Pearson invests in an IT growth strategy

February 28, 2012

Marjorie Scardino

Pearson group led by Dame Marjorie Scardino has been investing in innovation to secure its future, and that of its flagship product The Financial Times

LWD has followed the successes of the grande dame of organizational leaders since one of our earliest posts [2007].

More recently we grumbled at the FT policy of restricting extractions from its e-content which we saw as part of the new emerging models for IT businesses, and not unlike Rupert Murdoch’s efforts to reinvent his own business model [2009], now threatened by the legal morass News International finds itself in. So it is somewhat more pleasing to report positively on this week’s news [28th Feb 2012] of Pearson’s efforts to reinvest its profits in innovation.

Dame Marjorie Scardino, the head of Pearson, has again scotched stories that the Financial Times could be sold as she earmarked another £1bn for acquisitions to drive the education group’s international expansion. Pearson, which also owns the books publisher Penguin and Edexcel, Britain’s main exams-testing body, spent £900m last year as it began to recycle proceeds from the sale of its stakes in the data provider IDC and the FTSE indices business. The money went on testing, technology and work-training firms in China, the US and Britain.END
According to the Thisismoney website

The publisher’s chief executive Dame Marjorie Scardino said the proportion of sales derived from digital output and services – such as teacher training – was more than 50 per cent. She fleshed out a rosy future in which the Pink’Un – as the Financial Times is affectionately known – would no longer be published in print format in some regions.

‘In places where our print run is very small, they’ll become digital places,’ she said, citing parts of Australia and west coast USA. Pearson reported rising sales in all divisions except North American education, where lower school funding has hit sales.

She added that she was ‘a bit sad’ that FT staff threatening strike action had refused to accept an offer including a 3.5 per cent pay rise and no compulsory redundancies. Pearson (down 47p to 1204p) has £1bn firepower for acquisitions. Directors have agreed not to take a 2 per cent pay rise this year, said Scardino, who earned a pay and bonus package worth £2.5million last year.

For a contemporary knowledge-based company, Pearson has a powerful statement of intent: Always Learning.

To go more deeply

See the thisismoney website post


Message from and to the Financial Times

January 16, 2012

The Financial Times now supplies information about its web articles with the request “Please don’t cut articles from FT.com and redistribute by email or post”. Point noted. The battle for pay to view continues

Rupert Murdoch was among the earliest figures to recognise the importance of developing new business models for successful management of news in the era of electronic information media.

The Financial Times, (FT) is also wrestling with these issues.

The FT is part of the Pearson group, the largest book publisher globally. Pearson, led by Dame Marjorie Scardino, has risen to the challenges of the electronic age. Its recent innovations include the search engine newsift

Creating value

On this issue I suggest that the FT may be misreading the way to create value from its information generating capacity. Increasingly the protectionist route is being eroded (music being the obvious example). News media are increasingly relying on social media inputs for the first signals of breaking news stories.

I remain a personal supporter (and reader) of the FT. However, as things stand at present, LWD will chose alternative sources from which to to extract information, and to critique and cite the source. What LWD does is of little importance to the FT. If a similar decision is reached by millions of web-savvy individuals around the world, it’s a different matter.


Sir Martin Sorrell defends leaders’ pay rises

December 19, 2011

Sir Martin Sorrell has an impressive if sometimes controversial business career. His robust defense of his 70% pay rise captures his leadership style

Harvard educated Sir Martin Sorrell has been a candidate for a LWD leadership post for some while. He appeared on the radar screen again, as I caught the end of a BBC interview in which he justifies his most recent earnings rise of 70% last year.

His broadcast performance was consistent with that of an earlier interview [2009], suggesting a leader who was both tough and successful.

Sir Martin Sorrell is the chief executive of WPP, the company he founded in 1986, which is now the world’s largest group of advertising, marketing and communications companies. Widely regarded as one of the most important figures in his field, he recently joined Evan Davis on Radio 4’s business discussion programme The Bottom Line. He shared his vision about the future of advertising, the benefits of scale, why tough love means you sometimes have to bite the bullet and reduce your headcount, and how long the present financial crisis may last.

His 2009 predictions turned out to be rather refuted by events. However, that is largely true for other distinguished leaders in these turbulent times. There is an interesting parallel in his admiration of Rupert Murdoch with the comments made later by Tony Blair in his memoires. These endorsements of the tycoon’s achievements help us avoid the ‘hero to zero’ mentality which can be found in much of popular leadership narratives.

Furthermore, most pundits did not get close to anticipating the aftershocks of the credit crunch emerging in 2008.

Rupert understands…

Somebody like Rupert Murdoch understands that he’s not just in the TV business or the film business. He understands he’s in the communications business. Rather like Theodore Levitt used to talk about the buggy whip industry. They’re not in the horse and buggy industry. They’re in the transport industry. And when the railroads came in, they were threatened; but if you thought about it as being the transport industry, you won.
Rupert understands that. He’s in film, he’s in TV, he’s in outdoor sites in Russia. He’s spread his empire around the world.

“A recovery of sorts”

“The first half of 2009 will be very tough – I think the second half of 2009 will get relatively better. Relative to the first half.
And I think in 2010 we will get a recovery – what we called in a recent statement a recovery of sorts “.

Tough love

Sir Martin’s career has been hugely successful and his success has been rewarded with honours and wealth. He takes risks and cuts his losses when they occur. In the interview he also talked about ‘tough love’ and the benefits of ‘letting people go’ however painful the decision. (Although he didn’t seem too pained, it seemed to me).

The Daily Mail, a popularist tabloid newspaper, was unconvinced about Sir Martin’s case. In an article hostile to his lifestyle The Mail noted:

My pay is very low, moans advertising tycoon with a basic salary of £1 MILLION a year

Sir Martin, 66, said his bumper income, which rose by 83 per cent to £4.2million last year, was fully justified and was mostly linked to the firm’s performance. He added that he considered his basic salary, of just over £1million, to be ‘very low’.

The juicy details

The article also replicated much that can be found on wikipedia on juicy details of his high-profile divorce which has arguably contributed to his celebrity profile, albeit for non-business matters.

Acknowledgements

To the website Short Person’s Support for the image of Sir Martin. The site also offers the following quotable quote:

Aunt Vorthys: “A nice young man … A pity he’s so short.”
Lady Ekaterin: “He’s not so short … He’s just concentrated”

[Lois McMaster Bujold, in Komarr]


Decline of a dynasty? Elisabeth Murdoch ducks board position on News Corp

August 6, 2011

Elisabeth Murdoch has declined an invitation to be nominated for a place on the board of News Corp. The move signals a decline in the prospects of a Murdoch dynasty

Rupert Murdoch’s actions over a period of years suggests his intentions of establishing a Murdoch dynasty at News Corp. The story has all the drama of a TV soap opera with a dash of reality TV as well. Part of the interest has been over which sibling would be most favoured to succeed the tycoon.

Any Murdoch is better than none

It has been suggested by biographers that any Murdoch would be prefered to someone outside the family. This is harder to achieve in a world in which there are interested parties or stakeholders. These extend to institutional investors, and governments concerned with Corporate responsibilities for ethical governance.

As might be expected, the eldest son Lachlan was front runner for heir to Rupert before signalling his reluctance to pursue a career in News Corp although remaining on the board. This placed youngest son James as a front runner in the speculation stakes. The 2011 problems of governance in the proposed takeover of Sky may have weakened the chances of James, but arguably have weakened the chances of all the Murdoch family to take over at the top of News Corp.

Elisabeth

Rupert Murdoch has no prejudice against women as business leaders. Elisabeth Murdoch was for a while a front-runner as his heir, and has demonstrated considerable leadership flair in creating her own media businesses. However, Elisabeth has, like Lachlan implied that her interests would lie outside the top job at News Corp. However, her interests have remained intertwined with those of her father.
Although allegations of nepotism have been made, there can be little doubt of her capabilities to manage large media operations.

According to the BBC

News Corp said Elisabeth Murdoch, 42, told [News Corp] directors that it would be “inappropriate” to join the board. She was expected to join the News Corp board after it bought Shine Group, the television production company she runs.

Prudence

Rupert’s eldest daughter Prudence MacLeod sits on the board of Times Newspapers Ltd, part of News International.

Then there’s Wendi

Rupert’s formidable wife Wendi has been considered a serious candidate for some while. A trust-fund established for their children has become a critical aspect within the power relationships in the extended family.

Leaders born and made

Dynasties provide rich materials for students of leadership. The eventual winners in the succession stakes sometimes justify what others call nepotism. Often however, second and third generation family members lack the entrepreneurial flair of the founders.


Murdoch Meltdown

July 17, 2011

Elisabeth Murdoch and father Rupert

In three turbulent weeks in July 2011, Rupert Murdoch faced a complete meltdown of his global corporation News Corp. The crisis has a timeline which can be traced to the imprisonment in 2004 of a few ‘rogue’ journalists in one newspaper, the News of the World. This spread to allegations of a culture of corruption and phone hacking at the NOTW, and its closure. The story continued to spread with political fallout reaching the wider global corporation

We concentrate on the turbulent weeks at the start of July 2011, after briefly reviewing the wider timeline of events.

BBC Timeline

The BBC gave a good summary of the timeline of events from 2000 to July 20th 2011. although for whatever reason, overlooked the dimension of police corruption which is also to be found within the story. The Timeline It begins with the appointment of Rebekah Wade (later Rebekah Brooks) as editor of News of the World in May 2000, and ends with her resignation as Chief Executive of News International, July 15th 2011

Resignation of a News Corp executive fuels the wider story

Within hours of Rebekah Brooks tendering her resignation as head of News International, her predecessor Les Hinton, one of Rupert Murdoch’s closest lieutenants in the United States, fell on his sword, saying that the pain his reporters had inflicted on innocent people was “unimaginable”. Mr Hinton has been the publisher of The Wall Street Journal since Mr Murdoch bought it in 2007 and his continuing presence was threatening to drag the media mogul’s prize US newspaper asset into the scandal.

Two symbolic events

Two events received particular media attention. They were presented as reflecting a callous culture, which ignored the impact of behaviours on members of the public who were already victims of tragic events. Each story involved journalists who had targeted families of victims of highly emotive tragedies. In the UK, the definitive episode involved tampering with the mobile of the murdered teenager Millie Dowler which may have given false hope to the family. Rupert Murdoch was to meet and apologise personally.

In the USA, allegations developed of hacking of phones of families of victims of the 9/11 World Trade Center bombings.

An unfinished case

This post ends [17th July 2011] at the start of a week which promises more in the unfinished drama surrounding Rupert Murdoch and the business empire he founded. One interesting theme is being reported concerning his daughter Elisabeth, on whom it is reported he is now pinning his hopes to take the dynasty forward. This is certainly consistent with a story that has cropped up from time to time within biographic accounts.


Rupert Murdoch Creates a New Business Model

August 6, 2009
Rupert Murdoch

Rupert Murdoch

The Murdoch Empire faces tough times. It has responded with an attempt to develop a business model which has the features of creative destruction, and may change all ideas of freedom of information

According to the BBC [August 8th 2009]

News Corp is set to start charging online customers for news content across all its websites. The media giant is looking for additional revenue streams after announcing big losses. The company lost $3.4bn (£2bn) in the year to the end of June, which chief executive Rupert Murdoch said had been:

“the most difficult in recent history …The digital revolution has opened many new and inexpensive methods of distribution but it has not made content free. Accordingly, we intend to charge for all our news websites. I believe that if we are successful, we will be followed by other media. Quality journalism is not cheap, and an industry that gives away its content is simply cannibalising its ability to produce good reporting”

Alfonso Marone, of Value Partners Group, told the BBC that the model could work for “for must-read, must-know content such as Wall Street Journal and the Financial Times [which already charge for content, for example] He believes that a micro-charging structure, where readers pay just 5p or 10p to access an article, might work. “This is less than the price of a text message],” he argued.

Sly Bailey, the chief executive of Trinity Mirror, doubted “that it is possible for publishers to charge for general news content when the same content is given away for free by the BBC, Google News and others. I don’t think this is about what Rupert Murdoch wants.”

The BBC is understandably interested in the story. It will inevitably be forced into even more changes which have already seen it go multi-media over the last few years.

The traditional press also has its free to view articles such as this one from The Guardian which argued that the BBC is, in effect, the biggest free news website in the world, and that “ In a world where everyone is taking a gamble, one thing is certain: a new round of Murdoch-led lobbying [threatens to] clip the BBC’s online wings”.

Who made the rule that everything on the internet should be free? It’s the question that beleaguered media executives around the world are have been muttering to themselves for months now. The only certain answer is that it was none of them, because when the decisions about internet strategy were being made in their organisations, none of the most senior bosses were particularly interested.
Now, hit by the double whammy of a cyclical advertising downturn and huge structural change, the news business is going through the same pain that afflicted the music industry. After years of hoping the problem would go away, news organisations are desperately reaching for the same strategy adopted by the music bosses: shutting the paid-for door after the free horse has long since bolted.
It’s not the first time that news organisations have flirted with charging for online content. The New York Times hoisted a pay wall around its columnists, only to find that everyone stopped reading them. After their precious journo-stars started to complain, the Times abandoned the strategy, but it led directly to the birth of the Huffington Post, a free comment website that provides a far more wide-ranging daily analysis of the US political scene.
The (Murdoch-owned) Wall Street Journal and the Financial Times have had limited success in charging for specialist financial news and comment. But the proliferation of free online sources, aggregated by the search giant Google, has doomed to failure any attempt by others to extend such charges to general news content.
Rupert Murdoch’s announcement that all News Corp’s newspaper websites – including the Sun, News of the World, Times and Sunday Times in the UK – will charge by next year is therefore a sign that the news industry is running out of options. The old business model – cover price plus ad revenue – is bust: blown apart by the loss of classified to online networks and collapse of cover-price revenue due to falling sales. The hoped-for cash from online advertising has not materialized, at least not on the scale that would support the kind of journalism practiced by the likes of Murdoch’s papers [ or for that matter the Guardian]

A Case for Creative Leadership

This seems a suitable case for creativity, and creative leadership. It is complicated enough deciding what the problem is. And then what ideas can be developed about what might happen in the future. The stakes are terrifying high for newspaper magnates, and the consequences will impact on a sizable proportion of the world’s population and its businesses.

Image of RM from uptown life