It’s been an odd old start to the new year for Rupert Murdoch and his family company, News Corp.

There’s been a deluge of bad and not so bad news in the US and Australia, and one curious deal mooted that raises the age-old question, is the Rupster up to one of his old tricks, distracting us, while making a significant move to benefit himself and the family?

These past few days have seen Murdoch’s News Corp reveal plans to cut MySpace, its failing social network site, or sell it. The cost to News would be at least $USS1 billion, given the $US5860 million purchase price in 2005 and hundreds of millions of dollars of write-downs and operating losses since 2006.

Then there was the not so surprising news at the weekend that News Corp’s online paper, The Daily will not be launched this week, as planned; the reason, so-called technical glitches.

“Mr Murdoch was to unveil the paper in San Francisco next Wednesday alongside his fellow media titan Steve Jobs, co-founder and chief executive of Apple, maker of the iPad. But the event has been postponed following fears of teething problems with the iTunes-based subscription service.”

Well, Murdoch can’t take a trick with the shock news overnight that Jobs is taking another bout of medical leave from Apple to fight complications from his liver cancer and subsequent transplant. If Jobs is not around, it won’ be the same for News and Muroch’s newest idea. It won’t have the clout or publicity burst that Jobs’ blessing would give it, especially among the Apple faithful and their iPads.

Given the company’s mishandling of MySpace, from Murdoch down (and including former CEO Peter Chernin), plus his current replacement Chase Carey, the delays to the new online paper are not surprising. News Corp just doesn’t seem to get technology right in any guise. And that goes back to the tech and net boom a decade ago when News blew the best part of $US4 billion on an assorted collection of failures. Does anyone remember LineOne or Delphi Internet, some of Murdoch’s and News’ previous great internet plays that are no longer around.

But the most fascinating bit of news was the suggestion that News Corp might buy Shine, the production company run by daughter Elizabeth, and partly owned by her. The price was a suggested $US1 billion.

The house journal in the US, (aka The Wall Street Journal) carried a report late last week:

“News Corp is in discussions about acquiring the UK production company run by the daughter of News Corp, chairman Rupert Murdoch, according to a person familiar with the matter.

“The transaction, which has long been the subject of speculation, could see the addition of Mr Murdoch’s daughter, Elisabeth, to the leadership ranks of News Corp, according to people familiar with the matter.

“The Shine Group, founded by Ms Murdoch, said Friday that it has hired JP Morgan Chase & Co to advise it on potential deals. A spokeswoman cited other recent deals in the international production sector as the impetus for the move. Last year, Time Warner Inc’s Warner Bros. Television Group acquired Shed Media, the UK creator of shows like Supernanny.”

Some media analysts suggest its a recognition as well that News Corp needs some new TV content ideas and that Shine has some to the current hits, led by MasterChef, which has made it big in Australia after being only a minor success in Britain where it was launched. But MasterChef Australia’s success is because of the work done by the en Network and Fremantle Australia, who had the subrights here until this year, not Shine which inherits a hit.

But if Murdoch plans to buy Shine then the company’s majority shareholders should be worried. Both the MySpace purchase and The Daily project were personally overseen and driven by Rupert Murdoch.

At the 2006 News Corp annual meeting Murdoch was waxing powerfully on the benefits of MySpace:

“And our new media assets — our latest investments — are moving quickly toward profitability. With the acquisition of MySpace.com and other popular sites, in the space of one year, our company has begun to rival and in some cases surpass the internet elite.

“News Corporation sites now rank second in total page views and fifth in unique visitors, reaching more than 70 million people per month in the United States. Revenues from MySpace alone have doubled every four months over the last year. And others are noticing. This summer, after the fiscal year-end, we announced a landmark deal with Google to provide search functionality to all of our internet sites — most importantly MySpace. With $900 million guaranteed to us over 15 quarters, this agreement more than pays for the MySpace acquisition. More importantly, it allies us with one of the great companies of the digital age, while signifying our ability to monetize our traffic in ways that make sense for our audience.”

And also in 2006, this comment was reported from Murdoch “In an investors’ meeting in Australia yesterday, Rupert Murdoch said that MySpace could now be sold for $6 billion — about a 10x return on the original $580 million that News Corp paid for it.” Now its a bust and Murdoch is nowhere near the failure, others have been drafted over time to cover the flop.

The heady years of 2006 were a long time ago. If it was Fairfax or another media group now facing a big loss on a deal such as MySpace, News Corp’s local media would be all over the story.

But the big pressure on News is in the UK and its biggest deal of all, the takeout of the majority shareholders in BSkyB for about $US10 billion.

These pressures are growing as a result of the News of The World phone-hacking scandal where the news flow has worsened fro Murdoch’s company in the past few days.

(And that $US10 billion cost would make it very hard for News to get away with buying Shine for a significant amount of money, let alone the claimed $US1 billion in some reports last week)

The BSkyB deal has to be completed by the end of 2011, according to News Corp’s own timetable and the resumption of bad news on the hacking scandal is increasing pressure on the UK government to to give it the green light.

If it its delayed by either UK government rejection or being sent to UK competition regulators, Murdoch might be able to buy Shine as compensation and pitch the deal as investing in content for his various cable and satellite TV (and free to air) TV businesses. But he could do far more cheaply by merely buying the shows from Shine and paying the usual fees.

Just over a week ago it became known that News International had suspended a senior editor at the News of The World over the phone hacking scandal, this one involving actress Sienna Miller who is suing News. On Saturday The Independent in London reported:

“Prosecutors are to re-examine all the evidence amassed by Scotland Yard during its investigation into the phone-hacking scandal at the News of the World.

“The move follows growing concern that the Metropolitan Police Force has failed properly to investigate claims that hundreds of politicians, celebrities and other public figures have had their phone messages illegally intercepted.”

And worse still for News and Murdoch (especially son James who is boss of News International), The Guardian reports this morning that Glenn Mulcaire, the private detective at the centre of the scandal, has started singing like a bird:

“News Corporation’s defence that phone hacking at the News of the World was the work of a single “rogue reporter” was on the verge of collapse tonight after Glenn Mulcaire, the private detective at the centre of the case, said the paper’s head of news commissioned him to access voicemail messages.

“Mulcaire is understood to have submitted a statement to the high court this afternoon confirming that Ian Edmondson, the paper’s assistant editor (news) asked him to hack into voicemail messages left on a mobile phone belonging to Sky Andrew, a football agent. Andrew is suing the paper for breach of privacy.

“It is also understood that Mulcaire said in the court statement that several other executives at the News of the World were aware that phone hacking was taking place, although he does not name them.”

Edmonson is the editor suspended by News before Christmas. Is he being set up to be the latest fall guy for higher ups at News International and to be the sacrifice to ensure that the BSkyB deal is not damaged?

But we should watch the possible Shine deal, that’s the big play for the family and for Rupert Murdoch personally. If that happens, will he then make son Lachlan an offer for his Australian assets and bring him on board?

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW