Why News Corp really pulled the plug on Project Alesia

News Corporation has been forced to abandon plans for its eagerly anticipated digital news platform, part of the company’s so called ‘Project Alesia’ initiative, citing runaway costs.

As we revealed this morning, bean-counters at Rupert Murdoch’s media conglomerate have decided to pull the plug on the year-long activity when it was expected to be finalised. The decision is said to be absolute: this is not a delay, or grand standing or being placed on hold; this an entire, dedicated News Corp UK operation being dismantled just days before a product was due to go to market.

So what’s going on at the media conglomerate?

£20m but still no cigar?

The unofficial line from News Corp is that after some 12 months of development and at an estimated cost of £20 million, those with control of the purse-strings decided the stakes for the news aggregation service are just too high, and it’s simply too big a gamble to take.

Can this really be true? Can the project’s failure be attributed to a last minute (after 12 months of development) realisation about the full costs involved? Anyone who knows anything about News Corp’s approach to its finances would be surprised at such an oversight.

Apparently, more than 100 people hived away in a Grays Inn Road office for the best part of a year, were only told of their fate on Friday (15 October). Those who were permanent staff are now in consultation, the more temporary specialists working on contracts (approx 80 workers), have been unceremoniously disbanded.

The UK project promised to make content from News Corp’s core print titles, and those of rival publishers, available across all digital platforms, including the iPad and Google’s Android operating system. It formed part of a bigger US drive, led by News Corp’s chief digital officer, Jonathan Miller.

Separate commercial leads were being developed and pursued in the US and UK, but both operations are now said to have been moth-balled. News of the digital failure is just the latest twist in what is already a very tangled and fascinating affair.

Where next for News Corp?

As things stand, News Corp is believed to have a very real, saleable asset that could yet attract VC backing or other joint venture possibilities. Apparently, protracted negotiations have already been held with most major UK magazine and newspaper publishers, with one influential source resolutely confident that “all major titles would have come on board within six months of launch, with the exception of The Guardian”. (It’s worth noting that GNM’s Tim Brooks was the first newspaper leader to go on record and warn against a united News Corp/BSkyB when I interviewed him in July.)

Sources close to WPP’s media buying powerhouse GroupM, who had been exclusively tasked to find launch advertisers for the new platform, express reservations about how many publishers were locked-in.

“Every press director I’ve talked to outside of NI have denied being involved in the project, so it was always very unclear who the amalgamation of publishers would be,” said one. “I only ever gleaned NatMag were keen to be involved, apart from that it was pure speculation,” said another.

The project nonetheless definitely attracted interest from clients, but a list of known publishing partners would have provided a welcome boost.

Another, and I believe more pertinent, development to add to this insight, is the fact that, since last week, many in the British media have joined forces against Murdoch’s attempts to takeover BSkyB in an open letter to business secretary Vince Cable.

Fearful of the combined control of a fully-aligned News Corp/Sky offering, Murdoch’s digital crusaders have performed a small miracle and united The Guardian and Daily Mirror with The Telegraph and the Daily Mail. This is no mean feat, just ask the NPA.

The would-be multimedia empire still waiting for regulatory approval includes The Sun, News of the World, The Times, Sunday Times, Sky and book publisher HarperCollins, and has the rival groups highlighting “serious and far reaching consequences for media plurality”.

The petition’s united front at such a delicate time in proceedings has led to an unprecedented backlash from Murdoch’s stable that has spilled out into Sky news reports, a leader column in The Times and comment piece in The Sun.

Hackles have been well and truly raised by the very publishers News Corp was hoping to enlist in the new project. Is it possible to get into bed with the same people who rail against you?

News Corp sources are adamant the decision not to take the product to market is purely related to concerns over running costs, estimated at around $200m over the next few years. But with the initial outlay for technical expertise and development already paid, would News Corp beancounters really pull the plug now?

Realistic economies of scale?

The biggest single change as far as News Corp’s finances are concerned since the project began 12 months ago, has been the company’s move to take full control of BSkyB, at a cost more than £7.8bn. That sort of money is guaranteed to eat into anyone’s cash reserves.

The deal on the table would have seen individual publishers paid every time a subscriber came on board, meaning until critical mass was reached costs would be high. The plan was to charge £9.99 per month for unlimited access to the bundled content. Projected forecasts were to achieve one million subscribers by the end of year one.

News Corp was funding the physical platform, described by some as being “light-years” ahead of anything else currently available, but sources strongly deny there was ever any interest in asserting any kind of editorial control over third-party content.

By way of comparison, News International has just launched a joint offer for access to the Times and Sunday Times sites, at a cost of just £1 for 30 days. But as yet, there is still no official statement on the impact these paywalls
are having on the business.

The autopsy for the ‘News Corp platform that never was’ has only just begun, but I believe that when faced with an increasingly hostile circle of potential publishing partners, uncertain advertising support, and a long, expensive subscription drive; securing the proven assets of BSkyB became a far more important, and attractive, priority.

But where does the UK’s publishing industry go from here?

  • Dee Livery

    $200m? That was just the lunch budget.