Remember Rupert Murdoch’s plan to convince other media companies to join him behind a pay wall and offer their stuff only via subscription? It’s still around, in some form. We’ll hear more about it in “three to four weeks” Murdoch said today during News Corp.’s earnings call.
Just what Murdoch has in store isn’t entirely clear. Last year, he sent digital media head Jon Miller out to convince rival newspaper publishers to join News Corp.’s Wall Street Journal in the pay-to-play ring. But it appears that Murdoch may now be thinking of a subscription offering that extends beyond newspapers and into entertainment.
I’ve asked News Corp. if it has anything to add to Murdoch’s hazy comments this afternoon, but I’m not optimistic. I do think we’ll hear more about this before the press conference Murdoch plans for later this month, though.
Meanwhile, here’s some background on “Project Alesia,” the subscription/pay wall plan that may or may not be what Murdoch was talking about today.
We’ve seen the numbers, so we know that News Corp. had a very nice quarter. Now let’s hear what Rupert Murdoch has to say about his company’s performance. I’m also interested to see how much ire Murdoch expresses for Google (GOOG) and how much ardor he has for Apple’s (AAPL) iPad, among other digital topics.
The following is a live paraphrase that includes my editorial notes; I’ll note direct quotes where appropriate.
Dave DeVoe going over numbers from the release.
Earnings include one-time items of three cents per share. [Should net that out of earlier reports when comparing to Wall Street expectations.]
Newspapers: Operating income up nearly five times. Higher advertising across nearly all markets. Forex helps, too.
“Other” (includes Myspace): Lower search and ad revenue, but costs are down.
Some balance-sheet talk: We’ve got a lot of cash on the books, and we know it. Some of it will get paid out to Jim Cameron and other participants in “Avatar.” But we’re working on ways to deploy the extra cash. We’ll get back to you on it by the next quarter.
Guidance: We’ve done better than anticipated in lots of our business for the last nine months, but our next quarter will be down. That’s because we expect the film business to be down $100 million, even including “Avatar” DVD releases (reason: We had very good quarter last year). Also, Fox Broadcast will be down. So we’re only bumping up guidance a bit.
Exceptional results, “pretty much across the board.”
We’re psyched for five reasons:
1. Content. Really important, and we’re really good at it. Shout-outs for “Avatar,” Fox News Channel, newspapers, TV shows. “Fortune favors the bold,” etc. “We have the no. 1 national newspaper on all three continents.”
2. Technology: We’re good at that, too. The Apple iPad, “which I believe will lead a revolution in content consumption.” First month, 64,000 active users for The Wall Street Journal iPad app. “Unlike the Kindle, we keep 100 percent of the subscriber revenue from the iPad.” Innovative subscription model coming to deliver content to people whenever they want it (paging Jon Miller, James Murdoch).
[Apologies, lost the thread here. But Rupert is gung-ho about TV and other core businesses]
Is there concern that you can’t keep growth in the next fiscal year? Can you?
Murdoch: Absolutely! Hedges on numbers. “We have a great slate of films coming up, but we don’t have an ‘Avatar’ in there.” If ad growth keeps up, “I think we can be very confident.”
COO Chase Carey: I agree! The ad market is actually picking up. Sports has been a little slower than other ad markets, and they’re now picking up. “Looks great.”
Question for Devoe: Please talk more about that big cash pile.
Murdoch: I can answer that! “We’re well aware that our balance sheet…is inefficient at the moment.” Increased dividends, stock buy backs, investing in our businesses, possibility of “opportunistic investments,” which we’ve been “nervous” about doing in past year but now we have some things we’re looking at. Cue M&A klaxons!
More color on the TV biz, please.
Carey: Strong recovery in most categories. Not just auto and telecom. Financial, insurance, all sorts of stuff. “It’s pretty broad.”
Murdoch: “We’re seeing pretty optimistic and expanded advertising budgets from the big advertisers.” Not sure when that money is coming, but would guess Q2, when they’re launching new cars. “There’s a lot of money out there on the boards.” And as free over-the-air audiences shrink–and ours is shrinking less–that money is finding its way to cable. So any show that can show any sort of advertising can attract money. “It feels good; that’s all I’m saying.”
Please talk about new retrans/carriage negotiations.
Carey: Fox News deals starting to come up. Will be staggered over a couple of years. “I think the Fox News network…is certainly–maybe with ESPN–second to none.” So pay up, cable guys! (And customers!)
Carey mounts a long defense of Sky Italia. I’ll refrain from transcribing.
Similarly, you’re probably not interested to read what he has to say about satellite TV in Europe.
Netflix is killing it. What does that mean for you guys? Good news because it says good thing about your library? Or maybe an opportunity for you to do more with your library?
Carey: Noncommittal answer. But: “There is a question whether the Netflix model is getting us fair value for our product.” So we’ll keep looking at windowing content and whether we’re getting paid enough for our stuff. “I think it’s a focus.”
Please talk about Fox Audience Network plans and MySpace/Google plans.
Carey: Google plan doesn’t affect FAN. Not going to comment on “rumors.” “I don’t think that’s productive.” But! The key is to build enough traffic to attract enough dollars. FAN has a done a good job.
Let me try to re-ask the same question regarding restructuring or spinoff of FAN.
Murdoch: Praises MySpace. In the past few years “we made some big mistakes,” but we have fine new management now. “Early indications, and they’re only indications, are that we’re getting new visitors, and they’re staying longer,” so ad dollars will follow.
[Sorry missed this question, but I believe it is about guidance.] Murdoch is not talking up the film slate, but indicates that he’s spending a bunch of money on movies, and the company will take hits on those initially before they see dollars come back.
Carey: The film business fluctuates from quarter to quarter. But our team is great, and we have great movies coming. “We couldn’t be more excited and positive about the film business.”
Murdoch: Our movie investors praise us.
Any film properties you’re interested in?
Murdoch: “We’d look if something real came onto the market,” but we don’t put MGM in that category, at least not at the price it’s asking. We prefer to invest in our own stuff, and that goes for TV shows as well. “Glee” is a big hit and we own it. Same goes for “Modern Family.”
More info on digital, please. What about MySpace profitability? What happens when Google deal ends w/MySpace?
Carey: “Clearly, MySpace is a work in progress.” [This is a familiar refrain.] But promising signs. Talking up “Glee” tryouts. Improved the platform, etc. By the end of 2010, we want a foundation installed that we can go forward with, and we want to have a cash positive business going into 2011. “The trends are better but they’re not what they need to be….A number of the key metrics are not going up, but they’re better than what they were.”
Are you getting retrans fees for Fox broadcast now?
Why isn’t TV station top-line growth showing up on overall segment results?
Has to do with way we present results. [Confusing and confused discussion about bookkeeping ensues.]
Press Q&A! (Usually much more entertaining)
Question about Australian news story about…mining?
Murdoch: “Nothing to do with media.”
Same guy has a question about Australian football (?). Rupert professes shock about whatever the scandal was.
Eighty-one advertisers bailed on Glenn Beck. Now it seems as if the only ads are in-house and for gold. When will you stop subsidizing the show and require it to carry its own weight?
Rupert says the 81 number is wrong and that Glenn Beck show doing great.
More color on that subscription model, please.
Rupert: Press conference coming in three-to-four weeks.
But: We’re getting about $4 a week for The Wall Street Journal… [voice trails off].
So this would be about entertainment as well?
Oh, you bet. Everyone’s been talking about negotiating with Apple.
[Both Rupert and FT's Ken Li seem confused. Me too.]
How much did you invest in Wall Street Journal New York edition?
Rupert. “Happy to tell you. We invested nothing.” Maybe $1 million in it. But ti already covers its costs. The notion that we’re spending $30 million on it is “BS.”
[Sorry, missed next two questions.]
Soon to-be Murdoch employee Claire Atkinson has questions about TV ads and online video ads.
Murdoch: WSJ.com is up 11 percent. $100 million in digital revenue at Dow Jones. At Fox news.com, “absolutely thriving.” [If he answered TV question, I didn't hear it, but I think he passed on that one.]
That’s all, folks.