Murdoch's brief love affair with the web

Murdoch's Fox websites have been restructured

Rupert Murdoch, the internet sceptic turned enthusiast, appears to have lost his appetite for the web.

Over the last few months, News Corp has been quietly downsizing many of its internet projects.

Recent internet retreats

Fox websites return to the networks

eVentures folds

Health venture closes down

Rupert Murdoch's retreat is hardly surprising in the context of recent dot.com failures, but it does represent an admission by the company that internet ventures rarely become money-spinners.

The recent move to transfer the production of three major websites from a separate company, News Digital Media, to the networks they are associated with, is a nail in the coffin for News Corp's internet strategy.

Fox Broadcasting Company, Fox Sports Television Group, and Fox News Channel will now manage their own websites, Foxnews.com, Foxsports.com and Fox.com.

The battle for succession

Behind the scenes, News Corp pundits are also watching Murdoch's sons, James and Lachlan, to calculate their involvement in the company's pursuit of new media opportunities. James is chairman and chief executive of the Asia's Star TV, while Lachlan is News Corp's deputy chief operating officer.

Chris Dixon, an analyst at UBS Warburg in New York, believes that both sons have played an important role in determining the company's more cautious approach to the internet. "The closing of News Digital Media is the natural evolution of lessons learned by both James and Lachlan," he said.

Elizabeth, Mr Murdoch's daughter, has now left the company and is involved in other online media groups.

An internet sceptic

Murdoch himself has had an equivocal relationship with the internet. Although he was a latecomer to the web revolution, in 1999 he appeared to warm up to new opportunities.

We never really had a big internet strategy

Andrew Butcher
News Corp

News Corp formed the venture capital company, epartners, in April 1999 with $300 million to invest the internet, interactive television and wireless communication.

Its first significant investment was a 50% interest in eVentures, jointly funded with Japan's Softbank. Eighteen months later, eVentures has folded - one more victim of the burst internet bubble.

Another project that has recently bit the dust is News Corp's joint venture with Healtheon/WebMD.

In January 2000, News Corp set aside $700m in media services to promote Healtheon's site.

News Corp also gave up 50% of its cable channel, The Health Network, to Healtheon as part of the deal. News Corp received Healtheon shares in return.

Late week, the cooperation between the two companies was basically canned. News Corp took a $200m non-cash charge in the fourth quarter of 2000 and clawed back 100% ownership of The Health Network.

News Corp's eVentures folds

Rupert Murdoch was not very interested in the internet, according to Andrew Butcher, a spokesman at News Corp in New York. "We never really had a big internet strategy ... Rupert believes in broadband and wireless technology," Butcher added. "I think he always been an [internet] sceptic."

Web strategies

News Corp's official internet policy is to leverage its strength in newspapers and publishing. This means using websites as a commercial tool to extend the brands of existing media outlets.

News Corp's websites in the UK and Australia largely conform to this model. The exceptions are classified and careers websites, such as CareerOne in Australia and FiredUp.com in the UK, which generate their own revenue (but not yet profits).

In the US, News Corp was initially more experimental and decided to set up the now-defunct News Digital Media to manage the production and content of its Fox websites.

"If the business model had worked, it would have created synergies with all the websites under one company, selling advertising and marketing the sites. But it proved not to be a stand-alone viable business," said one New York-based analyst who follows News Corp.

UBS Warburg's Dixon has speculated that conflicts between online editors and editors at the Fox channels may also have hastened the demise of News Digital Media. He cites this as a common problem with the strategy of managing stand-alone websites that use content from another source.

News Corp's Butcher countered that there was never enough integration between News Digital Media and the Fox channels to create conflict situations.

As other media companies reconsider their web strategies, News Corp's troubles will be closely watched.