News Corporation's Digital Dilemma

            
 
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Case Details:

Case Code : BSTR210
Case Length : 14 Pages
Pages Period : 1999-2006
Organization : News Corporation Limited
Pub Date : 2006
Teaching Note :Not Available
Countries : Australia, US
Themes : Business Environment
Industry : Media, Entertainment, and Gaming

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EXCERPTS

Background Note

Murdoch inherited the Adelaide News and Sunday Mail newspapers from his father who died in 1952 and formed News Limited. He later expanded his business by acquiring and starting several new newspapers and magazines - Cumberland Newspapers (1960), Mirror Newspapers Ltd. (1960), The Australian (started in 1964), News of the World (a British Sunday newspaper, acquired in 1969), The Sun (1969), Sydney Daily Telegraph (1972) and Sunday Telegraph (1972) and New York Post (acquired in 1976), and others.

In 1980, Murdoch started News Corp as a holding company of News Limited. During the 1980s, the company expanded through acquisitions...

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News Corp's Internet Initiatives

During late 1990s, News Corp's Internet strategy was to use its websites to promote its strengths in its newspapers and publishing businesses. The company's websites in Australia and the UK were based on this strategy. For the US market, it planned differently...

Internet Beckons Murdoch Again

After the dot com crash, only a few dot com companies such as Amazon.com, eBay, MSN, Google and Yahoo!, survived. These companies slowly but steadily grew in size and their websites saw a gradual increase in revenues from online advertisements. By the end of 2004, online advertising became the fastest growing segment ahead of traditional media advertising...

FIM's Acquisitions

In July 2005, FIM made its first acquisition when it bought Intermix Media (Intermix) - an online company with a network of thirty websites including the popular community portal MySpace.com - for US$ 580 million.

Commenting on this, Murdoch said, "Intermix is an important acquisition for News Corp, instantly doubling the number of visitors to our sites and providing an ideal foundation on which to increase meaningfully our internet presence." Analysts described the acquisition as a bold move...

Offering Triple Play Services

In October 2005, News Corp's BSkyB, the largest pay-television channel in the UK, acquired Easynet, an Internet Service Provider (ISP) with a significant broadband presence in the UK, in a deal worth US$ 385 million. This acquisition was undertaken in response to the competition that News Corp's satellite television was facing from the cable TV industry in the UK. The cable TV industry had invested heavily to offer triple play services to its customers...

 

The Road Ahead

Analysts termed the acquisition spree of News Corp aggressive and in the right direction. According to Greenfield, "They are aggressively buying their way into an Internet strategy from nowhere, three months ago." They felt that the popularity of IGN and MySpace.com would give News Corp. websites the necesssary traffic and it was up to the company to convert them into ad revenues and even profits...

Exhibits

Exhibit I: Financial Performance of News Corporation (2001-05)
Exhibit II: Internet Advertising Revenues in the US (1997-2004)
Exhibit III: Top 15 Countries by Broadband Subscribers (2005)
Exhibit IV: Internet Initiatives of Various Media Companies
Exhibit V: A Note on Myspace.Com
Exhibit VI: Global Shares* of Display Advertising Revenue by Medium (%)


 

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