Milly & the BSkyB deal: why Murdoch could be heading for….

NEWSCORPSE

In death, Milly Dowler may have presented decent people everywhere with the opportunity of a lifetime. The Hackgate scandal and the BSkyB deal are no longer about Newscorp’s position in the UK media market: stop Rupert Murdoch here, and there is every chance his global business could implode.

In the rush to throw ordure at the Newscorp hearse over the last two days, many observers have forgotten the main reason why Rupert Murdoch wanted the rest of BSkyB in the first place: a regular profit-line that’s almost a tidal wave of cash in its own right. Rupe already made a call on the shareholders for the money to pay for BSkyB (something quite a few voluble institutions are unhappy about) but the deal makes a lot of sense for both them and him. BSkyB has a cash flow to die for – the latest figures show a staggering £3.2 billion of annual revenue – and margins most CEOs can only dream about: profits leapt to £520Million in 2010 – a 26% increase on the previous year.

But Murdoch needs this scale of money-flow because his other ventures are showing performances that range from disastrous to mediocre.

MySpace is dead and sold – for just $20Million, a fifth of the asking price. Rupert Murdoch lost Newscorp shareholders $580 million investing in and then completely mismanaging it. It was his first and only foray into social media, and the thing with these products is, putting up firewalls isn’t a good idea. The Digger isn’t good with anything that’s free or open.

Fox News in the US, meanwhile, continues to lose viewers. His manically Rightist views (so incessantly pumped out, the Channel was voted Most Biased News Station in the US last month) are not in vogue at the moment: we could argue all day and night about exactly why, but the bottom line is that Fox’s ratings declined again last quarter (Apr-June) by 6% – and significantly, 14% in the 25-54 demographic. Newscorp’s other problem here was (until recently) Glenn ‘Bonkers’ Beck, a presenter so clearly off his head, Murdoch eventually had to dump him because corporate America stopped buying airtime in his slots. But the guy did have an audience, and it hasn’t been replaced.

In the UK, rumours persist of Murdoch quietly inviting offers for his paywalled disaster, the UK Times titles. The Times (as well as its sister title the Sunday Times) has suffered a massive drop in online readership since disappearing behind paywalls in July last year. As well as the discreet ‘For Sale’ sign, there is continuing speculation that the company will rethink the policy. It would do well to hurry up about it: a misleading figure of 105,000 subscribers latterly released by the Wapping Liars actually covered total sales for the first four months of 2011. Churn is still a chronic problem, and the monthly readership is around 26,000. Before the paywall, the two titles racked up around 20 million unique users a month – more than 13 times larger than the papers’ combined print circulation of 1.5 million. The mind boggles at how much this is costing The Dirty One….and how big the drop in ad revenue has been.

But Newscorp’s great white hope is  ‘The Daily’ – a tablet format  taken up by Apple, and the subject of some pretty confident grins from Newscorp’s owner earlier this year. However, rather like his role-model the USSR, when a news blackout on data is declared, then you know Soyuz Murdoch may not be coming back. Until very recently, tales of the Daily having made a firm start followed by a dull thud were purely anecdotal. But now – with major help from the Canadian social media firm PostRank – media writer Joshua Barton has been analysing Twitter activity at The Daily since its launch. This suggests — at least when viewed through the lens of Twitter sharing — that The Daily is losing audience over time. In eight weeks there were just 6,026 tweets….and falling.  As in, falling off a cliff. Decline and churn show the same pattern as the Times newspaper: a vertical drop once trialists start being charged for the service.

So things aren’t looking good for The Man who is Always Right. In fact, strip out the money Rupe made from the soccer Premiership in 2009, and Newscorp effectively made a loss that year. As if to start managing expectations, Murdoch has sent his only son down to Earth to issue some pretty downbeat stuff about the global economic outlook – which he was doing assiduously throughout June.

Poor outlook or not, Newscorp’s hard place is now surrounded by UK rocks in the shape of disgusted advertisers, prying legislators, a whole new public inquiry, and a remarkably hasty discovery in Wapping of who sanctioned the Milly Dowler hacking: as I write, the Beeb’s political editor Nick Robinson is burbling away at the BBCNews website, and very much fulfillling Andy Coulson’s expectation of being thrown to the lions. ‘News International now know who “sanctioned and commissioned” the hacking of Milly Dowler’s mobile phone’ says the site, ‘[Nick Robinson] told Andrew Neil on BBC Two’s Daily Politics that the firm was not naming names, but claimed it was unlikely to be chief executive Rebekah Brooks.’ That’ll be Andy Coulson then.

But being a shrewd old sociopath, Rupert Murdoch knows that this will simply make his negotiations with BSkyB shareholders even more of an uphill struggle. Reports from Slog sources are suggesting the 61% majority owners want £11 a share at least. Newscorp’s initial offer was £8. That’s a big difference: where is the Old Boy going to find 38% more cash?

And I very much doubt if it will end there. Because of all the foregoing factors, and the immediate crisis Murdoch faces, BSkyB’s movers know that he must do this deal….or wind up in very bad shape as a business. There may also come a point at which BSkyB find Murdoch himself simply too toxic to have as a buyer anyway.

Only the events of the next few days will clarify some of these imponderables. But for those of us keen to consign Newscorp to the lead-lined coffin, there is a very important lesson here. This is a window of opportunity we may never have again – to wipe the stain of this ghastly organisation from the face of the Earth. Stop the BSkyB deal going through, and this (plus his rapidly elevating pariah status) will erase Rupert Murdoch’s malign power forever.