The decision to close the News of the World in the UK because of the fallout from the phone hacking scandal shows the importance of ethical behavior and public credibility for media firms.
The paper had been hacking the private communications of celebrities, politicians, crime victims, and even relatives of soldiers killed in Afghanistan and then spent four years trying to cover it up by paying hush money and—according to some reports—bribing police officers to ignore its crimes.
The paper, owned by Rupert Murdoch’s News Corp., was Britain’s largest selling Sunday newspaper until it spectacularly unraveled in recent weeks. Continuing revelations of illicit activities and the announcement of Parliamentary and police investigations led advertisers including Ford, Sainsbury, Lloyds Banking Group, Virgin Media, Dixons, and Vauxhall to pull their advertising.
Perhaps it was embarrassment—but it was more likely the loss of revenue, the loss of almost $3 billion in market value for the parent company because of declining share prices, the hundreds of millions of pounds in damages that will have to be paid, and the fact that the paper’s meltdown was endangering Murdoch’s takeover of BskyB—that led him to kill the paper.
Unfortunately, the scandal shows that some journalists and news organizations will go to any length to get a story, no matter how disgraceful and unethical it may be. Fortunately, the number of journalists who will go as far as those at the News of the World are limited, but the outrageous conduct highlights the growing chasm between those who believe everything should be public and that journalists have a right to do anything to get information and those who believe in a right to privacy and a right to be left alone.
The culture at the News of the World that led to the behavior shows that pressures on organizations to put their interests above those of the public needs to be resisted. It is hardly a culture reputable news organizations and companies should emulate. Not only the reputational costs—but the economic costs as well—are far to high.
The International Business Times is the leading provider of international business news online.
MySpace Sale Underscores the Risks of Exuberant Digital Investments
The decision by News Corp. to dump MySpace once again reveals the risks of over exuberance toward digital companies that do not have a proven business model or long-term customer loyalty.
There are plenty of digital investments that meet those requirements, but a number of the most hyped firms moving toward IPOs and acquisitions do not. They need to be considered with hard headed pragmatism.
MySpace was launched 2003 and rapidly became the toast of the digital world as a social networking site and “the place” for musical stars and fans to connect. By 2005 it was the fifth most visited site on the Internet.
New Corp., which was anxious to benefit from growth in digital media, jumped at the opportunity to acquire the service and paid $580 million in 2005. It was an enormous price for a company with an unclear revenue potential.
Within two years MySpace had grown to be the world’s number one social networking site and was receiving 100 million unique monthly visitors. But it still had revenue problems; its visitors weren't paying customers and advertising wasn't paying its costs.
Despite landing a $900 million ad deal with Google, MySpace reported just one period of profitability. On top of that, it lost its cache with users and its leading position was soon eclipsed by Facebook.
Overall, it is estimated that the MySpace lost at least $1.5 billion under News Corp. and those losses dragged down the News Corp.’s overall earnings. The extent of its losses has never been completely clear because its results were not transparently presented in News Corp. financial reports.
After desperately trying to revive MySpace, News Corp. put it up for sale with an asking price was $100 million. It was sold in June to the online advertising network Specific Media for $35 million (about 6% of what News Corp paid for it), but the company was really just giving it away to get it off its books. As part of the deal, News Corp. took a minority equity stake in Specific Media.
Investing in emerging industries is always more risky than investing in established ones, so it requires a good deal of realism and clear headedness about the opportunities and their potential. It is not good enough merely to throw money on the table in hopes of drawing a winning hand or because the crowd is encouraging you on. A solid business plan that it is already working and producing financial growth and a user model based on more than popularity and status are required unless you investing high-risk capital you can afford to lose, as well as other opportunities it might have funded.
There are plenty of digital investments that meet those requirements, but a number of the most hyped firms moving toward IPOs and acquisitions do not. They need to be considered with hard headed pragmatism.
MySpace was launched 2003 and rapidly became the toast of the digital world as a social networking site and “the place” for musical stars and fans to connect. By 2005 it was the fifth most visited site on the Internet.
New Corp., which was anxious to benefit from growth in digital media, jumped at the opportunity to acquire the service and paid $580 million in 2005. It was an enormous price for a company with an unclear revenue potential.
Within two years MySpace had grown to be the world’s number one social networking site and was receiving 100 million unique monthly visitors. But it still had revenue problems; its visitors weren't paying customers and advertising wasn't paying its costs.
Despite landing a $900 million ad deal with Google, MySpace reported just one period of profitability. On top of that, it lost its cache with users and its leading position was soon eclipsed by Facebook.
Overall, it is estimated that the MySpace lost at least $1.5 billion under News Corp. and those losses dragged down the News Corp.’s overall earnings. The extent of its losses has never been completely clear because its results were not transparently presented in News Corp. financial reports.
After desperately trying to revive MySpace, News Corp. put it up for sale with an asking price was $100 million. It was sold in June to the online advertising network Specific Media for $35 million (about 6% of what News Corp paid for it), but the company was really just giving it away to get it off its books. As part of the deal, News Corp. took a minority equity stake in Specific Media.
Investing in emerging industries is always more risky than investing in established ones, so it requires a good deal of realism and clear headedness about the opportunities and their potential. It is not good enough merely to throw money on the table in hopes of drawing a winning hand or because the crowd is encouraging you on. A solid business plan that it is already working and producing financial growth and a user model based on more than popularity and status are required unless you investing high-risk capital you can afford to lose, as well as other opportunities it might have funded.
Labels:
audiences,
business models,
Facebook,
internet,
investors,
My Space,
News Corp.
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