From MySpace to the Daily: The real tragedy in News Corp.'s digital experiments
Give News Corp. credit for one thing: The company may have stumbled with the Daily, but it knows how to get people talking about how digital news should work.
The Daily died two deaths this week. First, it was shuttered by News Corp. Then it was autopsied to death. Everyone had their reasons for what went wrong. It was doomed from the start. Tablet-only publications don't work. The content was uninspiring. Paywalls only work after large readerships are won. Etc.
When all the conversational dust settles, two important lessons will be clearer. The first is one that was ignored in much of the grave dancing: News Corp. is accelerating its split into two companies, a publishing entity called News Corp. and an entertainment entity called Fox Group. (Can someone please explain why Fox News is being folded in the entertainment unit? On second thought, nevermind.)
Investors have been clamoring for the split, because print publications have been weighing down profit margins of the TV and entertainment business. The imbalance between ad dollars spent on print versus time spent means this won't change any time soon. And News Corp. doesn't want to spin off its already ailing news business with a money-losing tablet experiment burning up cash. News Corp. might have kept The Daily going if it weren't for the split.
The second key lesson from the death of the Daily was summed up nicely by Alexis Madrigal: “We do not control the distribution of our work. Period. It's horrible and bizarre and it is also the way that the media world works now. You can't push; the content has to pull.” This is an elegant way of saying nobody has still figured out yet how to monetize digital news in the long term.
And that gets to why News Corp. in general – well beyond what happened the Daily -- is such an interesting case study in the age of digital news.
News Corp. is the quintessential media giant. The company made $33 billion in revenue last year, with a quarter of that amount coming from its publishing businesses and 45 percent coming from its cable and movie divisions. News Corp. has made high-profile pushes into the Web. Its macro thesis has frequently been right although the results were poor. The company bought MySpace for $580 million in 2005 and sold it last year for $35 million. And now there's The Daily, which reportedly ran losses at the rate of $30 million a year.
But despite some valiant online efforts, this is still a company with a very traditional media model. All of News Corp.'s major divisions have a digital component to them. 20th Century Fox films appear on Hulu, which News Corp. owns about 30 percent of. Fox Sports and Fox News sell ads on their websites. And the Dow Jones sites have a significant online presence. But all of these are old media models that News Corp. has tailored to the Web with at best mixed results.
Take Fox Sports. Reporters like Ken Rosenthal are skilled at using Twitter to post breaking news and scoops, but that hasn't translated into the rest of the organization. According to eBizMBA, FoxSports.com lags five other sports websites, including leader ESPN. Fox Sports Mobile is ranked as the 21st top-selling app in the iPhone app store. ESPN has six different apps in the top 20.
It's a similar story in Web news. Wsj.com has 1.3 million paid subscribers -- evidence that paywalls can work for a select few sites with an installed and loyal customer base -- and 34 million visitors a month. AllThingsD is an influential tech news site. But other sites aren't doing as well. Marketwatch.com looks to be experiencing a decline in readership. And Fox News' cable leadership has yet to translate to the Web.
In all the areas where News Corp. isn't thriving on the Web, the company seems to have taken an old-fashioned approach: Just port the stories from other channels onto a basic website, then publish links on Twitter and Facebook. It's not that this leads to failure. It's more that this doesn't lead to the future. Again, nobody has cracked the secret of digital content yet. And the most powerful media company in the world is, for the most part, not really trying.
I say "for the most part" because both MySpace and The Daily were interesting experiments. They might even qualify as noble failures except that News Corp. never allowed them the freedom they would have had, had they been independent startups. Instead of letting them stumble their way into a business model that resonated with a new audience, News Corp. had its own ideas of how the audience should use MySpace and the Daily.
In the case of MySpace, the social network was beginning to emerge as a community of bands and their friends. Under News Corp., it became undefined, a sprawling mess. Only now is MySpace limping back to that original business model, although it may be too late now. Similarly, a free Daily could have not only build up a larger audience at the start but also collected invaluable data on how people were actually using the publication on tablets.
Rupert Murdoch may have imagined he was giving both initiatives a lot of leeway, but in fact both suffocated inside the climate-controlled environment of a traditional media company. It's no accident that Hulu, the online-video site that News Corp. was instrumental in founding, has fared relatively better. But Hulu's popularity has increased only after CEO Jason Kilar, who turned Hulu from an expensive joke into a viable business, was granted a degree of independence.
Many of The Daily's obits mentioned that the company had been losing $30 million a year. That's a lot for a startup, but less than a tenth of a percent of News Corp.'s revenue. The real tragedy with News Corp.'s digital experiments is not that it's been wasting money. It's that it hasn't yet learned to give them the freedom they need to figure out new business models in an inchoate industry. And now that the company is being split up, it's a lot less likely to bankroll new experiments in the future.