The Littlest Murdoch
Feb 08 1999
NEW YORK - Consider, for a moment, the world's biggest media companies and what they're doing on the Net. Bertelsmann ? Already a pre-eminent European ISP, it's about to launch www.bol.com, quite possibly the world's largest e-commerce site. Time Warner ? Pathfinder will never become a great Net magnet, but the company is nonetheless deeply immersed in e-commerce and owns sites - like CNN.com - that are the envy of their rivals. Disney? The Go Network - though unproven - is up and running and, through ESPN, Disney runs the most successful sports sites on the Web.
And Rupert Murdoch's News Corp.? Let's see, there's ... um ... actually, News Corp. has barely made a dent on the Net. Last month, News Corp.'s Fox network made some noise about a promotional arrangement with Yahoo , but that deal only underscored the fact that News Corp. is a second-tier player. Unlike just about any major media company you can name, News Corp. has no portal, no proprietary search engine, not even a site with traffic that would make anybody's top 10 or 20 list. Unless that situation changes this year, the company risks cementing a laggard's reputation and missing out on business opportunities for years to come.
Almost all of the responsibility for creating that Net presence falls to one man, and he's all of 26 years old. He is not, however, just any 26-year-old. He's James Murdoch, Rupert's youngest son, and his goal is to make News America Digital Publishing, News Corp.'s new-media division, a world-class Internet business - the sooner the better. To that end, NADP currently has 140 employees and an eight-figure budget.
Unlike his older brother, Lachlan, whom many have deemed to be Rupert's successor, James is not given to much public schmoozing. Few new-media players have even met James, and almost none claim to know him well enough to offer a perspective. "I think everyone is interested in what he's doing," says a top executive at a New York Web services firm. "I just don't think anyone knows what it is."
During an hour-long interview in his Chelsea office, James was polite, quiet, almost retiring. He wears a band on his middle finger and a tattoo of an abstract light bulb on his right forearm. In contrast to News Corp.'s often crass market tastes, James' desk features the paperback edition of Don DeLillo's Underworld, and his coffee table has the latest Granta. Although his father is a native Australian , James is a creature of New York City. He attended the prestigious Horace Mann High School in the Bronx, and he speaks without a trace of an accent.
At Harvard, James lived off-campus, and his academic concentration was in film and puppet animation, part of the university's visual and environmental studies department. "I worked with lots of different kinds of puppets, made from paper products and found objects," says James.
In 1993, his father acquired Delphi Internet Services for a reported $12 million and set off to make it his major toehold in the Internet. He hired staff by the dozens. James, then 21, took an internship at Delphi, although the fit was less than perfect. Assigned to "basically design screen savers," as he says with some self-derision, James' art-school sensibility was met with shrugs. "Everyone then was talking about the Internet as this town: Over here you have your theater, over here your meeting place. And I kept talking to them about spheres, about different intersecting spheres. They thought I was crazy in the design department."
Delphi did not work out, for James or his father. Delphi, an early ISP that also offered community site aspects, never attracted subscribers beyond the low six figures. After a planned partnership with MCI fizzled, the senior Murdoch sold the company in 1996.
Financially, the losses were substantial - in the tens of millions - but hardly overwhelming at a company in which legend holds that Murdoch was willing to overpay for TV Guide by a billion dollars. Still, the experience clearly soured Rupert on the Internet, and the company lost interest in producing anything digital for a time. Whenever Internet projects were proposed at News Corp., someone would inevitably say that it had been attempted and failed with Delphi, and the matter would be dropped.
Not long before he would have graduated from Harvard, James dropped out and moved back to New York to found Rawkus Records with two high-school friends . After the company narrowed its focus to hip-hop, it found critical and commercial success, with a record produced at the Manhattan club Lyricists Lounge and acts like Mos Def and Black Star.
James admits that one of his motivations was to make a name for himself outside his father's business. But as soon as Rupert realized that James had a knack for the music industry, he asked him to handle portions of his empire. News Corp. bought a majority interest in Rawkus in 1996. James is no longer involved in the label's day-to-day management, but he does oversee Mushroom Records and Festival Records, which together control more than 10 percent of the half-billion dollar Australian music market.
James is full of hints that in a slightly different universe - perhaps one in which he had a different last name - he would be someone else. Proudly calling himself a "professional cartoonist," he shows off original ink versions of an amusing regular strip he draws called Albrecht the Hun. The running joke behind Albrecht is that he's the Hun who would prefer not to be; while others urge him to join in raping, looting and pillaging, Albrecht stays under a tree reading. In a recent wordless strip, Albrecht finds himself at a nasty, violent football match. While fisticuffs and gore fly around him, Albrecht's thought balloon depicts a photograph of lawn bowling.
Especially given the senior Murdoch's forays into football, it's tempting to connect Albrecht with James himself . James' response? "That's ridiculous." By 1997, James was scheduled to become deputy publisher at the New York Post - a money-losing daily paper dear to Rupert's interests - but he stayed on at NADP. James' experience at Delphi was one of his principal qualifications. "Designing screen savers for Delphi made me think about ways to bring content into people's homes, like a billboard for the home," he says. "What we were really thinking about was what PointCast would come along with years later."
How prescient: To date, News Corp.'s near-acquisition of PointCast is arguably James' defining career move. Through much of 1997, James negotiated to purchase the once-vaunted deans of push technology, only to have the deal fizzle.
Common wisdom says the collapse of the deal was a lucky break. A late 1998 New Yorker piece painted News Corp.'s half-billion-dollar near-purchase of the Internet's flavor-of-the-month as almost a disaster. But Murdoch and other top NADP officials insist that their interest in the technology has been misunderstood, and they don't feel that they dodged a bullet. PointCast, they say, was always valued "as a television play, not an Internet play," according to Matt Jacobson, NADP executive VP and a close chum of James Murdoch.
In other words, Murdoch patiently explains, "At the time we were looking at PointCast, we were very interested in developing interactive services on digital satellite platforms - which we still are." Especially given News Corp.'s development of the since-aborted ASkyB satellite system in America, PointCast seemed a natural way to develop screen savers for TV .
The PointCast experience does suggest that NADP will - like ABC and NBC - make its Net splash through an acquisition rather than a startup. Some suggest that the promotional game of footsie that Fox is playing with Yahoo is a prelude to a merger, though the almost-certain multibillion-dollar price tag might be too much for News Corp. shareholders to absorb.
James insists that nothing should be read into Yahoo's recent deal with Fox. "Yahoo bought some ads," he says. "There is nothing tremendously strategic about it." Moreover, he says the company will "absolutely not" get involved with a portal. "The way the market is going is fucking crazy, excuse my language," James exclaims. "It's just a scam. There are some great companies out there ... but the jury's still out on whether the deals between media companies and portals or search engines - or whatever they're calling themselves this week - are going to work out."
If the company's external strategy has been slow, it may be because its internal business model was out of whack. "It was a nightmare," Jacobson says. "They were getting 50, 60 million page views a year, and there was not a lick of ads." According to Jacobson, he and James brought a drive to the company that it lacked.
Jacobson got rid of the ad rep firm and hired Dave Madden, the former associate publisher of Runner's World magazine. "I remember when we got our first $10,000 ad from Microsoft , and everyone was really excited." Now, he claims, the revenues are more than $5 million a year.
That growth is impressive, but for the moment it appears to be hemmed in by NADP's fairly stagnant content. A few operating Fox Web sites exist, including www.foxnews.com, www.foxsports.com and www.tvgen.com . But they don't begin to touch the kind of market domination News Corp. enjoys in other media.
James says the relaunch of the TV Gen site last week as a Web- and television-based listings service - now co-owned with cable giant TCI - is a first step into interactive television. "It's a clear indication of where our heads are at," says James. While he doesn't put much stock in interactive programming, he does believe that the Web and television will combine for effective "interactive services." So far, however, TV Gen offers the usual entertainment gossip and listings common on sites like Mr. Showbiz and People's AOL site.
The Fox news site reads rather like a small city's daily newspaper: Almost all of the stories are pulled off the Associated Press or Reuters wires. In a market packed with competitors like MSNBC, CNN.com, the big national newspaper sites and news services on portals, it's hard to see how Fox News' interactive site will distinguish itself.
So far, the company's strongest Web play seems to be straight out of the Murdoch playbook: push the sports. Historically, Murdoch media properties have used sports as a wedge to enter a market. Murdoch's current bid to buy the Manchester United Football Club for a billion dollars will likely lower the price of broadcast rights and position Murdoch for broadcast rights to a rumored European soccer league.
NADP emphasizes sports, as well. Relaunched last fall, www.foxsports.com strongly encourages readers to customize and plays heavily off the network's TV personalities. Company executives also plan a Fox Broadband service that will emphasize Web delivery of sports video clips. "When I started here, the sports department was four guys and a roll of quarters, and the site was a section of the TV Guide site," says NADP executive producer Scott Ehrlich. "We knew sports was a big opportunity, so we broke it out, and the staff has gone from four to almost 40."
Accompanying that hiring blitz were several lucrative offers made to key players at other sports sites. "They compensated for their late start by pushing the known salary scale, just as Fox did in 1996 when setting up a news channel," says an executive at a rival sports outfit.
Rather cockily, Ehrlich predicts that the crowded Web sports arena will, in a few years, narrow down to just ESPN and Fox. "A naive statement," says a major player in Web sports. Not only does Ehrlich's brash forecast ignore the chance that an Internet giant like Yahoo or AOL will offer sports content, it also ignores CBS SportsLine and one of Murdoch's major competitors - Time Warner - in the form of CNN/SI Interactive. Jim Walton, president of that not insignificant outfit, responded to Ehrlich's prediction with two words: "We'll see."
Given Fox's deep pockets, Rupert Murdoch's competitive thirst and synergistic intangibles, few will bet against NADP's eventual success. "They're ultimately going to be a huge player," says Geoffrey Reiss, senior VP of programming and production at ESPN Internet Ventures. "They seem so far more interested in trying to get across 'Here's Fox on the Web,' as opposed to figuring what works on the Web, to meeting the user halfway. But they have many of the same assets that we did in establishing ourselves, and that makes them formidable competitors."