Love affair with America

Rupert Murdoch’s love affair with the United States is fascinating and fairly educative to any entrepreneur even today.

He started going to the States very regularly in the mid 50s. His biographers all agree that at this point in time he did not even dream of ever owning any media property there let alone becoming a citizen in order to do so. His main interest in the US was to get ideas. Whenever he got back to Australia his luggage would be packed with magazines and newspapers that he had collected to mine ideas out of.

Admittedly there was a lot happening in the US in the 50s. The emerging super power by 1959 was seeing the average American family spending 6 hours daily, 7 days a week watching TV. Australia was of course several years behind and so it was easy for Murdoch to pick up ideas and simply re-create them back home. If anything his greatest gift has always been his brilliant flair for spotting trends in popular culture.

Back home in Australia Murdoch’s involvement in Adelaide’s first TV station to go on air, Channel 7 meant that he collected a lot of programming and also got ideas for TV back home. For instance he copied the TV Guide in the United States and created a replica in Australia.

At this point ideas for newspapers would have been limited. Newspapers in the United States are very different from anywhere else in the world in that they rely very heavily on advertising and therefore tend to have many more pages and one often has to look for the editorial amongst the tons of advertising and advertorials.

There is an interesting aside here from the Kenyan media scene where after years of building a name and revenues based on circulation, a very deliberate decision was made in the late 80s to transform the business model at Kenya’s highest circulating newspaper, the Daily Nation to rely much more heavily on advertising. Rates were jacked up and state-of-the-art colour presses that could reproduce colour advertisements quickly and cheaply were installed. There are those who argue that this was a mistake because the newspaper lost a huge opportunity to grow its’ circulation and collect enormous revenues from the rapidly growing Kenyan population over the years. If you look at the circulation of this newspaper it has actually slightly dropped over the years. And this has nothing to do with competition and even less to do with the advent of technology. Neither can really be blamed for the lost opportunity.

Other observers acknowledge that this was the smartest move to make at the time because the country was going into a lot of political uncertainty and continuing to rely so heavily on circulation would have been a mistake and the kind of risk that share holders would have cringed at were they given the facts.

This is an interesting debate because Rupert Murdoch’s empire was built mainly from the huge circulation. His most successful newspapers as we have already seen were hardly the kind that any serious business would want to do an advertising campaign in. Especially what he managed to achieve in the United Kingdom from The Sun and News of the World. We shall take a detailed examination and analysis at his acquisition of those properties and how they operated later in this series, but for now looking at Murdoch’s balance sheet at the end of 1983 clearly gives us the answer to any argument one wants to have on circulation versus advertising revenues.

The biggest cash cow in the entire Murdoch empire that year (as in all other years) was The Sun which earned a staggering $50 million in 1983 and 40% of News Corporations’ (Murdoch’s umbrella company for all his media properties) total operating worldwide profits. 70% of The Sun’s revenues were from circulation and NOT advertising.

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