News Corporation Corporate Strategy

Analysis (1990 - 2011)

Table of Contents
Summary - Corporate Strategy

Executive Structure
Timeline - Acquisitions Traditional vs 2 Sided Market

Bet on MySpace vs Facebook

Performance - Stock, Industry Rupert Murdoch The Last Tycoon Future Growth, Risks

Summary
Corporate Strategy (1990 -2011)
Corporate Strategy Sharing of Activities Behavior Based Control - is used in an uncertain environment, where as outcome based control is used in certain environment and is easy to implement and cheap Vertical Integration - Maintaining the content and distribution dynamics. Easy to manage the contracts. In case of information goods its vital because managing contracts are very difficult Information Goods - 2 sided market for (digital/information) goods have infinite economies of scale, 2 sided or 1 sided market with physical goods have finite (diseconomies) of Scale Ownership Minority economic interest with voting control (Other Example - Google) Internal SSP Remains Same - Entrepreneurial Structure & Rapid Decision Making, even though business have grown globally and in different segments, but same structure and decision making style is used Dirty Digger Still Placing Bets - Direct TV, MySpace Rupert Still In Control No Succession plan

Corporate Strategy - Spectrum

Investment Strategy Portfolio Management Restructuring Corporate Strategy Transfer of Skills Sharing of Activities Business Strategy

Berkshire Partners

Textron

Newell

News Corp

Manage Uncertainties Low Cost Low Value

Exploit Uncertainties High Cost High Value

Source: Google Search, Creating Corporate Advantage , David J. Collis & Cynthia A. Montgomery

Corporate Strategy
Resource Continuum
General
Wide Transferring Outcome Small Nature of Business Scope of Business Coordinated Mechanisms Type of Control Corporate Office Size Special

Same content is used in different formats

Narrow

Sharing Behavior

Large

Source: Creating Corporate Advantage , David J. Collis & Cynthia A. Montgomery

Executive Structure
Mar. 2011
Rupert Murdoch Chairman & CEO (79)

Chase Carey Deputy Chairman, President & COO (56)

James R Murdoch Deputy COO, Chairman & Chief Executive Europe & Asia (37)

David F. DeVoe CFO (63)

Arthur M Sikind Sr Advisor To Chairman (71) Roderick I Edington Non Exec Director (60)

Joel Klein Exec VP Office of Chairmen Natalie Bancroft Non Exec Director (30)

2004

Rupert Murdoch Chairman & CEO

Chase Carey President & CO COO

Lachlan Murdoch Deputy COO

David F. DeVoe CFO

Arthur M Sikind Exec VP to Chairman

Peter Chernin President & COO

Legend

New

Present in 2004

Change in Responsibility

Source: News Corporation, Data Monitor 2010, Annual Report , 2010

Timeline - Post 2003

Acquisition (118), Others
2005 Acquires My Space (Intermix Media) for 0.77B in US. Acquired IGN Entert., Community-based internet media & services co. for Video Games & other forms of digital entertainment for 0.65B in cash 2007 Sale of Direct TV, Took 16% stake in News Corp (11B) back from John Malone (Liberty Media) by trading 41% stake of Direct TV

2003 34%of Direct TV (Satellite Broadcast Network) is Acquired in US

2011 Acquires Shine Group International TV Increased Stake in the German PayProduction group for TV platform, Premiere, to 30.5% 0.67B Increased its stake in Sky (Owned by Elisabeth Deutschland (formerly Premiere) Murdoch Succession Plan from 30.5% to 39.96% in Play ??)

2009 Restructured Fox Businesses Consolidating Film &TV Production Businesses in a single unit and TV Networks Biz into a single unit

Restructured its Asian broadcast Becomes Carbon Neutral businesses into three units, including STAR India, STAR Greater China and Launched The Daily, Acquired Dow Fox International Channels National US publication Jones (WSJ) for 5.6B built specifically for the iPad

2004 Shifts Domicile to US Company's shares were listed on the New York Stock Exchange

2006 Launched new general entertainment broadcast network MyNetworkTV Announced $900 million deal with Google in 2006)

2008 HarperCollins & WSJ formed 3year publishing partnership to develop books written by the Journal's expert editors and reporters Voluntarily transferred its stock exchange listing in the US from NYSE To NASDAQ Global Select Market

2010 Signs to acquire 90% of Wireless Generation, Privately-held Education Technology Company for 0.36B in cash

Source: Google Search

2 Sided vs Traditional Market

Overview Traditional Market
Value moves from Left to Right and Information flows from Righto Left Growth beyond some point usually leads to diminishing returns. Maximum Profit Contribution when MC = MR, that is it suffers from diseconomies of scale Cost Revenue

Suppliers (wholesale)

Create

Price
(Retail)

Advertise or Promote

Move

Distribute

Service

Customers

Upstream

Value Chain

Downstream

News (Paper Based) Traditional Market

Create Content (News)

Price Content (News)

Distribution

Customers

Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR

2 Sided vs Traditional Market

Overview 2 Sided Market
Value moves in both direction from Left to Right and Right to Left Marginal Revenue and Profit contribution is always increasing as user base grows, Network effect leads to infinite economies of scale (for information goods only) Revenue Revenue

Cost

Customers

Customers

Upstream

Value Chain

Downstream

News (Paper Based) 2 Sided Market Old Model

No economies of scale as this is not a digital good Advertisers (Ads, Classifieds) Create Content (News) Price Content (News)

Distribution

Customers

Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR

Cost

PLATFORM

2 Sided vs Traditional Market

News (Digital/Online) 2 Sided Market - New Model
Economies of scale are infinite as this is a digital good, because Marginal Cost for distributing to an additional customer is nearly zero Advertisers (Ads, Classifieds) Create Content (News) Price Content (News)

Distribution

Customers

Other Examples
Company Google Industry Type Web Search/Advertising Platform Type Audience Builder

Amazon (ebay, Trading Post)

Monster (Seek) iTunes Betfair AP Moller-Maersk

E-Retailer
Recruitment Music Gambling (betting) Logistics

Matchmaker
Matchmaker Matchmaker Matchmaker Cost Sharing

Source: STL Partners, Telco2.0 , Strategies for 2 Sided Markets, Thomas Eisenmann, HBR

2 Sided Markets
Google Model

Cheap Adverting for Brands

Low Cost Per Transaction

Free Product for End Users (Subsidised)

Google Platform

Massive investment in Google Platform Google Indexes 34B+ pages

Source: STL Partners, Telco2.0

2 Sided Markets
Network Effect - Google vs Vodafone

$18

$16
$14 $12 Billions

Google, $17b

$10
$8 $6 $4 $2 $1 2 3 4 5

Vodafone, $3b
6

Years After Inception : Network Effect - Six Times larger in 9 years in comparison to largest mobile operator

Source: STL Partners, Telco2.0

MySpace vs Facebook
Myspace Failure Old Media Model
Identified an opportunity with Myspace (Social Media), but couldnt leverage it Turned out to be a losing bet, in discussions to sell for $100M Reason Applied Old Media Model in a 2 a Sided Market Locked in Advertisers (via Google Search) on Upstream Side, and let the Customers Create Content (primarily blogs). Didnt let/opened Upstream Side to other Customers Networks effects on Downstream side are not leveraged on Upstream side leading deterioration in asset and momentum shifting towards other platform (Facebook)

Revenue Upstream Cost

Only 1 Customer (Advertisers)

Downstream

Content

MYSPACE Platform

Distribution

Customers (Subsidised)

Source: The Australian, Google Search

MySpace vs Facebook
Facebook Success New Media Model
Reason Applied New Media Model in a 2 a Sided Market Opened Platform for various Upstream Customers Hosted Content from various players, Ads, 3rd Party Application Developers Opened Platform for various Downstream Customers Market Research Companies, Subscription (soon) Networks effects on Downstream side are leveraged on Upstream side built mass and momentums

Revenue Upstream Cost

Various Customers

Revenue Downstream

Content

FACEBOOK Platform

Customers Distribution Paid Data Research

Revenue

Source: The Australian, Google Search

Performance
Stock Market - Trend
Global Financial Crisis
Near Bankruptcy

Competitors Disney, Warner

Source: Google Finance

Performance
FY 2010 Rev. By Division, Region

Book Publishing 4% Newspapers and Information Services 18% Integrated Marketing Services Direct 4% Broadcast Satellite Television 12%

Other 5% Australasia and Other 16% United States and Canada 54%

Filmed Entertainment 23%

Television 13% Cable & Network Programming 21%

Europe 30%

Source: News Corporation, Company Profile, Mar 2011, Data Monitor

Industry & Competitors

Status & Trends
Attributes Revenue in Billion by 2010 (Size) Growth (CAGR% 2006 -2010) Expected Revenue Growth by 2015 Expected Growth (CAGR% 2010 -2015) Industry News Corp. 32.778 5.9 Walt Disney 38.063 2.2 Time Warner 26.888 (7.69) Viacom 9.34 (-20)

781.7 1.7 913.3 3.2

Products & Services

FY - 2010
Filmed entertainment: Production and distribution of motion pictures Television and cable: Television programming Cable and satellite network programming Direct broadcast satellite television Magazines, inserts, books and newspapers Interactive programming guides Magazines Newspaper publications Book publishing Others: FM radio Production and distribution of promotional products and services Online programming

Source: News Corporation, Company Profile, Mar 2011, Data Monitor

Rupert Murdoch
The Last Tycoon
A lot of people claim they have ten-year plans or five year plans. But basically, the most successful businesses are the opportunistic and you take your opportunities when they come Rupert Murdoch, 1985 Probably the most inventive, the bravest deal-maker the world has ever known Andrew Neil, Sunday Times, 2002 For better or for worse, our company is a reflection of my thinking, my character, my value - Rupert Murdoch, 2004 The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow Rupert
Murdoch, 2008

I just want to live forever Rupert Murdoch, 2007

Source: Times Magazine 2007, The Last Tycoon, Google, Forbes

Future
Growth
Digital Economy - As more and more content of various formats are digitised, more opportunities will be available to grow at minimal cost Sports League, Formula One Racing buying a sports league will give necessary information and direct access to contents and its rights

Risks
Succession: News Corp is managed centrally and predominantly by Rupert, to this date there is no succession plan being made public Increasing Competition: Operates in a highly competitive business, Leads to Pricing Pressure, impacts Rev. & Market Share Piracy: May adversely affect the company's revenues derived from films, television shows, books and DBS (Digital Direct Broadcast Satellite )programming Legal Disputes: The company is involved in various legal disputes Shine (2011), Valassis Comm. (2006, resolved in 2010) Lawsuits may adversely affect the market reputation of the company, which in turn will negatively impact its growth and investors' confidence
Source: Business Spectator News Corporation, Company Profile, Mar 2011, Data Monitor

Thank You
End of Document