News Corp chief Rupert Murdoch is crying “uncle” when it comes to the Internet. He has been increasingly vocal about newspapers never making a profit by giving their content away online. He expects to start charging for the content that all his newspapers post on the Net. He calls the current situation of free Web access a “malfunctioning” business model.
Currently the Wall Street Journal is the only News Corp publication that charges a subscription fee. Reportedly revenues from subscriptions are booming.
“That it is possible to charge for content on the Web is obvious from the Wall Street Journal’s experience,” he said. The company, he said, is “absolutely” seriously considering charging for Web access to all News Corp newspapers, including the Times (of London), the Sunday Times, the Sun and the News of the World. It could start happening, he said, within the next 12 months.
“The current days of the Internet will soon be over,” Murdoch said.
Of course, there’s quite a difference between the “must-read” Wall Street Journal and the company’s other newspapers, which have quite a number of competitors. Murdoch also said News Corp would not allow Amazon.com to use its content on Kindle e-book readers. The New York Times Company and the Washington Post Company are running pilot programs of putting their content on the Kindle.
Perhaps prompting Murdoch’s thinking is the company’s most recent quarterly financial results (the third of its fiscal year). Total company operating profit declined 47% to $755 million compared to the year-ago quarter. Revenue declined 16% to $7.4 billion.
The newspaper division barely made a profit. Quarterly profits dropped 97% from $216 million in the year-ago quarter to $7 million. Murdoch said the company’s newspaper advertising revenue in Britain fell by 21%. The main savior was a price war among supermarkets, which prompted them to run more ads in the company’s tabloid publications.
Another old-line media, TV networks, also took a hit. Profits from the company’s TV networks dropped 99% from $419 million to $4 million. The company blamed the decline on not having the Super Bowl to broadcast this year and less advertising at Fox channels in the US and its Star network in Asia. Revenue dropped to $1.28 billion from $1.8 billion.
The company accounts separately for the TV networks it runs on pay TV. Led by the US’ Fox News Channel, they did quite well as a group. Profits increased 30% to $429 million.
Movie and TV shows did well at 20th Century Fox, which had an 8% increase in profits to $282 million although revenue fell to $1.47 billion from $1.62 billion. “Slumdog Millionaire” and “Marley and Me” were big money spinners.
News Corp’s financial reports have an “Other” section that includes MySpace. “Other” had an operating loss of $89 million compared with a loss of just $7 million a year earlier. The decline was blamed on a decrease in ad revenue, higher costs because of a MySpace music venture and the introduction of new features. Having called for an end to the Internet as we know it, Murdoch then called an end to the economic recession.
“There are encouraging signs in some of our businesses that the days of precipitous declines are done, and things are beginning to look healthier,” he said. “I’m not an economist,” Murdoch said, “and we all know economists were created to make weather forecasters look good. But it is increasingly clear the worst is over.”
We’re more inclined to believe Murdoch’s prediction about the world’s economy turnaround than we are about the Internet changing. During the quarter News Corp had a net gain of $1.2 billion on the partial sale of its shares in NDS Group and a noncash tax benefit of $1.2 billion from resolving several tax matters. The prior-year period included a gain related to its swap for stock of a stake in DirecTV to rival Liberty Media.
This article ran first in the Rider Research publication The Online Reporter.