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Analysts: News Corp.'s Web Plan Carries Risk.
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Author: Sherman, Jay
Section: DEALS
| Analysts: News Corp.'s Web Plan Carries Risk |
Murdoch Hopes to Capture Online Advertising Via $1 Billion Buying Spree
When it comes to gaining a foothold in the Internet space, the easy part for News Corp. might have been writing the checks.
The Rupert
Murdoch-controlled media giant has been on a tear in recent weeks,
spending well over $1 billion to buy three Internet companies, which
almost immediately vaults News Corp. into the Internet big leagues. But
as Mr. Murdoch realizes his dream of being a player in the Web space,
questions exist regarding whether the company will be able to execute
on its Internet plan and allow the assets to take advantage of the
rapid growth in online advertising.
What's more, the
company has paid what some analysts consider a rather high price for
entry into the Internet space, which only heightens the risk.
In the past few weeks
the company has purchased Intermix Media, a company that owns more than
30 Web sites, including the popular social networking Web site
MySpace.com, for $580 million; IGN Entertainment, an owner of
male-oriented video gaming Web sites, for $650 million; and Scout
Media, a college sports Web company for a sum that News Corp. won't
reveal but that some market observers have pegged at $100 million.
Each gives News Corp.
a front-row seat in several areas the company has expressed interest in
dominating, including entertainment, news and sports. But each business
is unique, and the combination might not readily mesh well.
"[News Corp.] has
bought relatively disparate assets through Intermix and IGN, and now
has to integrate these, build a common culture, and also drive their
core content from traditional media to Internet platforms that can
achieve incremental revenue," said William Drewry, a media analyst at
Credit Suisse First Boston. "That is a tall order and unprecedented in
the media sector."
To be sure, News
Corp. is not alone in trying to make a Web play. Nearly every major
media company is looking to increase its presence online, and for good
reason: Merrill Lynch estimates online advertising will grow to $25
billion in 2010 from $9.6 billion in 2004.
Furthermore, with an
ever-growing number of consumers spending more time online, executives
at traditional media companies are looking to gain a foothold on the
Web to stay relevant with consumers.
What's more, there's
a financial motivation: Merrill Lynch pointed out that so-called new
media stocks outperformed traditional media stocks by 370 percent since
mid-2001, and most executives at traditional media companies have been
doing everything they can to improve their companies' stock price,
which have stagnated in recent years.
For its part, a News
Corp. spokeswoman said the company has no plans to integrate its
recently purchased Internet assets beyond placing them under the
umbrella of the company's online unit, Fox Interactive Media. She added
that the companies purchased will remain independent, with each
business operating separately.
~~~~~~~~ By Jay Sherman
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