News Corp. COO Details Internet Strategies

MySpace Acquisition Provides Treasure Trove of Demographic Data

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NEW YORK ( -- A bullish Peter Chernin shed more light on News Corp.'s Internet strategies as he fielded questions from investors at the Credit Suisse First Boston Media Week Conference yesterday.
News Corp.'s chief operating officer, Peter Chernin says 'We are a pretty simple company.'
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Within the family
Mr. Chernin, News Corp.'s chief operating officer, talked about the plan to keep content within the News Corp. family by using its own assets to distribute content rather than portals such as Yahoo and Google. He also touched on launching a Fox business news channel and a strong TV network scatter market.

"We are a pretty simple company," he said. "We are trying to make content and then we want to be able to get it into viewers' homes ... without gatekeepers, without intermediaries." He said the single biggest trend has been the growth of broadband and that bodes well for content companies such as his. Driving more people to that content was the fuel behind the major Internet spending spree the company embarked on earlier this year.

"It was revealing the content on which we spent billions was being showcased on those portals and Fox or News Corp. was getting no money for that," he said. "So we thought we better find a way to monetize that across new [media] and not let others take that money."

Seeing the light
The real wake-up call came when News Corp. entered a partnership with MSN that made the portal's default sports page. Traffic on the site skyrocketed, sending it from the eighth ranked online sports site to a three-way tie for the top spot. After that, Ross Levinsohn came to to News Corp. management with a list of five potential Internet acquisitions, the top two on the list being MySpace and IGN. Mr. Levinson suggested they think about buying one of them. "I said, 'Why don't we buy them both?'" Mr. Chernin said.

He told investors the Internet acquisitions have made the company rich in consumer data, with 27 million to 28 million registered at MySpace and another 5 million or so registered on other News Corp. sites. And the data is not, he noted, gathered through cookies or by passively tracking people.

"People are giving us information," he said, "about what their favorite movies are, what their favorite television shows are, where they live, what their ages are, who they would like to meet, who their heroes are, what their religions are, what they care about, what kind of car they are interested in, their favorite sports teams, what they like to do when they go out -- that's an unbelievable treasure of data about the most highly valued group or demographic group for advertisers."

Right now, he said, the company is working on writing instant messaging code for MySpace and will probably also look into adding a voice program.

Broad rights agreements
With the company's new media distribution assets, it has become more important to sign broad rights agreements for its content. The question, said Mr. Chernin, is "how do we slice and dice some of the reality shows we are doing typically?" Part of the "American Idol" deal Fox announced last week, for example, gave the network a broad new stretch of rights, including wireless, Internet and the opportunity to repurpose content for the Fox Reality Channel on DirecTV.

"We are going to look to exploit 'American Idol,'" he said. "It won't be same show that you see on the network, but there will be different versions of 'American Idol' available on different platforms."

He outlined News Corp.'s growth as coming from three types of businesses: mature, high cash-flow ones, like its newspaper and broadcasting assets; its "momentum" or faster growth businesses such as its satellite companies and cable networks; and what he called "next-generation growth engines." He cited strong network scatter market in the mid-to-high single-digit range and what he called "historically low cancellation rates" -- around 5% for the January quarter.

Business news channel
Mr. Chernin also confirmed the business news channel Fox has long talked about launching to compete with CNBC is still in the works.

"We invested well over $1 billion in launching Fox News and we can do business news much more economically," he said. The trick, he said, will be guaranteeing carriage from cable operators before it launches. Fox is in talks with several of them right now. Most suspect News Corp. will try to add carriage of the business news channel to the Fox News affiliate deals up for renewal in the next year.

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