Murdoch - The Last Frontier or The Next Frontier?

Stepping back from the hacking scandal and the detail that must now obviously be sifted through, I try to wonder about the tactic of the Murdoch empire in dropping the toxic News of the World so quickly, there is the obvious desire to complete the BSkyB deal as a paramount concern, but are we starting to see a change in direction for News Corp for the long term as media disintermediates across the spectrum? Ditching a print medium in this long term view is merely small change and may have been on the cards in the medium term anyway, recent events would have just made it more expedient. Thinking about this made me go back to a speech Murdoch gave in Paris in May this year to the eG8 Forum. The speech was titled Education: The Last Frontier.



In the speech Rupert Murdoch outlines a compelling truth about how education is lagging behind in the use of technology to engage and facilitate learning and he sets out compelling evidence that any learning technologist would firmly agree with, but before we commend him too highly on this noble outspoken and passionate speech (apologies for evident cynicism) – what lies behind it?
His opening statement that “we are living through a time when many of our leading economies are not performing as they should” maybe the key indicator to his mindset, he knows that News Corp will need to diversify their businesses away from mainstream media over the next couple of decades.
He continues, “everywhere we turn, digital advances are making workers more productive - creating jobs that did not exist only a few years ago, and liberating us from the old tyrannies of time and distance. This is true in every area except one: Education”. Like countless other publishers News Corp knows the education market is being set up for ripe exploitation across the globe.

He preceded this speech by making strong forays into the educational market at the end of last year, firstly by acquiring Joel Klein, the chancellor of New York city’s public schools, the same man who is now heading the internal News International investigation in the UK, he is Executive Vice President overseeing investments in digital learning companies with a News Corp education division and a $2 million salary. A few weeks after Klein joined News Corp they then acquired Wireless Generation, a Brooklyn based education technology company, for $360 million, with News Corp owning a 90% stake. Prior to this takeover News Corp had told the New York Times they planned to make “seed investments” in entrepreneurial education companies, it is likely that Wireless Generation is the first of these investments. Spokeswoman Andrea Reibel stated that “Wireless Generation is positioned to grow aggressively, and it was the right time in the company’s journey to find a home where it will have access to the resources it needs to fuel that aggressive growth”.

Rupert Murdoch stated “When it comes to K through 12 education, we see a $500 billion sector in the US alone” about the acquisition. Murdoch is not stupid, he would have seen the success of other large publishers entering into the education sector and firmly set his eyes on the same prize as he concludes in his eG8 speech “Right now, these are just bits and pieces. Our challenge is to learn from what works best - wherever in the world we find it - and put it all together. My company is determined to try - in a big way”. Is this Murdoch's next frontier?

The landscape in education is shifting dramatically and quickly, particularly in the learning technology sector.
We have recently seen the acquisition of the large global learning technology provider Blackboard(the provider of VLE’s for a large proportion of global education) by “affiliates of Providence Equity Partners” for $1.64 billion. Providence Equity is an investment banker; naturally for investment banking, the firm’s goal is profit. To maintain Blackboard’s stock price at Oracle price-earnings ratio of 20—equivalent to an annual 5% return on investment (ROI)—earnings would need to increase from 2010’s $16.6 million to $74.9 million. That is, net revenue increases and cost reductions of at least $58.3 million are needed to be comparable with other public software companies. The average annual ROI of private equity firms for buyouts is 19.6%, though they may accept a less aggressive figure for one or two years. Assuming a market capitalization of $ 1.5 billion, earnings would need to be $292 million. This is $271 million more than current projections for 2011. To meet their expectations software prices would need to increase 52.3%. This could well impact increased licensing costs and maintenance costs for thousands of schools and HE organizations.

Additionally we know that for profit educational establishments owned by large corporations in the US are not without their own scandals as last year’s US Senate Hearings and undercover investigation by The U.S. General Accountability Office into practices at 15 for-profit colleges showed.

Whilst this activity has predominantly been in the US, the global marketplace for the publishing/ information businesses extension of their offerings into education is rapidly growing and as the global outsourcing sector develops into rapidly developing economies (RDE’s) such as India, China and Brazil as their populations are growing and professionalising at a fast rate. Those publishers with their combined resources and global reach will squeeze orthodox education and training providers and gradually start to make headway into buying their way in to the marketplace. It is safe to say that the squeeze has already started with the HE White Paper in the UK that had it’s way paved by the report law firm Eversheds provided to David Willetts back in 2010 and was commissioned by private education provider BPP, owned by Apollo Group.

I am not against the injection of private investment within the education sector or private providers of education (I work for one), but I am cautious of large corporations manipulation of education as a market and where it may lead based on the history of the profit motive that drives large corporations and the inevitable risks that start to occur over time. We’ve seen it with the property markets, the banking markets and even more recently with the media in the guise of the News International scandal.

I’m mindful of what Richard Hall outlined in his post,

“Higher education is explicitly a commodity now. It is explicitly open to market forces and for-profiteering. This exposes it to risk, hedging, venture capitalism, and the treadmill of competition. This means that all of the social relationships we develop and nurture within higher education are subject to the rule of money. There is no outside this exchange mechanism that frames how we relate, as Capital turns back in on what it terms ‘the developed world’, in order to accumulate [our mutual futures] by dispossession through debt-driven consumption.”

We need to keep a watchful eye on the corporations that do enter this market and how they operate in their other fields of business, what is their operating ethos and ethics? Something we are all asking about News Corp this week and as they marketise our education, we must educate their markets.

And just in case we ever need reminding of News Corps ethos and ethics: