Murdoch desperate to catch up in the internet race
It seemed an ordinary weekend in Carmel, a sleepy seaside town on California's coast - a 30-minute hop in a twin-engine plane from San Francisco. The weather was sunny. Tourists ambled along quiet shopping streets. Doris Day lives a reclusive life here and Clint Eastwood was once mayor - probably Carmel's biggest claim to fame.
However, a short distance from town, at a plush 400-acre resort inside a gated community in the Santa Lucia mountains, it was anything but business as usual.
Rupert Murdoch, the chairman and chief executive of News Corporation, had gathered his leading lieutenants for two days of private discussions on what he has described as the company's highest priority: how to grapple with the threat and opportunity of the internet to the media empire he has spent a lifetime building.
News Corp owns a clutch of media assets - including the Times, the Sun, the New York Post, Twentieth Century Fox and Fox Broadcasting - that are the envy of his peers. He wants to enjoy a similarly powerful position in cyberspace.
Forty-five of his senior executives, including Les Hinton, head of News International, and Rebekah Wade, editor of the Sun, are understood to have arrived for a reception on Thursday night before getting down to business on Friday. On the agenda was how to turn News Corp's web properties into a hub for entertainment-related content. One News Corp insider called the strategy an attempt to create an "entertainment Google" - a one-stop shop for all those looking for computer games, movies, music or chat online.
Publicly, executives admit that there could be some way to go. Peter Chernin, News Corp's second-in-command, told the New York Times that, in cyberspace terms, "we're a scrappy entrepreneurial company at the beginning of something".
But if the past nine months are anything to go by, the company is racing to catch up with competitors. "They are aggressively buying their way into an internet strategy from nowhere," said Rich Greenfield, an analyst at Fulcrum Global Partners.
This weekend's summit is the second on the subject that Murdoch has called this year, following a meeting in New York in February. The first appears to have had a galvanising effect. In July, the company formed an internet unit, Fox Interactive Media, run by a former Foxsports.com executive, Ross Levinsohn, to oversee its website interests. Days later, the firm agreed to pay $580m (£315m) for Intermix Media, a company with more than 30 websites led by MySpace.com, the fifth most popular site on the internet.
Then, last week, News Corp reached a $650m deal to buy IGN Entertainment, which runs sites such as GameSpy.com for video game fans. It also bought Scout.com, which owns about 200 niche sports websites. Murdoch has said publicly that the company is in talks to acquire a search engine, thought to be Blinkx.
The quick succession of deals gives News Corp 70 million unique users and 12bn monthly page views. That catapults it into the fourth-largest internet firm in the world by page impressions, behind Yahoo, Time Warner and MSN, according to the investment bank Merrill Lynch.
It is of little surprise that Murdoch is approaching the internet with new-found urgency. Advertising dollars are rapidly migrating online. Jupiter Research recently forecast that the online advertising market would reach $18.9bn by 2010, comparedwith $9.3bn at the end of 2004, at the expense of traditional media. The adoption of broadband means that consumer habits are fast changing, especially among the young.
"I think it is an understandable and pretty predictable course for him to take," said Michael Wolff, the writer and media commentator. "Murdoch is a nervous guy. The idea that he might be missing out on something is awfully painful. But he is just dipping his toes in. Why buy these? Partly because he can afford them. He's not making big bets here."
Murdoch appears to have spent more than a decade trying to figure out how to exploit the online world, and has had more than one false start.
News Corp acquired one of the earliest internet service providers, Delphi, in 1993 and entered a joint venture with the telecom firm MCI, hatching grand plans to launch a service called iGuide that would combine access, a daily online newspaper and guide to the web as well as content from other parts of News Corp. When MCI pulled out ahead of its launch, Murdoch lost his nerve and the idea was ditched.
After that early experience, he avoided large investments in the late 1990s, drawing derision from rivals - but avoiding the vast losses some of them suffered.
Now, the News Corp boss has spoken of his intent to build a network that will "redefine the portal". In an April speech to American newspaper editors he said: "We have to refashion what our web presence is. It can't just be what it too often is today: a bland repurposing of our print content. The challenge for us is to create an internet presence compelling enough for users to make us their home page."
He went on to pursue two themes - the provision of deeply local and personalised news and the creation of "virtual communities" linking coverage to blogs and opening up sites to feedback.
Suddenly, some of the deals begin to make sense. Scout.com, which will be integrated with Fox sports sites, offers highly local and niche content, including college sports. MySpace.com is the largest social networking site where young people post home pages and blogs and meet the like-minded. The challenge will be stitching together existing News Corp content with the new sites and capabilities.
Although led directly by Mr Levinsohn out of Los Angeles, the 73-year-old chairman has been spending much of his own time working out how this can be done.
Still, even if the web has matured, it doesn't mean that the current round of hasty acquisitions won't be regretted in leisure - as many earlier ones were. After the $580m Intermix deal, Murdoch said there wouldn't be any more acquisitions of that scale. News Corp then agreed to pay $650m for IGN, which lost $14.3m last year. Temptation can be a terrible thing.
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