Tuesday, 3 July 2012

News Corp split will lead to more adaptation

Cell division is a routine part of the lifecycle
of living organisms.
News Corp's recent announcement that it will split into two separate entities the two parts of its business has received little critical analysis in the Australian media, even by Fairfax, its major competitor here. Maybe Fairfax thinks the move is not of interest to most of its readers and maybe they're right. The national broadsheet run by News Ltd, the local arm of the global enterprise, The Australian, ran a number of stories about the split when it was announced. But those stories have mainly disappeared from the website and, in any case, they were mostly laudatory. Interviewed on Fox News, Rupert Murdoch, who will retain leadership of both companies, said the split had nothing to do with the UK phone hacking scandal, a view that I share. The first really independent analysis of the split has come from the New York Times and the story underscores a number of risks for front-line staff as well as for the newspapers themselves. A reporter in the News Ltd business here is quoted in the story, and these words appear to me to contain the most germane analysis of the split so far:
“People fear the loss of the security that has come from being underpinned by a vast and profitable entertainment empire.”
The split extricates Murdoch's newspapers and the publishing company HarperCollins from under the profitable umbrella that has been created over the past decades as Murdoch has bought up and developed free-to-air TV, pay TV and movie assets. Those companies will sit in the new entertainment company.

The story also points out that the split will result in a new level of transparency for the news assets. Lots of people, in future, will be able to understand the scope of the subsidisation that, many believe, has enabled those news companies to continue operating. Released into a hard world alone, those companies will now be forced to innovate in order to survive, instead of relying on cash infusions from the giant parent company. The change will bring to bear new pressures on managers, who must now devise ways to generate profits so that they can continue to operate.

While the majority of committed news watchers believe that Murdoch has a soft spot for the news business, and that this characteristic has enabled largely unprofitable newspapers to continue to operate regardless of the scope of their financial losses, there is no doubt that he also believes in business itself. And he innovates ahead of his competitors. This is why he has been able to move sideways into those profitable entertainment businesses, and remain financially healthy despite the global advertising shifts that have taken place over the past decade or so. It is also why he was the first news proprietor in Australia - apart from Fairfax in the case of the Financial Review - to embrace paywalls for his websites.

There have already been job losses in Australia for News Ltd. It's not surprising that its journalists are a bit wary of what the future holds, and that they express consternation when asked about it. But change in the face of environmental shifts is a characteristic of all living organisms. Cell division, for example, is part of the body's way of repairing itself. It is also essential in sexual reproduction, which is nature's way of ensuring a level of diversity within populations that can allow for evolution. Before sex appeared evolution was slow. With the emergence of new ways of combining genetic material to produce unique individuals, evolution sped up to a degree that has enabled an astonishing array of species to exist across the globe.

In my mind there's absolutely no doubt that, despite the spin produced by News Ltd at the time of the split, this change to the circumstances under which News Corp will produce news in future will lead to futher adaptive behaviours at its mastheads. And that's a good thing. What has led to the desperate straits in the news industry to this point has been a signal failure to adapt to a rapidly changing environment.

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