MEDIA ANALYSIS: One false move now, and Newscorp is going down.


Murdoch’s brave face can’t hide the desperation in his decision to get out of China.

Despite grandiose statements of rude health for Newscorp, it is becoming increasingly obvious that its owner Rupert Murdoch is both short of cash….and facing a revolt from the company he desperately needs to control.

Referring to the recent addition of a paywall to the Times’ sites, last week Rupert Murdoch predicted “It’s going to be a success – subscriber levels are strong. We are witnessing the start of a new business model for the internet.”

But subscriber levels are not strong – they are awful. As predicted in the Slog scoop of 19th July last, they’re running at levels far too low to make paywalls a commercial goer in a non-premium content newspaper. Our prediction came good just 48 hours later when various US sites showed how the subscription take-up on the Times online was just one in a hundred – and readership of anything on the site had collapsed.

Last week, Murdoch boasted that his quarterly results showed Newscorp to be ‘in a strong position from which to grow’. But while Aussie sites controlled by The Multinational One insisted that his quarterly profit upturn was a result of raised ad revenues, in fact without the success of one-off fantasy-adventure film Avatar, things would still be looking sick. The movie has raked in record box-office takings of $2.7bn – quite a lot when you consider total quarterly profit for the group was just $839M.

Roop himself was keen to suggest that ad revenue was coming back – but given the emerging global outlook, an old goat like him knows only too well that there’s no chance of that short blip maturing into a trend. Ask anyone in the ad business, and they’ll tell you in private that incomes are set to dive as output grinds to a halt in the West.

Other signs are emerging that the Murdoch Empire is in barely disciplined retreat. Newscorp is trying to take on the acquisition of remaining BSkyB shares in order to have control over the huge cash-flow there – but things aren’t going well: a single digit has been shown to the initial offer of 700p a share, and while last week some observers thought 750 might secure the deal, today things are different. One insider told the FT over the weekend that

“The non-execs have not even agreed on 800p as the price they would accept. It could be 830p before they would recommend a bid to shareholders, and perhaps Newscorp couldn’t afford that. They could go hostile.”

There has been concern inside and outside the BSkyB building for some time that members of the top management team are do not relish losing the independence that comes with being a listed company.

Now this morning comes the revelation that Newscorp is to sell control of its three Chinese TV channels to a fund backed by China’s second largest media company. Murdoch entered the Chinese market to great fanfare, but like many before and afterwards discovered that for once, the playing field was tilted against him, rather than in his favour.

The last of the Digger’s woes concerns the continuing money-pit that is MySpace. A belated attempt to get up to speed with the launch of MySpace Everything has proved nothing beyond the fact that Yahoo OMG already does everything the new service does – and more. MySpace continues to bleed users from every orifice.

Last year, The Slog’s mother-site nby showed that without the English Premiership soccer income, Newscorp would not be a viable business. The way things are now, it would be bust. Without just that one movie Avatar, it would be double-bust.

Roop was smart to bring forward the Premiership negotiations last year, and clear a quick deal before these later solids started to hit the fan. But he still remains dependent on this source of income – a soccer division with, outside of Arsenal, no sane business model beyond US and Eastern sugar-daddies buying truculent foreign players. Any one of a number of events could collapse that income stream….and help to finish off the modern world’s most prolific dumber-down of content: a man now retching on the bitter irony of arguing that his paywalls are protecting journalistic quality.

Now about the price of those serialised memoirs, Lord Mandelson….