Smart management behind the trashy stories

As the 1950s drew to a close Rupert Murdoch remained a small time emerging newspaper publisher in Australia with no representation in Sydney, the biggest city in the country.

The big two publishers in Sydney behaved like a cartel and were determined to keep out any outsiders looking to enter their lucrative market. Murdoch made several attempts in vain but as 1960 beckoned his luck started to change. A publisher serving mainly the outskirts of Sydney was willing to sell and Murdoch used a friend to make a bid keeping the real identity of the person behind it a secret until the deal was sealed. Cumberland Newspapers, the group he purchased distributed about 400,000 newspapers weekly in the suburbs. It was not exactly the kind of thing he was looking for but at least it gave him a foothold into Sydney. Early in 1960 his big break came. The Mirror newspapers were up for sale. This consisted of an evening daily and a Sunday newspaper published in the heart of Sydney. It also gave him printing plants in Sydney, Brisbane and Melbourne.

It is said that Murdoch did a jig when the deal went through and could not stop telephoning his close friends in excitement. This was an important step in his bid to establish himself as a major newspaper publisher in Australia. It marked the moment when he joined the big leagues proper.

On entry into this market, he was determined to be the top circulating newspaper in Sydney. Murdoch’s impact was felt almost immediately. Sensationalism and vulgarity became the trade mark of the Sunday Mirror. PROWLER STRIPS WOMAN NAKED. BANNED SEX BOOKS, FREE FOR SOME. GANG RAPES GIRL 10. WHIPPING FOR HUSBAND-WIFE’S RAGE. WHY MY SON IS A KILLER-MOTHER’S STORY. GIRL 13 RAPED 100 YARDS FROM HOME.

The daily was not much different although an effort was made to cover plenty of politics and to write intelligent editorials.

But his efforts did not stop there. He was constantly searching for promotions to boost sales. For instance he serialized new books. Circulation and profits climbed steadily.

But Murdoch’s success was not just in the content of his newspapers and in promoting them. One of the key things is that he understood the newspaper business much more than most people understood it. Many times his rivals underestimated him and dismissed him as a publisher of trashy articles for the masses. But behind that facade was a very well run business with a management system that worked.

For instance there was the Blue Book. Other newspaper groups had monthly reports, Murdoch’s blue book was weekly. Every week every property owned by Murdoch had to send in their figures to him. That meant that if there was any problem developing (e.g. increase in costs in a certain area, circulation drops etc) it was noticed right away.

To this day these weekly figures still come to Murdoch weekly from all over the world.

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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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