For years, Facebookit is (META 5.38%) The relationship with publishers might best be described by the social media site’s ambiguous “It’s Complicated” status. Initially, digital publishers were excited to partner with the company, believing the site’s huge user base would improve their organic reach and generate more ad revenue.
More recently, the excitement has turned into growing apprehension as journalists have begun to realize that what CEO Mark Zuckerberg considers best for his company may not be best for them. Moreover, like Facebook and Alphabet combine to absorb nearly two-thirds of all digital advertising revenue, online publications are being forced to change their business model.
The transition has been difficult for many, with The New York Times and The Washington Post being among the few to successfully transition to an online subscription model. However, the Fox News founder wants to take digital journalism to a whole new business model: cable TV.
News Corp. wants distribution fees… from Facebook
Zuckerberg again angered publishers when he penned a lengthy message on the website announcing the company’s intention to prioritize posts from friends and family over news content. This move will result in a further drop in organic (read: free) reach for digital publishers, and a possible increase in non-organic promotion costs and/or publisher advertising costs due to increased spot rates.
It seems that Zuckerberg’s recent announcement has touched the nerve of the executive chairman of Twenty-first century fox (FOXA) (FOX) and press company, Rupert Murdoch, with the information baron releasing a statement. After chastising Alphabet’s Facebook and Google for popularizing “slanderous news sources through algorithms that are profitable for those platforms but inherently unreliable,” Murdoch pushed the companies to pay publishers distribution fees “trusted”, “similar to cable companies”. Although Murdoch’s statement was published by News Corp, such postage could also impact Twenty-First Century Fox properties – like Fox News Online.
You can’t blame Murdoch for trying to turn the internet into cable. After all, his Fox News channel is the second most expensive network behind ESPN (more on that later). But more broadly, Murdoch seems to want Facebook to subsidize the news industry.
News Corp and Fox News digital properties could be at risk from Facebook’s latest move
Murdoch’s “slanderous” accusation was interesting, given Facebook’s recent announcement. Continuing its drive to increase meaningful interactions on the site, the company will allow users to rank news sites they deem credible and trustworthy. In a new post announcing the move, Zuckerberg noted, “there is too much sensationalism, misinformation and polarization in the world today.”
Zuckerberg’s decision could have a disproportionate impact on News Corp digital properties like the NY Post and Wall Street Journal, both considered right-wing websites, but its impact could extend to Fox News digital content as well. . Currently, the television network and online site are awaiting a spin-off from Twenty-First Century Fox, with the remainder being sold to The Walt Disney Company, and will remain part of Murdoch’s empire. Although the network is most often mentioned, the website is impressive on its own – according to data from website analytics firm Alexa Internet, Fox News is the 61st most visited website in the United States.
According to the Pew Research Center, the Fox News brand is considered the most trusted news network by viewers with consistently conservative views. Another Emory University study estimated that Fox shifted the presidential election 3.6% to 6.3% to the Republican candidate. The morning show fox and friends he is often said to speak directly to President Trump, with the President often tweeting news shortly after it is covered on the program.
Fox’s conservative modus operandi is ideal for cable television, as the company can monetize conservative subscribers through operator fees and advertising, but it also derives revenue from liberal and independent subscribers, as standard cable packages include chain. In contrast, his liberal MSNBC counterpart, a Comcast subsidiary, benefits from similar advantages.
However, Zuckerberg’s plans could hurt organic traffic for both websites, as those with different political views may be more likely to view Fox News or MSNBC’s websites as less reliable and rank those sites. Consequently. Judging by Murdoch’s initial rebuke about ‘slanderous’ news sources, I’m willing to bet his letter is less about postage and turning the internet into cable TV (hope not) , and more on ensuring what he thinks is a fair deal on bio reaching all of his digital properties, especially Fox News.
Jamal Carnette, CFA has no position in the stocks mentioned. The Motley Fool owns shares and endorses Facebook and Walt Disney. The Motley Fool has a disclosure policy.