News Corporation's Digital Dilemma
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Case Code: BSTR210 Case Length: 14 Pages Period: 1999-2006 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.400 Organization: News Corporation Limited Industry: Media, Entertainment, and Gaming Countries: Australia, US Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
"I don't think there's any doubt that the Internet is going to improve out of sight when we get better telephone services. It is going to be used more for information and entertainment. It is going to affect newspapers; it is going to affect television."
- Rupert Murdoch, CEO of News Corporation in 2005.
"If there's a strategy there, I don't see it yet."
- Richard Greenfield, Analyst, Fulcrum Global Partners LLC, on News Corporation's Internet-related Acquisitions.
Introduction
On July 15, 2005, News Corporation (News Corp), one of the world's largest media conglomerates, started a new business division called Fox Interactive Media (FIM). FIM was started in order to offer a richer online experience to all its users in the field of entertainment, news and sports by consolidating its US websites - Fox.com, Foxsports.com and Foxnews.com.
FIM would also coordinate the web properties of News Corp's television business. FIM aimed to create a unique broadband experience for its users by giving them access to News Corp's vast archives as well as its video assets and content related to the latest news, entertainment and information.
Rupert Murdoch (Murdoch), the Chairman and CEO of News Corp, said that FIM was established in order to capitalize on the rising broadband and Internet usage. News Corp was facing tremendous competition from broadcasters such as CBS, who had been revamping their websites with a focus on videos and blogs.4 The steps taken by News Corp were clearly aimed at strengthening its Internet presence which, Murdoch felt, had started to pull audience, especially young people, away from the traditional media like the newspapers and even satellite television. News Corporation had missed the earlier 'Internet revolution'5 that had started in the mid-1990s. Just shortly after Murdoch ventured into the Internet arena in late 1999, the dot com bubble6 burst and he lost a huge amount of money.
Murdoch was slow to move again, after 2000, when the Internet was beginning to pose a threat to television and newspapers by capturing advertising revenues and the younger audience, Murdoch waited till the end of 2004 thinking this was yet another bubble. However, with more and more advertisers, audience and competitors going to the Internet, it was emerging as a strong media channel and Murdoch decided to focus on it in a big way. In February 2005, Murdoch held a meeting with his executives to discuss the company's Internet strategy.
Later, at the annual meeting of the American Society of Newspaper Editors in April 2005, he commented on how newspapers had been complacent in spite of the rising threat from the Internet, "As an industry, most of us have been remarkably, unaccountably complacent. Certainly, I didn't do as much as I should have after all the excitement of the late 1990s. I suspect many of you in this room did the same, quietly hoping that this thing called the digital revolution would just limp away. Well it hasn't.....it won't.....and it's a fast-developing reality we should grasp as a huge opportunity to improve our journalism and expand our reach."
Well it hasn't.....it won't.....and it's a fast-developing reality we should grasp as a huge opportunity to improve our journalism and expand our reach." The Internet world threw up many challenges to a company like News Corp. The primary challenge was that the Internet had itself become a medium and a means of distribution of media content, and this would affect News Corp's newspaper business.
Another challenge was deciding on the best possible product portfolio in the wake of rapid digitization. The growth of the Internet would also pose a serious threat to the company's film and television businesses in the form of digital piracy and loss of advertising revenues....
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