Hollywood Reporter Mermigas on News Corp
News Corp. sculpting bold plan for growth
Late in July, Diane Mermigas wrote a multipart series on Fox News Corp that included an interview with Ruport Murdoch. Her second piece focused on how the media firm is leveraging its branded content and traditional distribution organs to both build a digital distribution model based on consumer interactivity and to develop its presence in emerging international markets.
Excerpts:
Excerpts:
News Corp. in the past 12 months has been forging media's future by buying and riding the likes of social networking leader MySpace.com and video gamer IGN to meteoric heights while also enjoying record performance levels at its core broadcast and cable television, film and print operations, even as they struggle to reinvent their business models.
With a current equity value of about $80 billion (one-quarter of which is investments), News Corp. expects as much of its growth to come from new and existing media endeavors as from its strategic financial interests in eastern Europe, Asia and other parts of the world, where commercial Internet, satellite, cable and even over-the-air TV are just taking off.
To that end, News Corp.'s new 2007 fiscal-year budget calls for bold plans to advance its digital broadband and international objectives at every level including the continued new-media extension of all of its traditional broadcast, cable, film and print businesses.
News Corp. is experimenting with new growth opportunities, from the new world of MySpace and the mobile entertainment shopping mall like Mobizzo to the creation of a new network economic model in MyNetworkTV and plans to test the waters with video-on-demand access to theatrical features within 60 days of a film's release.
Mobizzo, a paid download online service for Fox-branded ringtones, games and grafix, will become a "significant business" over the next several years in the same vein as the TV-to-DVD explosion, Chernin said.
MyNetworkTV, which launches Sept. 5 with a lineup of English-language telenovelas and station affiliates covering more than 85% of U.S. TV households, could generate $50 million in operating income with just a 1.8 rating, according to UBS analyst Aryeh Bourkoff.
Merrill Lynch analyst Jessica Reif Cohen estimates that Fox's nine smallest O&Os, which generate an estimated $87 million in annual earnings and collectively cover 7% of U.S. households, could be combined with about $3.7 billion in cash to provide Malone with a total $5 billion buyout. Some analysts value Liberty's stake at twice that amount.
"We expect News Corp. could sustain earnings growth in the 15%-20% range over the next three years, making its multiyear financial outlook the strongest among the major media companies," Lehman Brothers analyst Vijay Jayant said. He is among the analysts who have raised their estimates for News Corp.'s fiscal 2006 fourth quarter, which will be reported Aug. 8.
One of its most challenging tasks is finding ways to leverage the power of its O&O stations and its revitalized Fox broadcast network in a digital world that demands interactivity. That imperative will require some experimentation beginning later this year with cable and satellite providers developing interactive programming and advertising.
Ideas range from offering viewers a choice of advertising to view during breaks, to using fast-forward and rewind respites for pop-up advertising, and eventually rating the commercials instead of the programs in which they appear. Fox O&Os might seek to negotiate an interactive advertising path to consumers from local cable operators as part of their retransmission negotiations, in lieu of cash payments or clearance of new Fox cable channels such as last year's Fox Reality Channel and the soon to launch Fox Business News Channel.
Some Fox network programming will be made available exclusively to Fox stations to download off their local Web sites and share more directly in advertising-related revenue and consumer fees.
Downloads, streaming and otherwise broadband-zapped content will provide new forms of wireless sponsorships and advertising requiring entirely new forms of metrics and pricing. News Corp. is game with 35% of its annual $27 billion in revenue coming from advertising, with an eye to ramping the company's annual $4.6 billion in earnings.
But, on the strength of its primetime lineup, particularly the "American Idol" juggernaut, Fox Broadcasting Co. is about to swing into the black. Overall revenue has increased about 7% to $2.9 billion, analysts say.
That sentiment is why News Corp. is considering the creation of a new umbrella entertainment portal as a gateway to its smaller key content Web sites, or creating more user functionality among them to better facilitate and the creation of such original content as mash-ups and wikkies. The objective is to increase and move user interactivity, advertising and e-commerce along the company's many Web sites, which include MySpace.com, IGN.com, TVGuide.com, RottenTomatoes.com, AmericanIdol.com, Fox.com, FoxNews.com, FoxSports and Scout.
But one of its most potent weapons might be "Generation Fox," the catchphrase Vinciquerra and Chernin cooked up during a routine meeting that signals to advertisers, competitors and even to Fox's own internal sales forces that it has competitive potency among 12-18 and 18-24 demos with its media brands ranging from MySpace and IGN to the cutting-edge cablers FX and Fuel.
"The great thing about the Internet is that the standards which have driven media companies in the past, which was some level of distribution scarcity whether you owned a chain of movie theaters or a network, is now gone. The Internet is the most democratized thing imaginable," Chernin said. "With MySpace, we have had to change our mindset. We cannot think of ourselves as programrs. We can only gingerly and reasonably offer users features like video downloads, give them the tools to manage their own (content) and our content, and allow them to decide."
