It's Online or Bust for Australia's Media Moguls

SYDNEY (02/03/2000) - Drive three Formula One cars very fast along a twisty track that is still under construction . . . at night . . . with no road map.

Such is the battle going on between Australia's three vast media empires as they reinvent themselves for the 21st century.

Goaded by fear and avarice, Kerry Packer's Publishing & Broadcasting Ltd.

(PBL), Rupert Murdoch's News Ltd. and John Fairfax Holdings Ltd. are locked wheel-to-wheel in an online contest.

Each has kitted out a new-age vehicle to carry its hopes. For Packer it is ecorp, for Murdoch it is News Interactive, and for John Fairfax Holdings it is F2.

Slickest and quickest off the starting grid has been ecorp. F2 is moving up through the pack, helped by a clever renovation of the oldest vehicle in the field. Bringing up the rear is News Interactive which may have the most powerful engine but is having trouble finding the right racing line through the turns.

That's a track-side view of the current race order as seen by media analysts in the stockbroking fraternity.

The media giants know disaster lurks at every corner but are enticed by the pot of gold waiting for the winner. First to reach the chequered flag wins a commanding position astride the virgin territories of online commerce.

The value of their traditional content is being marginalized by the Internet's new distribution mechanisms. They fear the Net's interactive delivery systems will strand their old media properties high and dry by siphoning off customers and advertising. But they also sense vast opportunities to leverage their content on the Net -- a prospect that is lighting up their eyes with dollar signs.

The new-year acquisition of Time Warner by AOL, a mere stripling just a tenth the age of 72-year-old Time, is concentrating their minds wonderfully. To Australia's media moguls, the deal confirms the value of their content and validates their efforts to find young online allies.

The general strategies of ecorp, F2 and News Interactive are similar -- identify the richest flows of revenue in the online world, stake a substantial claim on them and repel all latecomers. Each is playing to its strengths and trying to minimize its weaknesses in pursuit of those goals.

Conventional wisdom insists the Internet rewards first movers so ecorp, which floated last June, generates healthy respect among share analysts. Its shares have nearly quadrupled from their A$1.20 (76.6 U.S. cents) issue price and some analysts value the company as high as A$1.5 billion even though it is still two or three years from turning an overall profit.

Its sharemarket strength flows from two principal sources: PBL chairman Kerry Packer's blue-ribbon reputation for business acumen among investors, and ecorp executive chairman Daniel Petre's equally high reputation for techno-savvy.

Says one analyst: "Investors see ecorp's links to Australia's most astute businessman, they see the Nine Network's marketing machine and they are going to trust it until they have been given some dramatic reasons not to trust it."

News Interactive and F2 have more difficult rows to hoe than ecorp, analysts believe. Their Internet initiatives are more liable to cannibalize the revenue streams of their core print properties than ecorp's ninemsn Web portal is likely to sweep customers away from PBL's major money-spinner, the Nine Network television group.

Neither F2 nor News Interactive exploded off the starting grid like ecorp, but as the race progresses F2 is going through the gear changes more smoothly than its Murdoch rival. It is gaining recognition for clever integration of its online and offline properties. For example, it is willing and able to change design features of its print editions to make them work more effectively with their online cousins.

"They are a standout company in their ability to merge clicks and mortar together," says Mark Holland, former IT editor of Murdoch's The Australian newspaper who now heads Web loyalty points company Analysts also have the comfortable feeling that Fairfax's various components are singing off the same song sheet.

Considering earlier efforts by large U.S. media organizations to splice themselves into the Internet, that is no mean feat.

Take Pathfinder, launched in 1994 by Time Warner as an online showcase of its print magazines. After pouring $A160 million into it, Time Warner disbanded the operation last year. Despite support from the top, it proved impossible to convince Time Warner's various magazines to work together on a centralized online project.

If F2 avoids that fate, the credit will be due to Nigel Dews, F2's chief executive, and Fred Hilmer, John Fairfax Holdings' chairman, and the relationship between the two.

"People were sceptical of Dews at first but they are warming to him because they can see him starting to pull it together," said one analyst. Hilmer, like Dews an alumnus of influential consulting firm McKinsey and Company, is seen as totally supportive of Dews' Web strategies.

News Interactive is moving online less decisively than ecorp and less nimbly than F2. For many analysts, it is a black hole -- churning with energy but with little information escaping about where that energy may direct itself.

Although News Ltd. first put its classifieds online four years ago, the group failed to produce a bold overall strategy and fell back into a largely defensive position. The man responsible for putting News Interactive back on the offensive is Director of New Media Patrice McAree, a U.S. sales and marketing specialist who was hired about 10 months ago.

He rejects suggestions News Ltd. is marking time while waiting for parent company News Corp. to lay down an online blueprint.

"I came in basically to rethink the entire strategy and reposition us as an online leader," says McAree, who reports directly to News Ltd. Chairman and CEO Lachlan Murdoch. The three strands he's trying to braid into News Interactive's online activities are strong content, a strong user community flavour and strong commercial features.

An obvious plus for News Interactive is the content generated from its 137 print mastheads in Australia which can be aggregated on its flagship news site, Another is the cross-pollination it can achieve between its old media and new media properties. The print mastheads will be used to build brand recognition for "sites focused on specific life events like buying a house, selling a car or finding a job," says McAree. "They will be an inch wide and a mile deep."

Building a portal site to compete with ninemsn is not in the script. will remain an aggregated news destination site but at the same time individual mastheads will be allowed to take themselves online "as the case warrants", McAree says.

That appears to expose News Interactive to the risk of sparking competition for the same online resources by different agencies like Time Warner's doomed Pathfinder exercise.

Outside the news area, News Interactive is taking a low-key approach. There will be no single big announcement but a number of e-commerce Web sites will be dribbled out over the next six months. The first has already appeared in the form of online auction house

Like roulette players stacking their bets on the same numbers, the three media giants are investing in many of the same types of online real estate.

Categories include general and specialized news, personal trading, financial services, shopping and job recruitment.

In the online auction room, for example, competes against ecorp's eBay Australia and F2's In financial services, F2 has placed its bets with,, and, while ecorp's portfolio includes and (mortgage lending). In the job recruitment space, News Interactive's is pitted against F2's

In the executive suites of all three organizations, the accent is on youth.

Ecorp's Petre, who at 28 was managing director of Microsoft Australia, now at 40 finds himself a relative greybeard. His deputy chairman, Jeremy Philips, is 27. F2's Dews is 36, and News Ltd's McAree is 38.

The lesson, it seems, is that young reflexes are at least as important as experience for Formula One drivers and online media executives.