June 27, 2012
Horse 1338 - News Corp. Snapped in Half?
The story which shot around the world last night was that News Corporation is toying with the idea of snapping the company in half; with the print section being in one company and moving pictures (sport, news, film, television) being in the other. No word was given as to what was going to happen to the online portions of the existing businesses, though you'd expect that they'd likely follow their current counterparts into the new companies.
Newspapers face the same sorts of overhead costs as books, magazines, CDs and DVDs have: the physical production of product and the distribution of product. The music industry seems to have survived quite happily without selling anywhere near as much physical product anymore and I'm sure that News Corp will have seen that and if it could would like to make its newspapers follow suit.
The big problem with moving to a digital only platform is something which I think scares News Corp. Although there is a physical cost in moving dead tree product around, the very fact that it appears at newsstands means that the messages which a newspaper wants to push, are seen by the general public. Remove that physical stimulus and to some degree, the reflex reaction which people are going to have which causes them to buy a newspaper is entirely snuffed out.
In the UK, newspaper circulation peaked in about 1977 and although The Sun has been topping the charts since about 1979 its 2011 sales were less than every year going back until 1975. Even so, to lose that sort of visibility altogether is probably going to make a very large dint in market power; other newspapers like the Daily Mail and Daily Mirror would only be too happy to fill the void.
In Australia where the newspaper market is more or less a duopoly (or in some cities an effective monopoly), the effect would be utterly devastating. In the cities where there are no Fairfax newspapers, a vacuum would be created and the cities where there are Fairfax newspapers, then Fairfax would either cover the hole left behind, or launch a new tabloid.
You could argue that news outlets like the ABC and the BBC effectively deliver news content far quicker and with a much wider scope of people on the ground than either Fairfax or News Corp. who largely buy overseas reports from AP or Reuters but there is still something tactile about reading a newspaper; even if the news is in some cases a few days old. The Financial Review shows in part that even with a digital alternative, people will still pay for quality journalism and the Fin which is a specialist publication and retails for $3.00 hasn't really seen a drop off in circulation numbers in the same way that dailies like the Sydney Morning Herald or the Daily Telegraph have.
Up until this point, printed newspapers in the News Corp stable have been subsidised by massive profits elsewhere in the group; Rupert has probably kept them on as some sort of plaything. To be perfectly honest, as we move further into the 21st Century and a new generation expects to find everything online, are they really going to bother going to a newsstand at all? Moreover do any of his six children actually want to inherit what will become an ever increasingly unprofitable business? Rupert himself has suggested that printed newspapers will cease to exist by the end of the decade and at least in the UK and Australia (the US is too far disjointed, as is Canada and neither South Africa or India which are the only other two Anglophone countries in the G20 have a tech dependent economy), I think that will probably ring true.
The underlying question that I have about snapping News Corp. in half is what happens to Fox News? Unlike the BBC which sends reporters out all over the world through the world service, Fox News doesn't to anywhere near a degree. Currently Fox News in theory has the ability to ride the same editorial and news networks as its print cousins but if the print division is cut off, what then happens to it? Probably a change in character and Fox News would become more like existing TV networks. I don't think that Fox News in the United States at least will magically cease to be the cesspool of right-wing nutjobs that it currently is because that's where it chooses to pitch itself.
I think what the snapping of News Corp. in half marks, is symbolically the undulation point which marks the beginning of the end. The top of the curve was reached some time ago, what we'll be seeing in future are accelerated declines as if newspapers are poor players who struts and fret their hour upon the stage and then are heard no more.
Posted by Rollo at 15:47