News Corp. sculpting bold plan for growth

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"Change or die" is the war cry of News Corp. chairman and CEO Rupert Murdoch and company president Peter Chernin.

News Corp. in the past 12 months has been forging media's future by riding newly acquired social networking leader MySpace.com and video gamer IGN to meteoric heights while also enjoying record performance levels at its core broadcast and cable television, film, and print operations, even as they struggle to reinvent their business models.

"Our goal is to grow new business faster than the old ones decline," Chernin said during an interview on the 20th Century Fox studio lot. "While we have an obligation to maximize our established businesses, I think the key to doing these things properly is [by] not protecting established businesses."

With a current equity value of about $80 billion (one-quarter of which is investments), News Corp. expects as much of its growth to come from new and existing media endeavors as from its strategic financial interests in eastern Europe, Asia, and other parts of the world, where commercial Internet, satellite, cable, and even over-the-air TV are just taking off. To that end, News Corp.'s new 2007 fiscal-year budget calls for bold plans to advance its digital broadband and international objectives at every level including the continued new-media extension of all of its traditional broadcast, cable, film, and print businesses.

Even the unpredictable twists and turns of a youthful online free-for-all like MySpace do not faze Murdoch, who considers it a unique springboard into what he calls "media's golden age."

"The Internet is about giving lots of people lots of choices, and everything we've ever done is about giving people choices," he said.

News Corp.'s other bold ventures include the mobile entertainment shopping mall Mobizzo, nascent broadcast network MyNetworkTV, and video-on-demand access to theatrical features within 60 days of a film's release.

Mobizzo, a paid download online service for Fox-branded ringtones, games, and grafix, will become a "significant business" over the next several years in the same vein as the TV-to-DVD explosion, Chernin said.

"The television DVD business, which didn't exist three or four years ago, is generating hundreds of millions of dollars in new revenues," Chernin said. "Mobizzo, which has about $1 million in revenues, didn't even exist a year ago."

MyNetworkTV, which launches September 5 with a lineup of English-language telenovelas and station affiliates covering more than 85 percent of US TV households, could generate $50 million in operating income with just a 1.8 rating, according to UBS analyst Aryeh Bourkoff.

One of News Corp.'s biggest challenges is finding ways to leverage the power of its TV stations and its revitalized Fox broadcast network in a digital world that demands interactivity.

Ideas range from offering viewers a choice of advertising to view during breaks, to using fast-forward and rewind respites for pop-up advertising, and eventually rating the commercials instead of the programs in which they appear.

Some Fox programming will be made available exclusively to Fox stations to download off their local Web sites and share more directly in advertising-related revenue and consumer fees.

These days, all roads at News Corp. lead to and through the Internet and interactive platforms and devices where investments go farther, and traditional marketing and distribution can cost next to nothing.

MySpace has morphed into a nearly 100-million-member phenomenon without the benefit of any marketing since News Corp. paid $580 million for it and other Web sites owned by Intermix Media last year. Since then, MySpace revenue and member numbers have quadrupled, it has turned a modest profit, it has exceeded Yahoo! with the greatest market share of Web visits, and its value has skyrocketed to about $3 billion.

The company expects to generate $350 million in interactive media revenue in calendar-year 2006, more than half of it coming from MySpace advertising and fees. Analysts estimate the figure will swell to $1 billion by decade's end.