Murdoch Fights Advertising Spiral

The Australian reporter Lara Sinclair says that the Rupert Murdoch owned News Corporation is set to beat the expected lack of advertising in print and television through the expansion of pay-TV in its European division – having bought 25 per cent the German Pay-TV company Premiere.

http://www.theaustralian.news.com.au/story/0,25197,23897228-30540,00.html

Mr Murdoch says that their involvement in the business will ‘more than compensate’ for loss in advertising in other areas. He has also hinted that revenue from this area will help fund other purchases.

Mr Murdoch is clearly expecting the loss in advertising revenue: ‘Our cable programming businesses are going to be a great profit driver for us in the coming years (if) advertising on TV stations and in newspapers has a hard time.' 'They will more than compensate.’

Mr Murdoch predicted a recession for at least two years, but expects the US to bounce back fastest, due to its ‘ability to innovate’.

He said the stress on advertising due to anticipated inflation would mean a ‘difficult couple of years’, and that ‘We’re all going to feel it in our business.’

However, he also indicated that many could take advantage of the situation and ‘increase our market share.’

Mr Murdoch is also owner of MySpace, and was at its relaunch in Cannes recently News Corp president and chief operating officer Peter Chernin said the changes would help usability: ‘It's much more about the user experience than it is about driving revenues.’

Neither Mr Chernin or Mr Murdoch are concerned about the programs rivalry with Facebook, Mr Murdoch calling it a ‘flavour of the month’ with MySpace doing well in the US in terms of advertising.

This is more confirmation that advertising is set for tough times. With Australia already set back in terms of expanding into such areas as internet TV, this could be a concern, particularly for those looking to start up companies any time in the future. While media moguls like Mr Murdoch may have other areas to expand to cover his losses, many Australian media companies, and certainly the smaller independent ones, may not. However, sharing his market knowledge could be helpful on that front, for those that have enough money to buy shares in a recession.

Further Mr Murdoch’s reports on MySpace and its need to please users instead of just extending the profit margin is in direct line with what Ross Dawson has said is what internet consumers can expect from the 2.0 version (see blog entry The Web we Weave: Australia’s 2.0) and is good news for anyone online. Hopefully our advertisers will keep this in mind in the construction of future internet campaigns to improve their chances of success in competing with the American industry.