For more on the fast-evolving world of digital news, check out my new site: Newsonomics.com
As if the New York Times' Arthur Sulzberger and Janet Robinson didn't have enough headaches, trying to figure out how to fend off that other daily beast known as the Wall Street Journal.
Until December, 2007, when Rupert Murdoch pulled off the coup of his lifetime, cajoling, wheedling and finally hard-lining just enough of the Bancroft family into selling the prize Journal to him, the Journal had been a national business daily -- not the Times' direct competition. As the ink barely dried on the purchase agreement, Murdoch made plainer his disdain for the Times, its product, ownership and political leanings. He's also made increasingly clear -- as much in product change as in words -- his plans to drive the Times into the ground.
Now, as 2010 dawns, he's got a new weapon to use in the battle, and it has nothing to do with newsprint. It's Avatar, the stupendous, box-office-busting sensation, produced and distributed by Wall Street Journal's cousin, News Corp's Twentieth Century Fox. Avatar is smashing revenue records, going past the third dimension, pulling in more $2 billion or more so far. That's compared to about $500 million in production and marketing costs. News Corp's big and smart bet will be paid off magnificently.
Consider: $1.5 billion or more in profit from one News Corp movie alone. That compares to Times' total revenue of less than $2.5 billion in 2009, and probably a small operating loss (the company reports its full 2009 on Feb. 10.)
Sure, the Journal itself has seen its own P and L struggles, along with the rest of the industry, though its last-quarter results turned positive, contributing to a $259 million profit for News Corp's news and information division. Yes, it's better positioned -- business-oriented national newspaper, online subscription revenue stream -- than most dailies, but it's struggling for advertising along with everyone else.
If you're Rupert Murdoch though, you just have to say, "Take some of that blue people money and invest it in the Journal. Remember I said I wanted to kill the Times." Maybe send them flying into the infinity of the flux vortex.
So, as the Times reorganizes its digital business operations, add something new to the Times woes' of downsized ad spend, too great a cost structure and little way to gain other than ad revenues digitally until at least 2011, given its go-slower approach to metering. Add the forest people, the Navi. Yes, the blue people, too, are on Arthur's back.
As Michael Wolff laid out in his Murdoch bio, "The Man Who Owned the News," Murdoch may run a global, entertainment-news conglomerate, but he's a newspaperman in his blood. Yes, top execs at far-flung News Corp ops and his own children understand that newspapers are the company's past -- in terms of revenues and growth -- but that makes little difference as long as Rupert is in charge. It also will make little difference as long as profits flow like a golden river.
How much sense does it make to pull money from high-margin areas of News Corp to subsidize another? Call it transfer tithing, call it intra-corporate welfare, but expect to happen as necessary, Take just 10% of $1.5 billion, and you've got quite a war chest.
The Times' dilemma is not one that is unshared by other news media. In my new book, Newsonomics, I outline what I call the Digital Dozen. These are the world's largest news companies from ABC to the Washington Post. All are fighting to reach the potential, English-speaking audience of almost a billion. Each can find huge reach, at low cost, given cheap Internet distribution. All, though, face the equally huge challenge of managing and reducing high cost structures in the shorter term.
Consequently, those Digital Dozen news companies that are part of larger companies derive lots of revenue from non-news operations -- and they have a great shorter-term advantage. Think News Corp, which relies on its three-continent news operations for only about 20% of its revenues. Think Thomson Reuters, which depends on news for less than 10% of its income. Think Bloomberg, whose 280,000 licensed terminals drive the business, as it experiments with Business Week, TV and radio. As Andy Lack, Bloomberg's CEO of multimedia, put it picturesquely last week at the Software Information Industry Association conference in New York City, "The reporters are a value-added service for the data. If you're a journalist, being associated with an enterprise that has that structure is a beautiful thing."
For the standalone news companies -- think New York Times, NPR, the Telegraph, AP in some ways -- it's a tougher slog. They have little cushion, little safety net. Maybe standalone news companies are obsolescent, profit or non-profit, or maybe the many efforts at diversifying business models will work to provide them cushions of a different sort.
Yet, today, beware the new blue man group that's on the offensive, simultaneously buoying the Journal and trying to sink the Times.