17 July 2011

There is a famous cliche, “What goes around comes around.” We’ve all heard it and no doubt said it before.

Even though he was considered by Forbes as the 13th most powerful man in the world as recently as 2010, it looks as though Murdoch’s luck is running out. And the “unlucky for some” placing will be difficult to hold on to, with people queuing up to enact revenge.

One of the problems Murdoch faces is that his empire in the UK holds people accountable irrespective of whether they are rich, powerful or popular. He was one of the untouchables. With his TV channels and Newspaper coverage, he is a powerhouse; a man who set standards and invariably changed the world.

But then along came the Internet.

I got some friendly stick last year at a round-table discussion held at UKFast’s offices in City Tower. The subject was “Pay-walls” and I predicted the collapse of The Times Online and other newspapers who chose to charge readers to use their site.

Although the Times is still online, one year on, it’s a shadow of its former self with traffic down to record lows. After instigating the Paywall, the publishers predicted a temporary slump. Experts were confident it would bounce back once people saw sense.

Well, they’ve seen sense alright. It’s just from a different perspective and it never bounced back.

Murdoch never really got the Internet. He loved newspapers and he saw them at their height when the corridors of power linked like veins, pumping headlines in a coordinated fashion across the globe. Who could have predicted that the fibres being laid under our pavements would one day destabilise the newspaper empire. The internet is gathering momentum and the new found power is in the lap of the consumer. It is the consumers who are now able to communicate in their masses, coordinating opinions as a collective. When Branson chose not to advertise in the News of the World and other businesses followed, with their coordinated effort, there was no other alternative.

But looking at the traffic to the News of the World site before it closed, it took a similar slump to the Times. The News of the World was already floundering. It wasn’t the first time that Murdoch has come unstuck on the Internet. On 20 July 2005, News Corp. bought MySpace.com and other popular social networking-themed websites, for $580 million USD. Only last month, it sold off Myspace for US$35 million in a much more low key affair.

It looked at the time as a panic buy. However, I think the decline of the once mighty MySpace is more down to the lack of understanding from the Murdoch boardroom of what users expect on the Internet.  In the same way, Facebook’s meteroric rise to fame and fortune is down to their obsession on giving their users everything they want quicker than everyone else.

In Murdoch’s world, the newspaper controlled the reader. It fed the news very much one way. On the internet, there is a dynamic relationship between the reader and the source, so the user contributes to the source and expands the feed, creating more news.

Nowadays, people don’t care where news comes from, as long as its accurate and transportable.

When giants like Google take their customers into consideration when making changes to their model, you’d think that other established businesses would follow suit with some simple market research. This is a lesson to us all that “listening to our customers” is the single most important rule in business.

I called Murdoch a dinosaur but not out of disrespect. As a young boy, the dinosaur was the marvel of all creatures that have been on the planet. But they are a great example of what happens when something so large is unable to adapt to rapidly changing environments.

And that is exactly what is happening here. It’s nature teaching us all a lesson. After Spring comes Summer, after Autumn comes Winter. The fall invariably comes at a price. It’s how you prepare for the eventualities and unforeseen circumstances that separate the good from the great.

Yet there are plenty of examples of businesses who have defied the laws of nature and ridden the economic storms of time. Sometimes business owners and people forget the disciplines that got them to the top of their game. They believe the hype and enjoy the glamour and rich pickings. This is usually the start of a slippery decline which is difficult to recover from. Good entrepreneurs bounce back, great ones learn from other peoples’ mistakes and whilst no one can go through business with a perfect 10, it’s imperative that you never make the same mistake twice.

And a year on from the Paywall going live, how is Murdoch’s empire now? Well, it’s not going well as you know as he prepares to answer to the Select Committee this week.

Was the catastrophic decline of TheTimes.co.uk and then the News Of The World a clear marker for the rest of fleet street that “Murdoch is fallible.” With readership leaving in their droves, Murdoch’s once powerful hold on Britain showed cracks. Big cracks.

These cracks never went away, they just got bigger. MySpace being a good example. The sacrifice of  the News of the World is actually a very small concession, as the 168 year old newspaper was already dying. It just needed humanely putting down.

The phone hacking incidents have certainly put a few extra nails in the coffin and all the friends he once courted are unable to throw him a life line, as what his business has done is simply appalling. With Police and Politicians likely involved, rival journalists dine out on the greatest revenge story of the past 100 years, whilst his own news channels are forced to cover the headlines that condemn their leader, adding insult to injury.

The modern media is a frightening place when things go wrong. Guilty by association. The ex-leader of the IMF, in line for the President of France, singled out and arrested only to have the charges dropped once the overly sensationalised story loses stamina and fizzles out. The victim is the man who lost his job and reputation. The victor the press who profit from salacious scandals.

Back in the UK, we don’t tolerate people who attack an underdog, so experts are predicting Murdoch is pretty much finished in Britain, but that should be the least of his worries. On the other side of the Atlantic, the politicians are lining up on Capital Hill. The laws are very clear in the US and it is highly likely that they will make an example of Murdoch or his son. If there is any knowledge that these practises were going on, he could face jail sentences.

Robert Maxwell who used his sons to help him run his empire made some hefty mistakes that Murdoch might have learned from.

Maxwell’s untimely and rather strange death triggered a flood of instability with banks frantically calling in their massive loans. His two young sons desperately tried to hold the empire together, but it collapsed nevertheless. It emerged that Maxwell had used hundreds of millions of pounds from his companies’ pension funds without permission to shore up the shares of the Mirror Group, to save his companies from bankruptcy. Eventually, the pension funds were replenished with monies from investment banks and the British government.

The Maxwell companies filed for bankruptcy protection in 1992. His son, Kevin Maxwell, was declared bankrupt with debts of £400 million. In 1995, Maxwell’s sons and two other former directors went on trial for conspiracy to defraud, but were unanimously acquitted by a twelve man jury in 1996. But again, guilty by association, their lives were pretty much ruined.

The difference is that Maxwell had both John Major’s support and Neil Kinnock’s. Very different to the situatiom today that Murdoch faces where everyone has fled the scene and politicians unite in parliament against the man they once feared.

Whatever your views on the subject, whether guilty or not, he’s guilty of underestimating the Internet and the people of Great Britain.  Incredibly, a year on, the £1 paywall still remains in place, in spite of the overwhelming evidence that it is killing yet another of his online businesses. Mind you, he has a little bit more to worry about at present.


Murdochs Empire on the decline
TheTime.co.uk lose significant viewers to their website
In 2008 the Sun, The Times and the DailyMail were neck and neck. 
The latest independent figures from Hitwise show The Sun has plateaued, whilst The Daily Mail has soared ahead a whopping 1100% more than the combined traffic of The News of the World and The Times. I know where I’d advertise.
Sun newspaper and The Times, Daily Mail, Daily Telegraph, Financial Times, Guardian, Independent, Evening Standard, Independent on Sunday, Mail on Sunday, Metro, Observer, Sunday Telegraph, Sunday Times and Wall Street Journal Europe. You can see the advert below.

Just minutes ago, the Metropolitan Police Commissioner Sir Paul Stephenson resigned.

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