How about we look at Australia’s best little media company, Newscorp (ASX:NWS)?
Who will Rupert Murdoch send from Australia to New York to bring the Wall Street Journal into to the 21st century? Hmm. Murdoch’s Newscorp reported a 22% rise in net income for the most recent quarter. The company’s timely investments in the Internet generated over AU$1.2 billion in revenue in the reporting period. That’s real money, even though we prefer Facebook (not owned by Newscorp) to MySpace (which is owned by Newscorp).
What about the Journal? The venerated financial brand has about one million paying subscribers and one of the few profitable online financial businesses in the publishing world. Murdoch’s rumoured plan is to make much of the Journal’s content free. He reckons that could boost the audience to about 15 million…non paying subscribers.
The bigger audience should garner more advertising dollars. But shifting the publication to an ad-revenue driven model is both more and less risky. It’s more risky because the Journal has proprietary content and reporting that some people are clearly willing to pay for. Why give it away?
Murdoch and his team must feel the weight of the Web. Copyright protection is nearly impossible on the Internet. Even if you charge for it, other people can give it away. And the inexorable trend in finance is that information and data have no monetary value. They are ubiquitous.
It’s insight and judgement that the retail investor now values (or so we believe). If that’s the case, give the information and reporting away and just sell ad space. It’s a much simpler model and in that sense, less risky than trying to protect a subscription-based brand name in an increasingly competitive world where most news is free.
None of this solves any of the problems we face as investors, of course. On that score, the market struggled to the surface for a few lung-filling gasps of air. The Dow rallied by triple digits and everyone breathed just a bit easier. It gives us time to think about what to do next.
The Daily Reckoning Australia