News Corporation's Digital Dilemma

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Case Details:

Case Code : BSTR210
Case Length : 14 Pages
Pages Period : 1999-2006
Organization : News Corporation Limited
Pub Date : 2006
Teaching Note :Not Available
Countries : Australia, US
Themes : Business Environment
Industry : Media, Entertainment, and Gaming

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"I don't think there's any doubt that the Internet is going to improve out of sight when we get better telephone services. It is going to be used more for information and entertainment. It is going to affect newspapers; it is going to affect television." ¹

- Rupert Murdoch, CEO of News Corporation in 2005.

"If there's a strategy there, I don't see it yet."²

- Richard Greenfield, Analyst, Fulcrum Global Partners LLC,³ on News Corporation's Internet-related Acquisitions.

Introduction

On July 15, 2005, News Corporation (News Corp), one of the world's largest media conglomerates, started a new business division called Fox Interactive Media (FIM). FIM was started in order to offer a richer online experience to all its users in the field of entertainment, news and sports by consolidating its US websites - Fox.com, Foxsports.com and Foxnews.com.

FIM would also coordinate the web properties of News Corp's television business. FIM aimed to create a unique broadband experience for its users by giving them access to News Corp's vast archives as well as its video assets and content related to the latest news, entertainment and information.

Rupert Murdoch (Murdoch), the Chairman and CEO of News Corp, said that FIM was established in order to capitalize on the rising broadband and Internet usage. News Corp was facing tremendous competition from broadcasters such as CBS, who had been revamping their websites with a focus on videos and blogs.⁴ The steps taken by News Corp were clearly aimed at strengthening its Internet presence which, Murdoch felt, had started to pull audience, especially young people, away from the traditional media like the newspapers and even satellite television. News Corporation had missed the earlier 'Internet revolution'⁵ that had started in the mid-1990s. Just shortly after Murdoch ventured into the Internet arena in late 1999, the dot com bubble⁶ burst and he lost a huge amount of money.

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1] Dominic Timms, "Murdoch Summons Top Brass for Web Brainstorm," www.media.guardian.co.uk, February 16, 2005.

2] "Murdoch's Web Gambit," www.businessweekonline.com, October 10, 2005.

3] Founded in 2001, New York-based Fulcrum Global Partners is an investment research company. It provides research analysis to institutional investors, portfolio managers and hedge funds.

4] Blogs are personal websites created by people to post news, opinions and experiences. Some blogs allow other users to contribute content.

5] Though the use of Internet dates back to early 1970s, the rapid rise in popularity of the Internet (called the Internet Revolution), according to analysts had started during the 1994-95, driven by websites such as Yahoo!, eBay and Amazon.com.

6] The growth of Internet fueled the growth of dot com companies -firms that provided products and services related to or by using the Internet. They grew rapidly in number between 1995 and 2000 as many individuals started their own companies. Most of these companies offered similar products and services. The uncontrolled proliferation of such companies ended with the bubble bursting in March 2000 leading to the closure of many of these companies.