News Corporation has been forced to abandon plans for its eagerly anticipated digital news platform, the company’s Project Alesia initiative, citing runaway costs.
(21 October), bean-counters at Rupert Murdoch’s media conglomerate have decided to pull the plug on the year-long activity, just as it was expected to be finalised.
The decision is understood to be absolute. This is not a delay, or grand-standing or being placed on hold; this is an entire, dedicated News Corp UK operation being dismantled just days before a product was due to go to market.
So what’s going on at the media conglomerate?
£20m but still no cigar?
The unofficial line from News Corp is that , those with control of the purse-strings decided the stakes for the news aggregation service are just too high, and it’s simply too big a gamble.
Can this really be true? Can the project’s failure be attributed to a last-minute (after 12 months of development) realisation about the full costs involved? Anyone who knows anything about News Corp’s approach to its finances would be surprised at such an oversight.
Apparently, more than 100 people who hived away in a Gray’s Inn Road office for the best part of a year were only told of their fate last Friday (15 October). Permanent staff are now in consultation, while the specialists working on contracts (about 80 workers) have been unceremoniously disbanded.
The UK project promised to make content from News Corp’s core print titles available across all digital platforms, including the iPad and Google’s Android operating system. It formed part of a bigger US drive, led by News Corp’s chief digital officer Jonathan Miller.
Separate commercial leads were being developed and pursued in the US and UK, but both operations are now understood to have been mothballed. News of the digital failure is just the latest twist in what is already a very tangled and fascinating affair.
Where next for News Corp?
As things stand, News Corp is believed to have a very real, saleable asset that could yet attract VC backing or other joint venture possibilities.
Apparently, protracted negotiations have already been held with most major UK magazine and newspaper publishers, with one well-placed source confident that "all major titles would have come on board within six months of launch, with the exception of The Guardian".
It’s worth noting here that when Media Week interviewed him in July.
Sources close to WPP’s media-buying powerhouse GroupM, which had been exclusively tasked to find launch advertisers for the new platform, express reservations about how many publishers had committed to the project.
"Every press director I’ve talked to outside NI has denied being involved in the project, so it was always very unclear who the amalgamation of publishers would be," said one.
"I only ever gleaned that NatMag was keen to be involved; apart from that it was pure speculation," said another.
Nonetheless, the project certainly attracted interest from clients, but a list of known publishing partners would have provided a welcome boost for the launch.
Hostile potential bedfellows
Another pertinent development is the fact that, since last week, .
Fearful of the combined control of a fully-aligned News Corp/Sky offering, Murdoch’s digital crusaders have performed a small miracle and prompted the uniting of the Guardian, the Daily Mirror, the Telegraph and the Daily Mail. This is no mean feat - just ask the Newspaper Publishers Association.
Murdoch's potential multimedia empire awaiting regulatory approval includes The Sun, the News of the World, The Times, the Sunday Times, BSkyB and book publisher HarperCollins, and it has the rival media organisations clamouring about "serious and far-reaching consequences for media plurality".
The petition’s united front at such a delicate stage of proceedings has led to an unprecedented backlash from Murdoch’s stable that has spilled out into Sky News reports, and a comment piece in The Sun.
Hackles have been well and truly raised by the very publishers News Corp was hoping to enlist in the new project. Is it possible to get into bed with the same people who rail against you?
News Corp sources are adamant the decision not to take the product to market is purely related to concerns over running costs, estimated at about $200m over the next few years. But with the initial outlay for technical development already paid, would News Corp beancounters really pull the plug now?
Realistic economies of scale?
The biggest change since the project began 12 months ago - as far as News Corp’s finances are concerned - is the company’s move to take full control of BSkyB at a cost of more than £7.8bn. That sort of money is guaranteed to eat into anyone’s cash reserves.
The Project Alesia deal on the table would have seen individual publishers paid every time a subscriber came on board, meaning costs would be high until critical mass was reached.
The plan was to charge £9.99 per month for unlimited access to the bundled content, and projected forecasts were to achieve one million subscribers by the end of year one.
News Corp was funding the physical platform, described by some as "light years" ahead of anything else currently available, but sources strongly deny there was ever any interest in asserting editorial control over third-party content.
By way of comparison, News International has just launched a joint offer for access to the Times and Sunday Times sites, at a cost of just £1 for 30 days. But as yet, there is still no official statement on the impact these paywalls are having on the business.
The autopsy for the News Corp platform that never was has only just begun.
But Media Week believes that when faced with an increasingly hostile circle of potential publishing partners, uncertain advertising support and an expensive subscription drive, securing the proven assets of BSkyB became a far more attractive priority.