News Corp.: Business Worse Than We Thought; Ad Weakness Catching Up to MySpace
Rupert Murdoch, who has been dour about the economy since last spring, now says things are worse than he thought. Three months ago, the News Corp. (NWS) CEO was predicting operating profits to increase four percent to six percent by the middle of next year; yesterday the company said it now expects a decline in the low-to-mid teens.
What changed? According to News Corp.:
- The U.S. dollar has gotten stronger, which makes the performance of the company’s many businesses less valuable.
- The markets for local TV advertising in the U.S. and newspapers around the world are awful.
- The overall economy is lousy.
And yes, that lousy economy is going to affect the Web, too. (News Corp., owner of Dow Jones, is also the owner of this Web site.)
News Corp.’s Fox Interactive Media unit (basically MySpace and a few other sites) recorded a 17 percent gain, driven by a 16 percent jump in display advertising. Those are fine numbers given the performance of other big Web players–just ask Yahoo (YHOO) or Time Warner’s (TWX) AOL–but they’re down from 57 percent growth in the last quarter. And they’re not going to let the unit hit the 30 percent growth goal the company laid out this summer. Asked to throw out a new target, COO Peter Chernin demurred.
Instead he described the business in general terms: Starting to hurt, but not as much as the competition. Transcript from Seeking Alpha:
We started off this quarter also feeling good. We are beginning to be honest to see some softening at the end of this calendar year and looking into the first couple of quarters, the beginning next year.
I still believe that we’re doing slightly better than the marketplace. But it’s clear from everybody else that there is a lot of softening in the display advertising marketplace and we are beginning to feel some of that. So I think still from our own sort of anecdotal appraisal of the business, we are pleased with the progress they are making.
We think a lot of areas, the launch of MySpace Music, the launching of SelfServe Ads, the increase in the quality and number of advertisers etcetera. We are pleased with their progress, but we are just beginning sort of December and then moving into January to begin to see some of the softness in the marketplace catch up to us.”