Last week, America’s biggest
newspaper by total circulation, USA Today, was effectively
discarded by its owner. News Corp, the owner of the second biggest (the
Wall Street Journal) suffered another revenue decline.
Today, the New York
Times’ media critic, David Carr, sounded
the death knell for print newspapers, while viral content site Buzzfeed raised
$50 million to accelerate its world domination through your Facebook
newsfeed.
The trend is undeniable. Traditional
newspapers and print publishers are struggling, while internet companies are
flourishing. But it didn’t have to be this way. The two sectors don’t have to
be at war, and the best evidence of that can be found in South Africa.
Earlier this year, I wrote about the astonishing
transformation of the South African media company Naspers. The company,
which owns more than 50 domestic newspaper titles, began nearly a century ago
as the mouthpiece of South Africa’s apartheid regime, but through some
extremely clever (some might say lucky) investments, it has transformed itself
into a genuine global digital media giant.
It now owns one of Africa’s biggest pay
TV businesses, but more importantly, is the single biggest investor in the
Chinese internet powerhouse Tencent. In 2001, Naspers paid just $34 million for
a 46.5% stake in Tencent, which owns, among other properties, the highly
successful WeChat messaging platform. Today its stake in the business is worth
more than $50 billion.
Naspers was also (indirectly, through
an investment in Russian internet company mail.ru) an early investor in
Facebook. Other bets it has placed, in key emerging markets such as India
and Brazil, have yet to pay off. But the lesson for legacy media companies
(and any incumbent, in any industry) is still crystal clear. Transformation is
possible, and diversification is wise.
As Sequoia Capital’s Michael Moritz has
pointed out, there is no reason why the New York Times Company could not
have achieved
something similar to Naspers. Instead it spent billions actually
increasing its exposure to print and on dubious investments in
areas such real estate. (To be fair, both Rupert Murdoch’s Fox and
Time Warner built enormous film and television empires on the back of
their print origins. But those legacy print businesses have now been spun
out, and are no longer shielded by their wildly profitable corporate cousins.)
The success of Naspers does not
guarantee the future of its newspapers (which, unlike its American
corporate peers, the company still controls). But it does appear to have given
the company a lot more flexibility in managing them. There is little pressure
from the company’s shareholder base to do anything too radical, because Naspers
has been a mind-blowingly good investment—thanks to Tencent. The stock hit
another high on Monday and is up by more than 3,000% over the past decade.
So if publishers really love newspapers
and news reporting, rather than being pointlessly
devoted (paywall) to “the smell of ink,” they should prioritize the
long-term financial health of of their companies.
Source: http://qz.com
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