In conversation with WPP chief executive Mark Read at the Cannes Lions festival, Lachlan Murdoch offered his take on pressing media matters including the relationship between publishers and platforms, the crisis of disinformation, and where advertising growth will come from over the next few years.
The sale of 21st Century Fox to Disney earlier this year was interpreted many different ways. For some, it was the capper on a series of divestments that indicated the empire-builder Rupert Murdoch was now a seller rather than a buyer. For others, it was proof that media consolidation has reached the point that even relative giants cannot compete with the larger players in the media world.
At a session on the WPP Beach at the Cannes Lions Festival of Creativity, Lachlan Murdoch, the heir apparent to the diminished Murdoch media empire, argued instead that the divestments are in service of refocusing the business around the areas in which it sees revenue opportunities.
That’s the power of live
Murdoch argued that, over the past few years, the company has been divesting in areas that don’t align with its core focuses. He noted that of the roughly 50% of its revenue that comes from advertising, 70% of that spend is around its live programming in news and sports:
“Of the advertising revenue, the remarkable statistic is that 70% of that revenue is derived from live television, and the reason that we've structured a company for that is because… when we are talking absolutely instantaneous live news, sports, opinion is where these people aren't delaying; they're highly engaged. As media gets more fragmented, the value of live is only increasing.”
That is more true for news content than sports, as a necessary result of having to pass a proportion of revenue back to the partners – Murdoch named NFL, Major League Baseball, USPGA Golf and Fifa as examples – while news is wholly created, controlled and owned by the company itself, so the margins are much higher despite revenue for news being smaller than around sports content.
Read questioned whether that focus on live content would ultimately be replicated across the industry, to which Murdoch replied that despite the disruption of the traditional cable bundle, the value of live content has remained consistent.
“You have to think about streaming as both video-on-demand and live. You have services today that are growing very well, like Hulu Live and YouTube TV. And there are other smaller players, and they effectively offer a bundle of live channels, a core bundle, or skinny bundle some would call it, for a lower price than the traditional cable operators, and households will choose, and are choosing, the convenience of having a core bundle of live channels.”
The consequences of news disruption
Due to its sheer size and number of titles, News Corp is exposed to the ongoing long term trends around print ad decline and the difficulties of monetising news. Read noted that one of the company’s pre-eminent newspapers – The Sun – had previously tried a paywall strategy, a strategy that has categorically failed and forced the paper to look for other ways of monetising its digital readers like Sun Savers.
However, Murdoch argued that the same would be true for all tabloids, but that there are other ways to make money off those users than direct revenue.
“You have to look at what's free online, and what's driven tabloid newspapers has been – for all of history, or every since the invention of the printing press – sports, news headlines, some gossip and also some opinion, but so much of that is available free online," he said.
“Our model in the mass-market publications to a free model has worked incredibly well. Even things like TalkSport; these can all be driven through the print publications.”
Despite his ebullience, the difficulties of publishing a tabloid with content that is easily replicable online for free has been demonstrated by The Sun itself, which recently announced that huge swaths of its journalists would be made redundant following a tripling of its pre-tax losses. Before those cuts were announced, Sun editor Tony Gallagher said the industry should take more of a chance on school leavers as journalists, ostensibly in service of diversity but also probably because young journalists are less of a drain on the paper’s coffers.
In spite of that, Murdoch noted the company is still in the business of journalism. He noted that engagement with audiences is a result of the quality of journalism produced by a paper, and cited The Wall Street Journal being the most trusted newspaper in the US per the first Simmons News Media Trust index.
Read asked how the company - and its newspapers’ individual editors - balance the need to engender that trust with commercial needs, specifically invoking ‘advertorial’ and its associated concerns. Murdoch responded: “Talking more broadly, you have to be very careful. You have to look at what reinforces the brand and what's in your audience's benefit, right?
"If you try to cross-promote or push your audience or your readers into something they don't want, or that the relationship is only good for us the publisher and broadcaster, that ultimately won't work and it'll ultimately damage our own brand and our relationship with our audience. Where you can launch new services with actually an audience benefit, they work well together.”
Read asked Murdoch about the role of platforms – primarily Facebook and Google – in disrupting traditional media business models. In response, Murdoch was unequivocal in arguing that the discussion around regulation of tech platforms is warranted.
Murdoch said that News Corp general counsel David Pitofsky was in Washington last week giving testimony to a sub-committee, and "said that the news model, the funding of the journalism... democracy is broken; it's absolutely broken, and the technology giants, what they've done is they've taken our content, they've targeted our audience, they've then targeted our advertisers and our clients to monetise that audience themselves, and what that means is that we fundamentally can't afford the journalism – all the journalism, the investigative journalism that we rely on so deeply.
“That raises a broader question of what else is happening with technology and the big technology platforms. People think about it as an anti-trust issue, but it's really more now. What's happening is there are anti-trust debates going on, but there's also obviously debates around privacy... what it's led to is certainly in the US is a quite partisan focus on either how to regulate or even more dramatic steps to pull some of these technology platforms back.”
In light of those undoubted pressures on traditional news businesses, the decision to divest properties that do not align with the opportunities around live content makes sense. Only time will tell whether further divestment of properties that lose out in the current digital publishing ecosystem, or regulation of the tech giants Murdoch blames for usurping publishers’ ad revenue opportunities, will be enough to arrest the ongoing trends to which News Corp is exposed.