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Murdoch's New Groove A conversation with the News Corp. chairman, who's emerged as a leader in digital media after some smart bets. Bryan Charlton / AP Murdoch in Adelaide, Australia, addressing News Corp. shareholders Newsweek Feb. 13, 2006 issue - Keith Rupert Murdoch may be 74 years old, but the way he sees it, he's got a young man's fingertips for what's cool. Last year the News Corp. chairman acquired MySpace.com, the wildly popular social- networking site, for $580 million. He then spent almost $1 billion to snap up two more Internet businesses for college sports and videogaming. Those sites, plus others in his media empire, now give him bragging rights as the Internet's fourth biggest purveyor of online media and networking sites in terms of page views, and sixth in unique users. And by the end of the month, he tells NEWSWEEK, he'll announce a $1 billion plan for adding broadband to DirecTV, the satellite-TV service he controls. All this, he says, will add up to "a conservative $1 billion" in his Internet revenues by 2010, not counting any more acquisitions. For months, Murdoch has been barnstorming the United States and other countries, proselytizing about Net opportunities. He slowed down enough to share his thoughts with NEWSWEEK's Johnnie L. Roberts on subjects ranging from why he thinks Sumner Redstone is wrong to Google's controversies with the U.S. and Chinese governments. He even offers his views on dissident investor Carl Icahn's plans, expected to be unveiled this week, to break up Time Warner. ROBERTS: The age of video downloads seems to have arrived with surprising abruptness. Were you and fellow media moguls caught flat-footed? MURDOCH: Most newspaper companies still have their heads in the sand, but other media companies are aggressive. And there are completely new start-up companies. There is a great pace of development, which is very exciting. At News Corp., we have been developing online extensions of traditional media for the last few years. What's happened now? We're seeing the spread of broadband. In the whole world today, only 190 million homes can receive broadband. That's going to go up in the next 10 to 20 years to at least 3 billion homes. We're just now at the very beginning of the shift to digital media. Millions of videos, some from GE's NBC and Disney's ABC, are being downloaded onto iPods. Why aren't your Fox shows on it? We're not knocked out by iPod so far. We've talked to them, to Google and others. But how many people really want to get video on a tiny screen when they already have TiVo or a similar service from their cable company or DirecTV? How many will want to pay $1.99 on Monday morning if they missed "Desperate Housewives" the night before? What's been announced so far with iPod and Disney and NBC is very small-time at the moment. So you're missing out on downloads? There are so many things you can do, particularly in other parts of the world, where mobile-telephone service is a lot more developed. We're downloading minute segments—original "mobisodes"—of the Fox hit "24." Soon we'll be downloading the funniest joke of the week in "Family Guy." People will be sitting in bars and holding up their phones and laughing. It'll be a pretty serious piece of revenue for us someday, probably. We'll be into all these things, some quite original and some of what others are doing. Are you happy so far with what's happening at MySpace.com? Last summer someone said this is an interesting site. We studied it and then went into negotiations. We had no idea that between then and now the thing would have doubled in size. We now have 50 million registered users. We are very happy with it. Tell me your plans for it. We are expanding so fast just to keep up with new registrations. With 50 million people there, the traffic could cause a physical breakdown. So we're not providing as many new services at the moment, but we will. MySpace will be a much richer site in six months. We expect to come in with video. People will put video up—videos of people hot-dogging in the snow, or whatever, as well as videos of themselves corresponding with each other. Damian Dovarganes / AP Their Space: Tom Anderson, left, and Chris DeWolfe Even as we speak, police are investigating claims that sexual predators have trolled MySpace for young victims. What are you doing about this? We're being very proactive. We plan to reach out further to school principals, church groups and community organizations to educate them on the safety measures we've developed. For example, no one under 14 is allowed to register on the site, and there are strict limits on who can access profiles of users under 16. We've also got a third of our work force monitoring the site to prevent inappropriate material from being posted. Can we find any postings from you on MySpace? There are about 60 Rupert Murdochs up there. People post me there. Some aren't polite. They feel they own MySpace and that the big corporation was going to come in and change it. Well, we haven't. You've been trying for a while to get cable distribution to launch a rival to CNBC. Any progress? We're in pretty intense discussions with the biggest cable companies, and making quite considerable progress. You can expect something fairly soon. Will it be on by the year-end? Yes. Google is being criticized for agreeing to censor itself in China. At home, it's fighting a federal subpoena for records on customer searches. What's your reaction? All forms of government ultimately are not going to succeed in trying to control or censor the Internet. In China you can bar a certain word. But Google will still enable billions of people to get a great deal more knowledge and education, though it may not be political information. Still, all of that has to be good. China made a deliberate decision to let in the Internet. They felt it was necessary in joining the modern world. They are going to have to live with the consequences. Google also has raised concerns about violating copyrights of TV shows and books. Your HarperCollins is a major publisher. Any concerns as a media owner? HarperCollins and others will ensure that it doesn't infringe on copyrights. But I admire Google enormously. It's a great competitive force. The great thing about Google is the 56 [million] or 57 million ads that are coming from people who never advertised before—the local pizza store or shoemaker. There's been a huge democratization of both distribution and retailing. Speaking of search and ads, are you moving into that business? In those aspects of search where we already have elements ... where we can target different audiences for advertising. But no way will we do a frontal assault on Google and Yahoo. Sounds like you'll license search technology and push MySpace into the business? Yes, as soon as possible. We are going to go after every type of advertiser—from local mom-and-pops to the greatest brand companies in America with MySpace. To increase the stock price, Viacom's boss, Sumner Redstone, split up the company. Now dissident investor Carl Icahn is trying to force the breakup of Time Warner. Look at Viacom shareholders. They made little or nothing. As of yesterday, the stock was back to where it was before the split-up. Look at Time Warner. They are very well run. If you split them apart, there's no more than $1 or $2 in it for shareholders. And that's without thinking about [capital gains] taxation. I don't know what Icahn thinks he's doing. Icahn has gone out on a limb. Even if he succeeds in getting it broken up—and that would be very sad—I don't think he'd make money out of it. But in the long term, is big or small better for the shift to digital? Size and synergies between the different segments of the company matter. As far as we are concerned, the Internet is broadening our opportunity, as well as for other big media companies with huge resources in sports, entertainment and news. There's just more opportunity. We are going to be seeing more [profits] in newspapers coming out of electronic delivery. The film industry may find that the [release] windows and the way it distributes films change. It's going to force a lot of change in the business models. But the absolute demand for content won't change. We believe that puts us on the eve of a new era of opportunity. © 2006 Newsweek, Inc.
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