18:39 PM

Analysis: Murdoch Seeks To Capitalize On Media's Internet Woes - Warns Against Government Aid

Rupert Murdoch, the head of media giant News Corp, yesterday published an editorial (free) in the Wall Street Journal, warning that government involvement in the newspaper industry, rather than the Internet, could harm the future of journalism.

He wrote:

No doubt you will hear some tell you that journalism is in dire shape, and the triumph of digital is to blame. My message is just the opposite. The future of journalism is more promising than ever--limited only by editors and producers unwilling to fight for their readers and viewers, or government using its heavy hand either to overregulate or subsidize us.

The editorial was based on his remarks to the FCC on December 1.

Mr Murdoch is a long-time critic of US laws that limit the cross-ownership of media properties. He said that such laws represent outdated, 20th century thinking.

If you are a newspaper today, your competition is not necessarily the TV station in the same city. It can be a Web site on the other side of the world, or even an icon on someone's cell phone... If we are really concerned about the survival of newspapers and other journalistic enterprises, the best thing government can do is to get rid of the arbitrary and contradictory regulations that actually prevent people from investing in these businesses.

Foremski's Take: Mr Murdoch's position on cross-ownership is not new but what is new is his opposition to tax breaks and special non-profit status for newspapers.

Even though government support for newspapers would offer benefits to his own properties, it would also serve to prop up his competitors.

The better strategy for Mr Murdoch is to take advantage of the disruption affecting the entire media sector and use it to accelerate the demise of competing media conglomerates. He would then be able to make acquisitions at pennies on the dollar.

However, to succeed with such a strategy he would need changes in laws limiting media ownership.

Secondly, he must come up with a profitable business model that takes advantage of the Internet while his competitors continue to struggle with declining advertising revenues. This is no easy task.

But it explains why he has been critical of Google and news aggregators, and has said he will impose fees on some of is online content. He is clearly trying to develop an effective digital/print business model that will give him an edge over competitors.

However, if he is successful in developing a profitable media business model what's to stop competitors following with a similar approach? None.

His strategy must depend upon being able to grab a first mover advantage to provide a head start. This would include making exclusive deals with powerful partners. These might include Microsoft [MSFT] and even Google [GOOG]. Both companies have a history of paying for digital content.

What's clear is that News Corp intends to take advantage of the Internet's disruptive effect on the media industry, to make acquisitions and improve its profitability.

If he is successful, Mr Murdoch would emerge as the savviest media tycoon of the past 50 years, able to bridge the chasm between the much different worlds of old and new media.

Not bad for a 78 year old.

As he writes in his editorial, "The future of journalism belongs to the bold."

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Please see;

Rupert Murdoch on Wikipedia.

Here are some extracts from Rupert Murdoch's WSJ editorial: Journalism and Freedom

...From the beginning, newspapers have prospered for one reason: the trust that comes from representing their readers' interests and giving them the news that's important to them. That means covering the communities where they live, exposing government or business corruption, and standing up to the rich and powerful.

... Some newspapers and news organizations will not adapt to the digital realities of our day--and they will fail. We should not blame technology for these failures.

...I can't tell you how many papers I have visited where they have a wall of journalism prizes--and a rapidly declining circulation. This tells me the editors are producing news for themselves--instead of news that is relevant to their customers.

...Though online advertising is increasing, that increase is only a fraction of what is being lost with print advertising. That's not going to change, even in a boom.

...Some rewrite, at times without attribution, the news stories of expensive and distinguished journalists who invested days, weeks or even months in their stories--all under the tattered veil of "fair use." These people are not investing in journalism. They are feeding off the hard-earned efforts and investments of others.

... the growing drumbeat for government assistance for newspapers is as alarming as overregulation... It is precisely because newspapers make profits and do not depend on the government for their livelihood that they have the resources and wherewithal to hold the government accountable.

... the basic truth remains: To make informed decisions, free men and women require honest and reliable news about events affecting their countries and their lives. Whether the newspaper of the future is delivered with electrons or dead trees is ultimately not that important. What is most important is that the news industry remains free, independent--and competitive.