News Corporation, the newly devolved publishing division in Rupert Murdoch’s global empire starts, launches on the New York and Sydney stock exchanges on Monday with the aim of dominating the smartphone market for news, entertainment and information.
Robert Thomson, the chief executive of new News Corp, told investors in Sydney the company would retain “Murdochian magic” and would have “a permanent startup sensibility” with globalisation and digitisation its biggest opportunities for growth.
“One of our foremost ambitions outside Australia is to own the second screen,” he said in an investor roadshow whether this was “a football match or a British election”.
He said the media sector was “still at the early stage of a second great migration, from print to web from web to mobile” and it was working on all fronts to make sure its newspaper content was a vibrant and appealing on smart phones.
In August the Sun hopes to make major inroads with the “second screen” when it starts charging customers £2 a week for online access. The company recently clinched a deal for exclusive rights to show Premier league highlights on the internet and mobile phones and is hoping this will getting Sun readers through its turnstiles.
Thomson said it is harnessing expertise from the TV side of the business as well as the Wall Street Journal to make sure the product is as distinctive as possible.
“We are working with Fox Sports and even the Wall Street Journal’s quirky writers to develop a different kind of commentary for smartphones,” he said.
He concerned that the newspaper business was lower yielding than the TV business and that the transformation into a digital growth business would “take longer than a couple of quarters”.
“All investors should understand that context. We are also candidly and decidely optimstic and focused … we are not here for the short term,” he said.
Murdoch hopes to emerge with a new lease of corporate life in New York and Sydney when the $77bn global media company he has built over 60 years splits into two separate publicly listed companies with the newspaper business, tarnished by the phone-hacking scandal, finally separated from its big US TV and movie brands.
The demerger is the culmination of a two-year campaign to “detoxify” the News Corp brand that started in the summer of 2011 with the abrupt closure of the News of the World and finished with the announcement in the last week that News International’s brand in London would be axed and the company rebranded News UK.
Overall the publishing company will continue to be called News Corp and will be home to 130 newspaper titles around the world, the new education business Amplify, the HarperCollins publisher, the Australian TV business, the Australian online property company REA and a US inserts business.
The addition of the non-press business has given some added appeal to the publishing spin-off which was unkindly dubbed “crap co” because of the loss-making newspapers. Times Newspapers Limited, which includes the Times and the Sunday Times, made a loss of £28m in the year to July 2012 according to its most recent results. Although this included a substantial £12m restructuring cost, the daily paper still loses money while it is understood that the Sunday Times is returning to profit.
The closure of the News of the World also added financial costs to the other titles – sources say some a £40m deficit was initially shared among the titles as a result of the shutdown.
To further the appear of News Corp, the company is receiving a $2.6bn (£1.7bn) dowry as part of the demerger. Some $500m is earmarked for share buybacks in the event of investors ditching stock, while the rest is expected to be invested in developing newspapers’ digital operations and to fund possible acquisitions, with many suggesting that Murdoch may yet try to realise a dream by acquiring the Los Angeles Times.
Murdoch told investors at the same roadshow last month in Sydney ahead of the demerger that the split gave him an opportunity “most people don’t get in their lifetimes – the chance to do it all over again”.
One analyst and keen Murdoch-watcher who asked not to be named believes that the tycoon will have to come up with something transformational such as a tablet giveaway if he is to repeat the success he had with the relaunch of the Sun in the 1970s or the launch of Sky TV in the 1990s.
The tablets would be pre-loaded with newspaper apps and could be funded by the entire industry.
Thomson said the new company would continue to have “Murdochian magic, a permanent start-up sensibility” which would take risks and follow its instincts.
Thomson has also told investors the company will start charging third parties for use of its readership and subscriber data and will be looking to “window” content in the same way the movie industry does with higher charges for first sight of stories and video.
The notion of charging for data was rubbished by one analyst in New York who pointed out newspapers do not know who their readers are in the same way as Google or Facebook and don’t have the information to sell. “They are using big data as a buzzword to get us all excited,” he said. The same banker was sceptical about the notion of “windowing”: “You pay for freshness, but if he’s talking about news, that’s all over Twitter within seconds, it’s a bit of a pipe dream.”
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