Last week, within 24 hours, News Corp reported a US$6.4 billion loss and Time Warner slumped $16 billion into the red. Ad revenue, of course, was to blame in both cases, Rupert Murdoch pointing to the collapse of car advertising in particular.
It seems perverse, then, that Want Want China Holdings chairman Tsai Eng-meng should be investing HK$1 billion in ATV. It used to be said that newspapers depended on rich men willing to lose money. Now it seems the same goes for TV stations - ATV is said to be losing HK$1 million a day. Given Tsai’s recent purchase of Taiwan’s floundering China Times, it can only be assumed he has developed a taste for haemorrhaging cash.
Amid all this gloom, it is significant that Facebook is happily celebrating its fifth birthday. Incredibly, in those five years, the site has gone from a dorm-room project to the world’s seventh most-visited site, according to recent comScore data. Of course, the collapse of the old media industry can hardly be laid at Facebook’s door - though as a symbol of the web’s incredible rise, it takes some beating. But if the new media barons - especially those still sat on piles of venture capital money - were tempted to feel smug as the dinosaurs of print and TV suffer, they should pause for thought.
The big question now is what happens when advertisers start spending again. Some pundits would have you think the current crisis is the death knell for old media. They argue that squeezed budgets will mean more digital investment and an irreversible shift in spend. But if there is one thing Facebook - indeed, the whole social networking industry - has failed to achieve, it is to provide an alternative. Its Beacon ad system, released in 2007, ran into trouble immediately over user complaints. Too often these sites enjoy huge audiences, but have still not found a way to turn that into advertising revenue.
And let’s not forget that few old media properties are still purely old media. While it is still unclear whether online ad revenues can sustain a large-scale media operation, companies such as News Corp are well placed to migrate advertisers across their online and offline media properties. As Murdoch admitted quite candidly: “We may never return to record levels, but we do believe we can capture a large proportion of the advertising that does return.”
The next, recession-hit year promises to be formative. If the likes of Facebook can get their act together and offer genuine, large-scale, cost-effective solutions to advertisers, then budgets really might begin to move. That is especially the case in the West but will increasingly apply in Asia too. But as long as they fail to do this, Murdoch - and maybe even Tsai - can continue to believe there is money to be made from the old media dinosaurs.
