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News Corp back to financial health as ‘digital dynasty’ emerges

Chris Andrews

Rupert Murdoch to begin pay-wall rollout as company turns its fortunes

All the splendid electronic devices available to us, from smartphones to e-readers to the forthcoming iPad, apparently don’t run on batteries; they run on creativity, ingenuity and content – and in particular Rupert Murdoch’s content. Thank god for Rupert Murdoch.

This revelation came during the News Corp earnings call earlier this week, where it was reported the media leviathan had turned its fortunes, reporting profits of $254 million for the three months to December, compared to losses of $6.4 billion a year ago.

Despite a $500 million one-off charge related to the settlement of litigation filed against the company by Valassis Communications, total revenue for the quarter increased by 10 per cent to $8.7 billion. Total segment operating income was reported at $1.2 billion, up from $839 million a year ago, resulting from growth at the Filmed Entertainment, Television, Cable Network Programming, Newspapers and Information Services and Book Publishing segments. These were partially offset by decreases at the Direct Broadcast Satellite Television and ‘Other’ segments – which includes loss maker Myspace.

There was of course a large boost from the company’s Twentieth Century Fox film studio, which produced the hugely successful 3D film Avatar. It alone saw profits surge from $112 million to $324 million, with Avatar box-office sales aided by DVD releases of films including Ice Age: Dawn of the Dinosaurs and Night at the Museum.

And now the company would appear to be in the run-up to imposing charges for access to all of its newspaper websites, including, the Times, the Sun and the News of the World in the UK. These are interesting times indeed. While the model does seem to be working for the Wall Street Journal, it remains to be seen whether it will also work for titles with a less specific remit. It is a contentious issue, but could mark a turning point either way – leading to others following suit if successful, or developing new models if not.

“We're in advanced discussions with other media companies around the world,” said Mr Murdoch. “All of them have turned to our company for ideas and innovations. We're currently in the midst of a very substitutive conversation with device makers on developing a subscription model that will develop high quality journalism to consumers wherever and whenever they wanted. We have begun to charge for on-line content at a couple of our US titles and we expect to expand to other titles in the coming months. We have the most experience given our success and various digital offerings at the Wall Street Journal.”

Beyond those discussions with device manufacturers about subscription models, as publisher HarperCollins is among its subsidiaries, it is keen to push Amazon for a new deal on e-book pricing (the Kindle maker’s flat $9.99 pricing model “devalues books and it hurts all the retailers of the hard cover books").

“From a crisis comes clarity, and the strength of our company and our strategy is clear for all to see,” said Mr Murdoch. “Excuse the immodesty, [ahem, Mr Murdoch immodest? No, it can’t be] the News Corporation's pre-imminence as a content creator comes as the debate over the policy of content is over. Content is not just king, it is the emperor of all things electronic. We are on the cusp of the digital dynasty for which our company and our shareholders will profit greatly. Devices and platforms are proliferating, but this clever technology is merely an empty vessel without any great content.”

“Our mission is clear and coherent, it is to create great content and customize it to suit our expanding audiences around the world. In the last couple of months, I have toured the most innovative Asian research laboratories and walked the floor with the Consumer Electronics Show. The message is the same everywhere. Without content, the ever larger and flatter screens, the tablets, the e-readers and the increasingly sophisticated mobile phones would be lifeless.

“Without content, these ingenious and wonderful devices would be unloved and unsold and I'm delighted, they are certainly not complacent that our employees’ creativity and energy have been paid the ultimate compliment by consumers. They've paid for our content.”

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