News Corp doesn't have much to show for its boldnessAugust 30, 2012: 12:07 PM ET
Relative to its peers in old media, News Corp. made some aggressive moves in technology. Only a few have paid off.
Update: This story was updated to include information on Hulu and Wsj.com.
By Kevin Kelleher, contributor
FORTUNE -- Top executives working in the turbulent arena of digital media are nomadic -- or they quickly learn to be. The business of making and managing content on the Internet changes so quickly that a tenure that might be considered brief in many industries is par for the course in digital media.
So when News Corp. (NWS) announced that Jonathan Miller would be leaving his post as the company's chief digital officer after three years, it seemed at first like another executive shuffle. But Miller's departure says something telling about News Corp. as it prepares to split up into two companies: Neither of the two News Corp-lettes seem to have anything to do with the Internet. And Miller's departure only underscores that.
Miller's tenure at News Corp. is largely seen as a mixed bag. He forged stronger relationships with companies like Apple (AAPL) and arranged deals like News Corp.'s $45 million investment in Roku, a maker of Internet-powered set-top boxes. But Miller also oversaw the disappointing launch of The Daily, a magazine designed for the iPad, as well as the dismal sale of MySpace for $35 million -- well below the $200 million the company hoped to get and a whopping sixteenth of the $580 million it originally paid.
More than any other development, the MySpace debacle illustrates the troubles News Corp. has had in digital media. What Rupert Murdoch imagined to be a magical goose that would sit placidly in its own room and lay lots of golden eggs turned out to be just a plain-old layer of eggs. Facebook (FB) prevailed because Mark Zuckerberg obsessed over how his most loyal users were using the site he was relentlessly redesigning to be more useful to them.
In other words, social media -- and digital media in general -- doesn't take care of itself. It must be tweaked and tinkered with by a team of engineers who must be attuned to how people are using a technology. That's the polar opposite of broadcast or cable media, where your audience is expected to swallow whatever content you send down the pipe.
Miller's activities outside News Corp. suggest a more adventurous attitude toward the web than he was able to display at News Corp. He funded Maker Studios--– one of the top five partner channels on Google's (GOOG) YouTube -- as well as walkie-talkie app Voxer. He serves on the boards of Shutterstock and TripAdvisor. None of those companies is the next Facebook, but they are all doing well. After four years at AOL (AOL) -- another once-hot property that languished inside a media giant -- Miller has also learned a thing or two about when a media giant isn't integrating an online business into its larger operations. And when it's showing signs that it never will.
That describes News Corp. in 2012. What has long been a powerhouse in news publishing and broadcasting simply doesn't understand how content works once it's ported to computer screens. Relative to its peers in old media, News Corp. made some aggressive moves in the past decade like buying MySpace and launching the Daily -- a publication that was doomed by its trust-us-and-subscribe business model. But it has little to show for its boldness.
News Corp. has had some success online. When it bought Dow Jones in 2007, it acquired Wsj.com and other sites that currently have 1.3 million paid subscribers. And it owns a 30% stake in Hulu, the video-streaming site founded by News Corp. and other content giants. Hulu is profitable, but has had its own share of bumps. It considered an IPO in 2010 before canceling those plans, and it has recently faced internal squabbling among its owners and the company's executives.
But other online experiments haven't fared so well. And so News Corp is finally moving away from being a company lusting after Internet superstars to become what it should have been all along -- a media giant that tailors its existing content to be useful on the web. But even here, News Corp. underperforms. On the web, Fox News, which dominates in cable ratings, lags CNN, MSNBC and four other sites. Fox Sports' site lags those of ESPN, Sports Illustrated and three others. (Fortune's parent company, TimeWarner, owns CNN and Sports Illustrated.)
Miller will continue to advise Murdoch for another year, but without his leadership, it's not clear who the digital visionary at News Corp. might be. Even if the company backs away from launching or buying new digital-media properties, it must still confront the reality that more of what we once called old media content is going online. Only it's migrating there without a clear, workable business model that can guarantee profits. And it will take a keen and cunning mind to find that business model.
So who will News Corp.'s digital visionary be? Most likely, Murdoch himself -- a man who has never demonstrated any understanding of how to monetize digital media and whose idea of user-generated content is a dogged campaign to degrade the simple art of tweeting into an exercise in executive logorrhea. In the past few days on Twitter, Murdoch's rants have blamed the "free, open uncontrollable" Internet for killing newspapers, blasted Silicon Valley for "few new mind-blowing (sic) innovations" and tittered at Facebook for its "difficulty monetizing to justify (sic) market cap." But after years of heavy investments, which of Murdoch's innovations have blown our minds? Where are his plans to monetize online content? Or, for that matter, his plan to save his own newspapers? Spinning them off seems an admission of defeat to the Internet he loathes.
It's ironic that Murdoch is sneering at digital media during the very week when his "chief digital officer" is stepping down. Or rather, it's telling. In an era when the Internet is becoming more and more powerful in distributing media, Rupert Murdoch's direction is more unclear than ever.