, down 30%. These numbers suggest newspapers and media organizations everywhere are facing a dark future.
Murdoch has reaffirmed that he is looking at a change in strategy. The days of the free read on the Internet are over, at least if he has anything to do with it. Murdoch has indicated he plans to start charging people to view his websites, including The Wall Street Journal.
"We're certainly satisfied we can produce significant revenues from the sale of digital delivery of newspaper content," Murdoch says. "The extent of the downturn has only increased the drumbeat for change. Classified revenues will never again reach the levels once seen in print."
He has appointed a high level team, including his son James and Dow Jones chief Les Hinton to look at ways of creating a "fee barrier" without pissing off readers and alienating advertisers.
They certainly will have their work cut out. Can you imagine telling your average Fox fan they have to start paying to access the Fox web site?
Financial Times editor Lionel Barber says newspapers have to start charging. He says the biggest mistake newspapers made was offering it free in the first place. Barber has a point. But the problem for newspapers is that they need to have a unique selling proposition, something that makes the site worth visiting. If they don't, it won't work. Now, The Wall Street Journal might have a unique selling proposition. But what about the other news sites?
The problem for Murdoch and other newspapers is that people will switch to free online services and there are plenty of those around. As Smart Company editor James Thomson says, it's an almost impossible task. "Essentially, what Murdoch needs to do is retrain hundreds of millions of online consumers to pay for something that has been free since the dawn of the internet. And he's got to do this in an environment where thousands of free news sites, blogs, online newsletters and even Twitter streams are being launched every year. So while Murdoch has no choice other than to change strategy, he's stuck between the proverbial rock and a hard place. The fact that everything is free on the net means he can't make money giving his content away. But the fact that everything is free also means he's going to have a very hard time making money by charging for content."
It does sound like a very implausible strategy. Funny that some are even humoring the possibility that such a strategy could be implemented in the current Internet environment…just feels very desperate. Thanks for the interesting read.
Best Regards,
Robert
http://www.accountingnation.com