Somewhere, Tom Freston is laughing.
Remember when News Corp. was supposed to have figured out this New Media thing way better than the other media empires, and Sumner Redstone was firing Freston for letting Rupert Murdoch snare MySpace? These days, not so much. New Corp., in fact, appears to be getting a bit panicky over the whole New Media thing.
Yesterday, the company announced pretty ugly second-quarter earnings (fiscal Q4), low-lighted by a $403 million impairment charge against Fox Interactive Media, which consists primarily of MySpace, as well as a $228 million “restructuring” charge due mostly to layoffs as MySpace. That’s $631 million in charges for the same “prize” News Corp. snatched away from Viacom for $580 million in 2006.
In the earnings call, Murdoch declared that he intends to start charging people to read all News Corp. newspaper content online, from the Wall Street Journal to the Page Three girls in the Sun, a sure sign that the company really doesn’t know what it’s doing online. Unless there’s some other strategy for leveraging the network economics of the Internet Murdoch hasn’t told us about yet, simply throwing up paywalls around everything isn’t a business plan. It’s taking your marbles and going home.
On the same call, newly appointed vice-chair and COO Chase Carey took a whack at Redbox, the $1 a night DVD rental kiosk outfit owned by Coinstar. “I think making our content available for $1 grossly undervalues it,” Carey said.
According to the Journal (sub. required, natch), Fox has told DVD wholesalers like Ingram Entertainment and VPD not to sell its movies to Redbox until 30 days after their initial release, the same anti-competitive-ish stunt Universal pulled earlier this year.
The fact that News Corp.’s No. 2 is spending his time worrying about dollar-a-night rentals tells you all you need to know about how far the studio is from figuring out to respond strategically to precipitously declining DVD sales.
If I were Carey (or Fox video head Mike Dunn) I’d be worrying about why Blu-ray, which Fox championed, hasn’t arrested the massive outflow of consumer dollars from the packaged media business. And I’d be focusing on how to structure my deal with Netflix before it finishes the job of remaking the online video-on-demand business into a non-transactional subscription business and Reed Hastings ends up with all the leverage, rather than risking litigation over my deal with Redbox. The DVD business is term-limited. Getting digital distribution right now will do a lot more for earnings in the long run than bashing a few kiosks to make yourself feel good.
Petulance is not a strategy.