If Only Avatar Was A Newspaper

Philip Stone February 3, 2010 Follow on Twitter

Avatar and the TV business helped News Corporation blast a 66% earnings per share improvement in Q2 over a year ago, but not very much was said about the contribution by newspapers that actually did 30% better but only because of a strong Australian dollar, continuing savage cost-cutting, and some ad growth at The Wall Street Journal. And as if Murdoch the elder doesn’t have enough hours in the day figuring out how to boost print revenues he now has to deal with his kids and sons-in-law causing a ruckus.

News Corp reported Tuesday that its UK newspaper  revenue in the quarter was flat, and that circulation revenue dropped 5%, with less promotional spending and other cost cutting still very much the game-plan as the company still figures out how to charge for online content. Although there weren’t precise numbers on the UK titles it probably means The Times remains  a big money loser and The Sunday Times that has always made enough to cover those losses and then some, is suffering with its revenues well down.  And the Murdoch UK tabloids, The Sun and The News of the World each took serious circulation blows in 2009, and while they are still cash cows, there’s not near as much milk as before. 

All of which casts the scene for why Michael Wolff, the Murdoch biographer, set cats among pigeons last week with a Twitter saying a source told him The Times and The Sunday Times were up for sale. A FT journalist followed on saying he had heard the same. But since then nothing. Murdoch, the elder, of course, has printer’s ink running in his veins, and selling The Times, the paper that some call the most prestigious newspaper in the world, surely is not in his calling. But it could well be within the makeup of his son, James, who now heads the company’s European and Asian operations. Or it may be that someone just made an inquiry if the papers might be for sale and the word got out.

Whatever, James comes from a digital background, including a very successful stint heading up BSkyB’s, and it is “0”s and “1”s running in his veins, not printer’s ink. The belief is that it was James who got dad to ditch the free London PM paper, thelondonpaper, that lost the company some £15 million, but since the word “free” is no longer part of the Murdoch vocabulary perhaps that wasn’t too hard a sale. But might that have been the beginning of unraveling the newspaper empire?

Elizabeth, Murdoch’s daughter, also had a successful stint running BSkyB’s before starting up her own very successful TV production company (it didn’t hurt that in the early days she got some lucrative deals from none other than BSkyB). She told TV executives in Hollywood this week exactly what the family thinks of free –“Free is so 2009”, she exclaimed.

Murdoch is adamant in getting his newspapers globally to charge for their digital products -- the word “free” really is a no-no these days at News Corp. The Observer  suggested at the weekend that BSkyB could offer its 10 million viewers an Internet subscription to the four newspapers at just an additional 50 pence (80 cents) a month and if they all bit on that it would be an additional £72 million ($115 million) annually. Even if only 10% took up the offer it would be handy new cash!

In Australia, where the newspaper empire started, Murdoch has pulled his very successful Australian newspaper out of its Nationwide News holding company and set it up as a stand-alone separate division. At the same time (because of?) Murdoch’s son-in-law Alasdair MacLeod quit as managing director of Nationwide News.  The company statement had him saying, “Naturally I am sad to be leaving but I am excited about the next phase of my career.” No word yet on what that next “phase” may be.

News Ltd chairman John Hartigan says The Australian will now get more resources as a stand-alone and he is looking for “an unprecedented era of growth” not just in selling more print newspapers but also on various digital platforms. In other words he is looking for double-digit growth.  Pulling The Australian out of Nationwide indicates management sees possible success there whereas the other Australian group newspapers may not do as well. Australia as a whole saw advertising income down 5% and circulation revenue down 3%. If The Australian can achieve its targets, given more freedom, then perhaps that business plan could be exported to the UK and to New York?

And talking of New York, Murdoch’s New York Post is slipping again in its circulation war with the New York Daily News – it’s not that either one is gaining but rather The News is losing less readers than The Post.The Post had doubled its weekday newsstand price to 50 cents in May 2008 and is paying the consequences.  Only the accountants know whether less readers paying more is better than more readers paying less.

The good news came from The Wall Street Journal where the print edition saw a 5% advertising increase and its digital network advertising revenues were up 17%. Circulation revenue also was higher.

Avatar figures will bump up next quarter’s revenues much more than they did this quarter so the News Corp. outlook is bright. One further dark cloud is Sky Italia which increased its pricing and saw a loss subscribers with a lot of churn. The battle with Berlusconi’s Mediaset may be having its affect. But in the US, the Fox News Channel had its most profitable quarter ever, increasing its operating income 51% from the same quarter a year ago. Editorially the channel beats CNN on a daily basis unless there is a huge breaking news event and then the numbers are closer.

The man responsible for that success is chief executive Roger Ailes and one might think that the Murdoch family would be grateful for that Fox News profitability. But   Elizabeth’s husband, Matthew Freud of that Freud family, really let Ailes have it between the eyes for what he saw as rotten journalistic standards at Fox. “I am by no means alone within the family or the company in being ashamed and sickened by Roger Ailes’ horrendous and sustained disregard of the journalistic standards that News Corporation, its founder and every other global media business aspires to,” Freud exclaimed to the New York Times.  

Now, that’s pretty strong stuff on which to go public and it wasn’t long before the gossip-sayers were asking whether that was Murdoch the elder letting someone do his dirty work for him or was it, as News Corp said in a statement, Freud’s personal view?

No wonder the elder doesn’t want to talk about succession. As they say, you can choose your friends but not your family.