Chernin's value judgments

Touts digital, but not papers, radio

While the soon-to-launch Internet video site from News Corp. and NBC Universal is often described by outsiders as traditional media's answer to YouTube, Peter Chernin said Wednesday that he would rather the entity partner with YouTube than compete with it.

Already having deals with AOL, Yahoo! Inc. and others, Chernin said, "We would also be happy to make a YouTube-Google distribution deal."

The News Corp. president and COO made the remarks during a discussion at the Milken Institute Global Conference in Los Angeles, where he also warned that there could be massive value destruction coming for the radio and newspaper industries because of the Internet and other digital technologies.

"It would be incredibly naive not to assume there will be billions of dollars in value destroyed," he said.

News Corp. owns more than two dozen newspapers, and Chernin acknowledged that the Internet has already done irreparable damage to the classified advertising model.

Chernin's remarks came the same day that Editor & Publisher magazine reported that it expects print media publications to post 2.5% year-over-year circulation declines for the six months ending in March, and worse for Sunday newspapers.

Value destruction, like the sort the music industry saw, will come to other media as well, but television and movies have a better opportunity to more than replace lost value, he said.

Indeed, Sony Pictures Entertainment CEO Michael Lynton predicted that revenue from the digital distribution of movies — apart from DVD — will outstrip money lost from piracy and other considerations.

"As things become more fractured and fragmented, the big, big brands become that much more powerful," he said. "A successful movie is getting watched more than it ever has in the past."

Chernin guessed that "pure digital" revenue, which doesn't include DVD and satellite television, will rise from 5% of News Corp.'s total to about 30% in five years.

Lynton predicted that Sony Pictures digital revenue will rise from less than 2% this year to about 20% in five years.

Referring primarily to TV, Chernin added that "things that aren't must-see are tremendously challenged because people have so many more alternatives." He especially sees trouble for TV reruns and shows in the "fringe-y time periods."

Lynton and Chernin shared a stage with a couple of new media's elite: Yahoo! chairman and CEO Terry Semel and former AOL chairman and CEO Jonathan Miller, who noted that fragmentation also is happening on the Internet, with 10,000 new blogs springing up daily.

Semel, who once ran Warner Bros. with Bob Daly, said video media executives are handling the digital revolution far better than their music counterparts did.

Recalling the problems Napster presented to Warner's music assets, Semel said: "We sat in every meeting, and all they ever talked about was, 'Let's sue this guy, let's sue that guy, and we'll block this guy.' They did a wonderful job of suing everyone, including themselves."

The TV and movie industry is "still a little slow," he said, "but a hundred times better than music."

Semel said that by the end of 2010 there will be 2 billion people on the Internet, as opposed to about 1 billion now, and many of them will be surfing wirelessly on cell phones and other hand-held devices.

That's no doubt good news for News Corp., which paid $188 million for a 51% stake in cell phone entertainment company Jamba, though Chernin admitted he's not personally a fan of video on tiny screens.

"I do not watch television on my cell phone or iPod, but I'm certainly more than happy to deliver to them," he said.

It's a generational thing, said Miller, who said his 13-year-old son and his friends don't much care about the device the content is on as long as it can be viewed on-demand. "They'll all gather round a wristwatch," he said.

Moderator Dennis Kneale, managing editor of Forbes magazine, pressed Semel on whether he thinks Wall Street appreciates the opportunity Yahoo! has to monetize its huge traffic — about a half-billion worldwide visitors daily. Semel demurred, though Chernin said, "I'd buy Yahoo! stock."

Chernin also noted that News Corp.'s high-profile acquisition, MySpace, also gets a lot of traffic.

"We have 150 million registered users," he said. "They gave us their names, told us what they like, their addresses, who their heroes are and what music and movies they like. We have just begun to monetize that."

The Milken conference ended Wednesday.