At the McGraw-Hill Cos. Media Summit in February, BusinessWeek editor Steve Adler asked Rupert Murdoch specifically about News Corp.'s interest in Dow Jones, for which Murdoch is now offering $5 billion. A transcript of the entire conversation is posted below.
Adler: You have expressed in the past interest in purchasing Dow Jones. You did a very intriguing interview with Holman Jenkins on the off (Inaudible) page of the Journal some time ago where you talked about how valuable it could be, and you seemed to talk about the need to spend for quality. If it were for sale, are you still interested in Dow Jones, even the way newspapers are going?
Murdoch: Well, I must say I'm cooling on it, I worried about it. But I do think that I would do something different to what they have done. They said, "Look, if you want normal Wall Street Journal stories, and as they happen, you can just go to the Web and you get it as they happen during the day." That's all right (Inaudible) time, but then taking it out of The Journal, and having a lot longer analytical stories somehow has taken all the urgency out of it, and excitement of reading it. I find more and more…I look at it and say, "Yes, I should read that", and I put it aside to take home that night to read, and too often don't get back to it. I think The Journal's opportunity has got a wonderful brand, and is to really go after(?) The New York Times nationally, with much more world, you know, significant world and national news. This is me theorizing about it. I don't think we'll ever get it, I don't think they'll ever sell it, and there would be a lot of constraints on doing so, too. I mean, this is a very unpopular thing to do with shareholders.
Media Summit New York 2007
Sponsored by The McGraw-Hill Companies
Rupert Murdoch with BW Editor Steve Adler
Feb. 8, 2007
SA: Well, it's really great to have you here.
RM: Thank you very much, Steve. Nice to be here.
SA: I'd like to sort of move in our conversation a little bit from old media to new media, and start with newspapers, if we might. I think you're the largest newspaper publisher in the world, and yet clearly this is a slow growth business, but it's now been in the news that you're part of the Chandler bid for the Tribune Company, and can you talk to us about how you see the future of newspapers, and why you want to be part of a Tribune Company bid?
RM: Yes. I think they're very vulnerable. We're worried, and working very hard with all our newspapers. And we have to learn to look at them quite differently, I think as you were doing with your magazine. You know, we have a great trademark, a great service with each newspaper, we hope, and we've just got to be neutral about what platform we sell them on, or deliver them on. As for the Tribune name, I don't really believe it's going to happen, I don't think it's going to happen. We were willing to go along, and I wanted to go along for a little bit of it. If out of that we can pull a joint operating agreement for Long Island Newsday and The New York Post, which would give us real supremacy here, we'd have way (Inaudible) circulation in the New York area, and we thought, you know, whatever happens over the next 5 or 10 years, that would be a very good operation to have. And so we don't want the whole thing.
People have asked me, you know, "Would I go in and do the whole thing, or take half of it," and it scares me. The point about newspapers as they stand at the moment is that young readership is going down. The old family lifestyle of having breakfast over the newspaper, and fighting over it is gone. That's partly women being in the workforce, kids being in a hurry, and getting other sources of easy news. I regret it because a whole newspaper, and to read it sort of, go through it gives you an opportunity to learn a lot of things that you didn't know about, and if you were to say "My Yahoo! was (Inaudible)" you'd miss an awful lot of information, which could be useful to you.
SA: So as a business matter, are you thinking about selling off some newspapers because of the slow growth?
RM: No. You know, we're said to have a lot of newspapers. The truth of the matter is we don't. A vast number of those papers are small and medium-size suburban weeklies in Australia. We have the major circulation paper, at least, in every state capitol, about five pages(?) in Australia, and we have The Post here, and we have The Times and The Sun in London, which are very major papers and major businesses.
SA: Just to be very local for a second, is The Post ever going to be a really viable business in New York?
RM: Well, if we could pull up this Newsday deal, it would be in five minutes. I would think so. We're the only paper that's put on circulation, and particularly when ABC gets more active our competitors I think will be (Inaudible)…the leading paper here, and we'll get more retail advertising. The problem is other things are happening, too, in the market place, the discounters have put the old department stores out of business so you don't get these multipage advertisements every day from four or five stores. The economics are getting more difficult for newspapers all the time. Their putting the price up simply, you know, hurts the circulation.
SA: The strategy of a lot of newspaper companies seems to be around cost-cutting right now. The Wall Street Journal just shrunk the paper to save something like $18 million, The New York Times is about to shrink its paper. Is cost cutting the right approach for people in the newspaper industry?
RM: No, I don't think so. I mean, it's okay there's some business cost cuts, like to shrink the size of the page in The Wall Street Journal makes it, to me, more readable. I like that. That's fine. I don't believe how big of an economy it is. They've had to make it up to the journalists, or to keep the coverage up. They've dropped a huge amount of their stock pages which is the quite thing to do. People today who are following the stock market follow it minute by minute, or hour by hour. They don't need to wait until tomorrow morning to find out how their stocks are doing. The New York Times dropped their stock pages I think without warning one day, and I didn't hear any complaints. It's a change. They put a little ad on page one, they did some distribution, whatever they can. I think they can get economies there if they can keep up their revenues, they can get economies, which still probably wouldn't justify the current share price. I mean, they're worth having, $40-$50 million a year.
SA: You have expressed in the past interest in purchasing Dow Jones. You did a very intriguing interview with Holman Jenkins on the off (Inaudible) page of The Journal some time ago where you talked about how valuable it could be, and you seemed to talk about the need to spend for quality. If it were for sale, are you still interested in Dow Jones, even the way newspapers are going?
RM: Well, I must say I'm cooling on it, I worried about it. But I do think that I would do something different to what they have done. They said, "Look, if you want normal Wall Street Journal stories, and as they happen, you can just go to the Web and you get it as they happen during the day." That's all right (Inaudible) time, but then taking it out of The Journal, and having a lot longer analytical stories somehow has taken all the urgency out of it, and excitement of reading it. I find more and more…I look at it and say, "Yes, I should read that," and I put it aside to take home that night to read, and too often don't get back to it. I think The Journal's opportunity has got a wonderful brand, and is to really go after(?) The New York Times nationally, with much more world, you know, significant world and national news. This is me theorizing about it. I don't think we'll ever get it, I don't think they'll ever sell it, and there would be a lot of constraints on doing so, too. I mean, this is a very unpopular thing to do with shareholders.
SA: Yeah. (Laughs) Let's turn from newspapers to an already somewhat oldish media satellite TV. You just got out of the satellite TV business in this country. You have serious interest in it elsewhere. Can you talk about how you see satellite TV competing against cable and the phone companies coming in? Is it viable in the U.S., is it a good business, and how do you see it U.S. vs. abroad?
RM: Well, on the short-term, direct is improving its service, it's wonderful. In another less than 12 months, by the end of this year it will have everything but the standard(?) definition, any high definition. And it's got to trade up in the quality of their view. I think they'll do very, very well. And then we're going to see their costs come down, the boxes they give away and put into the home. The new HD box with a DVR attached now costs about $500. That will be less than $300 to them within a year. And when they put that in, their churn drops by about 50%. So a lot of little things to say, they're going to have two, three good years. The problem is broadband. They cannot deliver broadband, and, you know, there may be some great technological breakthrough. I don't think it's YMX(?), I don't think it's got the power to really compete with the cable, or with the telephone companies. At the moment we've just seen Verizon starting up very expensively, but really only going after the sort of low-hanging fruit, and not much effect. But I think the appeal of the triple play, which may become the quad play with mobile phones is going to be very, very hard to compete with. Now, that doesn't apply to us in (Inaudible) where the European commissioners makes a pretty permanent ruling. The last (Inaudible) into the home, the local phone company's got to carry you. So if we put a fiber, which we've got now, fiber networks throughout Britain, which we're extending out, that can take sort of the long tail, they can supply the Internet, everything you normally get today on broadband, but you'll still have a massive hundred of channels of high definition coming out of the sky, and we'll put the two together. We have telephony, of course. I think we're in a very, very strong position. But you already signed up more people than anybody else, other than British Telecom for broadband, and they only announced it a few months ago.
SA: Mm-hm. But in the U.S. you're glad you're out of it? You had some…
RM: We can't do that here is the problem.
SA: Yeah, right. So you don't have those capabilities, but I think you also were concerned when you got into about having to rely on cable companies as kind of the gatekeepers, or guardians for your content. Are you less concerned about that now, or is it just something that you're (Inaudible)?
RM: No, we think our content is pretty well established. We'll be pushing it go, you know, further established, (Inaudible) with it. But we have about as many channels as we need. I mean, we're opening smaller channels, sports channels such as one for the Big 10 colleges, all of which, you know, you can say it's niche, but it's pretty big niches that they fill. There is a lot to do still in television here, but those sort of things the cable companies pretty much have to have.
SA: Speaking of TV, I really wanted to see if I could press you a little bit on the Fox Business Channel. There's been so much speculation about that. It seems as if from the reporting we could do that it was somewhat controversial within your company. CNBC is so dominant, it's been a very cyclical business when the markets are up, everybody's excited about looking at market coverage, when they go down they're less excited. Why did you decide to go ahead with that, and how are you going to differentiate that from CNBC?
RM: We think there is a great opportunity there, I've always thought so. We all agreed, and wanted to do it, and then about (Inaudible) there's a bit of nerves in the company we held up, but we are going ahead, we will be on the air this year. We just go up the road desperately building out studies for it. So sometime in the fall we will go to air, and we will be announcing shortly. We're not going to announce too much detail on the programming because everything we do at CNBC immediately will copy. (Laughter) Not perhaps everything, because we want it to be a little bit more business friendly, I think, the CNBC has been, you know, they leap on every scandal, or what could be a scandal, and we won't ignore them, of course, if they're genuine stories, but it's just an atmosphere to it that's sort of a negative, I think. So we think there is a real opportunity there.
SA: And you've actually the launch next week, I think I read. Is that true? You're officially going to announce the launch of the channel next week or…? You just announced it, so…
RM: Within the next seven days.
SA: So it's public?
SA: Okay. (Laughter)
RM: There will be more detail coming.
SA: Okay, great. On another TV…
SA: Let's stick with TV a little bit. My Network TV was one of the disappointments in the earnings report that came out yesterday. Why isn't that doing better? You have this telenovela approach, it seems to not be getting good ratings. What's going wrong, and how can you make that work better?
RM: Well, I think our execution of it was not great, and, you know, was something quite new. The fact is we had eight stations, which were the lead stations, practically, everything called UPN. That closed, and were put into CW. And we cease to have NCW-owned affiliates in all those eight places. So we thought we had to come up with something rather than just old repeats. And we thought that this could work. Maybe they weren't good enough, or daring enough. Anyway, it hasn't worked. So we did something else, it's as simple as that. You know, in the overall picture, it has its (Inaudible) is having a very good rise in profits, we can afford to make, thank God, one or two mistakes, not too many.
SA: Okay. There was a feeling, I guess, that people were being asked to make a commitment every single night to these telenovelas (Inaudible).
RM: (Overlap) Yes, which have been very successful in countries in our industry, and are extremely successful here, I believe on the Spanish stations. But it was also too big a change. There are really programs appealing to women who watch these things normally, and the old UPN had been a very male, and probably minority, audience.
SA: So they weren't ready for that dramatic of switch?
SA: Uh-huh. Yeah. Okay, let's make a leap into the digital space. Your purchase of MySpace at the time shocked a lot of people, to spend $500 million on something that at the time people didn't even quite get what it was, and you had what seemed to be a fickle youth audience that had jumped from Friendster to MySpace, might jump to something else. Why at the time did you think that there was a real business there? What was your thought process in getting into that? Because you had been way ahead of people (Inaudible) stuff.
RM: You know, the timing was pretty clear two, two and a half years ago. It's suddenly became apparent to me that we were living in an absolute booming economy, and print advertising, and for that matter television advertising was not growing at the rate it normally would have in the past. I mean, you only had to look at where the money was going. There was a lot of money going into that. So we said, "It's time to move seriously." So we looked at dozens of things, and we came across this little company called Intermix which had, I don't know, half a dozen sites of varying success. Except standing out in that was MySpace, which had grown in months from nothing to 20 million of registered people, and was growing faster all the time. So we decided to take that.
We thought it would tie in also with Fox Sports, which has a very large, young audience, and it took off. And then actually it only earned 51% of that, but they had a firm option to buy the other 49% from the founders for $70 million, so we really paid $650 for it, and you can discard…we might be able to sell the other little sites for a total of $100 million. And it's grown faster than we've expected. We've had to almost put the brakes on it and say, "Look, we're physically just handling this traffic, and it causes…and we just need a lot more (Inaudible), a lot more service," putting up serving farms(?). It's not a vast amount of money, $50-, $60-, $70 million, which I think we'll have to repeat again very quickly, but we're now worth $150 million, that was two weeks ago, and was going(?) over $2 million a week.
SA: Kind of a good problem to have, right?
RM: Twenty percent of it, perhaps a little more an hour is coming from our new markets in Britain, and France, and Germany, and Italy, Australia. We're number one in Britain already, and it's extraordinary. And the advertising has gone from basically nothing to…well, on a net basis say $25 million a month, but growing every month. It's grown by almost 30% every quarter. And then next year we'll be kicking in with a research revenue from Google. So, you know, we think that MySpace, or together with IGN and without Fox Sports, you know, we'll be getting very close to a billion dollars of revenue.
SA: I mean, the rap against it initially was there's no business model, and then you did the Google deal, and people said, "Aha, okay, there's an advertising model," and now we think to the extent there's a rap, it's that the audience is maturing, you're already getting older people, and you have fewer younger people coming in, because there are very low barriers to entry, and it's a fickle audience, a lot of people are moving to Facebook. So are you worried about how quickly that audience moves from one thing to the next?
RM: No. We don't think they are. We think a lot of young people, or college kids, are undoubtedly going to Facebook, but they stay with us. I think what if people are on two site? You know, Facebook, if you're a college student, you pretty much need it. And it doesn't mean that they don't stay and enjoy all the things that you can get. And we had to be very, very competitive. For instance, when Google bought YouTube, and politely they refused to share it with us, we just went down there and said, "Listen, we've got to really work at our video site," and we go to our best engineer there and they worked night and day for a week, and now we've got…you know, we're very clearly the number two (Inaudible) and probably have 60% to 70% as many uploads as they do.
SA: Mm-hm. Do you think it was some sort of breach of faith for…
RM: Some people say we have more, but we don't believe that ourselves.
SA: Were you angry, do you think there was some sort of breach of faith for Google to, which was your partner, to go off and essentially become a significant competitor?
RM: Yeah, I think it's coming less and less. I might have overreacted. We thought, "Well, you know, we're just signed up, and it's a big deal, and we're the great social site," and suddenly they bought a big community site. Well