James Murdoch/Chairman & Chief Executive, Europe & Asia, News Corp
talks with Aryeh Bourkoff/Vice Charimain, Global Head of TMT, UBS
James: It is a time of incredible pace in the media business. The competitive set is so much broader and so much more global. On the ground you compete in a town. For NewsCorp – they are an international business. About 1/2 of the revenue is outside of the US. It’s about discipline. There is a lot of passion about newness – and it’s about stepping back and figure out what works. Take meaningful risks and figure out what works. When you are in a global business – there are only so many balls you can have in the air at one time. Keep things reasonably limited – you won’t fail at NewsCorp if you take a risk and it goes wrong. You will fail if you don’t do anything.
Aryeh: It was early 2004 when James was named CEO BSkyB. James changed strategy and went for 10 million subs – stock when down 24% in one day. Take us through how you thought through that.
James: We hit that goal a while a ago. There is a reason why being contrary is a better idea. Sky is still a young industry. Once you start to stand still in an organization it gets hard to innovate. When you take a big risk like that the community divides. It makes it easy to separate the wheat from the chaff even internally. It’s extraordinary that a team of people can bend an organization to a goal. Is the culture about growing and innovating or is it about protecting the status-quo. Digital TV is brand new, and the business models are delivering more choice at lower costs to consumers.
Aryeh: You’ve been called NewsCorps first New Media Executive. How are you thinking about the next 5 – 10 years down the road.
James: We look at the competitive set. It’s more global and much larger. Looking at Google and Apple – and Apple is 10x the size of NewsCorp. There is risk there. BT announced results yesterday and they are a competitor too. In order to compete you have to invest more in content and technology at a faster degree then we have ever done before. It’s not about the old competitive game. The whole framework in how we think about industrial policy in Europe has to change.
Aryeh: How are you thinking about monetizing content around the world?
James: First rule is that if you are going to monetize something, your should probably not give it away for free. In the digital business – we are happier to have fewer paying customers. We would like to have more – but we have to work hard to convince them and prove value. The advertising business assumes that 100% reach is needed, but that might not be the case. In Europe and Asia – 70% of revenue is subscriber base. We have 20% market share in advertising in India. One of the problems in the online business is that the key metrics are not creating value for them. I was surprised that people got worked up over Unique User numbers as compared to competition. Wrong metric. You can’t start to develop a retail model until you have a price. Digital TV will look like cable channels. We are investing in retransmission consent in America. You will see a shift in margins – there is a transfer of value going on.
Aryeh: Isn’t it more challenging to create that margin online?
James: If you look at The Times in the UK. It’s similar to a monthly subscription. You are happy to pay for a service that will put the product in front of the consumer in an iPad app in the UK. The problem with the apps is that they are MUCH MUCH more cannibalizing the print publication.
Aryeh: Vertical integrations is coming back. India is a fast growing market.
James: There are lots of good arguments from a customer POV for vertical integration. A set of products to sell is a much better angle than being one dimensional. We don’t pursue vertical integration exclusively, but in priority markets it makes sense. India is a good example.
Social Media, MySpace, Cord Cutting and The German Market – 3 questions from the Audience
James: MySpace & Social Media – is in a hugely competitive space. All of the businesses should interact with social platforms all the time and they are. Social networking has been an incredible change in how the web works and it’s profound. The world is a lot more nuanced and the interplay between the content and the social networks than we normally think of.
For Cord Cutting – 12-18 months ago you had the beginning and end of the digital switch over in the US when we turned analog off. When you look at new competition for video distribution, there are questions of price, bundling packages, and customer service, etc. – the big issue is that the basic packages are broken down in a different way in Europe than the US. People will continue to pay for great programming. There is a great deal of investment going into production. The big question is will a-la-carte pricing grow? Places like Japan that have worked this way the platforms haven’t grown and it can get very costly to the consumer. But the competitive landscape will work that out. It doesn’t matter if the cord itself is cut – watching on the tablet or PC – the business model will be about subscriptions and bundles.
The German Market – there is a strong PSB – the public services in German are the best funded in the world. There is less choice in Germany than there can be. Sky is picking up – we have 12 early channels there, we have PVR (SkyPlus). If we can be successful and get in there – we can be successful.
My (Shenan’s) 2 cents – James Murdoch is an impressive speaker and this was one of the best panels I’ve watched.