Amid all the throwaway lines and bullish spin, Rupert Murdoch and his executives always bury some truths in their comments about quarterly profits.
For example, he’s no longer certain News Corp can introduce his much-threatened pay-for-content model for his newspapers this financial year (there are only eight and a bit months to go).
He says everyone is working hard on the idea, but he’s not as definite.
And yet in August it was suddenly an issue of the highest urgency as he and his executives went around the world abusing free sites, national broadcasters such as the BBC and ABC and tech giants such as Google. It was vintage Sun King material, with his band of faithful courtiers doing his every bidding.
In May he actually told us we could see it with a year. Yesterday “I wouldn’t promise that we are going to meet that date”, he said in his post-results briefing.
So why the change or the slowing of the process?
Could it be linked (it has, all along) to the fact that News Corp’s $US900 million ($A993.7 million) internet search agreement deal with Google, is looking more and more shaky.
Could Rupert be forced to “deal” with Google to make up what is said to be a massive shortfall on the MySpace social networking website that is now yet another Murdoch technology blunder?
And could this failing deal and the monetary loss be the driver for the move to make users pay, and be colouring the language used by himself (his plagiarism comment in a Beijing speech a month ago) and the “parasites” comment from Wall Street Journal boss Robert Thompson (a Murdoch poet of the moment)?
The Financial Times reported that: “MySpace, once the centerpiece of Rupert Murdoch’s digital strategy, has fallen ‘significantly’ short of expectations and is jeopardising a critical $900 million internet search agreement with Google.
“Weaker traffic means the News Corp division is now expected to receive about $100 million less from a deal that had underpinned investors’ confidence in the MySpace acquisition, executives revealed.
“We’re still losing traffic,” said Chase Carey, chief operating officer of News Corp. “It’s a business in transition.”
In 2006 Google agreed to pay News $US900 million for the exclusive right to provide search advertising to the once-thriving site over three years if MySpace could guarantee a minimum volume of traffic.
News paid $US580 million for MySpace, which was ahead of Facebook at the time of purchase, but now trails it badly.
News has already written down much of the value of MySpace because of falling traffic and declining ad revenues. MySpace is now returning to its music roots.
If News does a deal with Google on the shortfall, and manages to sort out other concerns, it’s possible the paid content idea remain a “future” option.
Meanwhile, the detailed SEC filing from News for the quarter reveals a bit more detail on the performance of the company’s newspapers in the US, UK and at News Ltd in Australia.
“For the three months ended September 30, 2009, the Australian newspapers’ revenues decreased 19% as compared to the corresponding period of fiscal 2009, primarily due to lower classified, national and real estate advertising revenues and a 6% impact of unfavorable foreign exchange fluctuations.
“Operating income decreased 45% in the three months ended September 30, 2009 as compared to the corresponding period of fiscal 2009, primarily due to the decreases in advertising revenues noted above, partially offset by a reduction in operating costs resulting from cost containment initiatives and lower newsprint costs due to a decrease in newsprint volume.
“For the three months ended September 30, 2009, the UK newspapers’ revenues decreased 21% as compared to the corresponding period of fiscal 2009, primarily due to lower classified and display advertising and circulation revenues across most titles and a 12% impact of unfavorable foreign exchange fluctuations.
“Operating results decreased for the three months ended September 30, 2009 as compared to the corresponding period of fiscal 2009, primarily as a result of the revenue decreases noted above and higher newsprint costs due to an increase in newsprint price. Partially offsetting this decrease were lower marketing expenses and the impact of cost containment initiatives.
“For the three months ended September 30, 2009, Dow Jones revenues decreased 13% as compared to the corresponding period of fiscal 2009, primarily due to lower advertising revenues at The Wall Street Journal and lower information services revenues.
“These decreases were partially offset by increased circulation revenues during the three months ended September 30, 2009 as compared to the corresponding period of fiscal 2009, primarily due to price increases at The Wall Street Journal. Dow Jones’ operating results for the three months ended September 30, 2009 declined from the corresponding period of fiscal 2009 as expense decreases, primarily due to cost containment initiatives, lower headcount and other employee related costs, were more than offset by the revenue decreases noted above. ”
But the enormity of the pay-for-content problem News confronts can be seen from the following bit of information in the quarterly report:
“For the three months ended September 30, 2009, revenues at that Newspapers and Information Services segment decreased $302 million.”
That’s US dollars, and includes subscription income from the Wall Street Journal. Making up that revenue (before any recovery in the wider economy) just from charging for content at the New York Post and the UK and Australian papers, is pie in the sky stuff. Murdoch has already said that much of the lost advertising has gone to the internet forever.
By the way, there was no mention at all about the situation of the New York Post, which lost about 19% of its circulation in the year to September and is now more deeply in the red than ever. That will be one paper the paid content idea won’t save.
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