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Reorganization savings add up for News Corp.

News Corp.'s dismantling of the News Digital Media subsidiary as an independent entity will likely go unnoticed by Fox viewers going online. "If anything, consumers will see an improvement because the sites will be far more linked with the broadcast brethren, going directly onto the sites with no filtering from the news, sports or entertainment source," says Andrew Butcher, News Corp.'s vice president of corporate affairs and communications.

The announcement of the reorganization at the start of the year came despite an upswing in visitors and sales, according to Jon Richmond, president of News Digital Media. "We were having a great deal of success. Our traffic increased from 2 million to 7 million unique visitors. We were on target to meet our revenue projections. We wanted to decentralize once we'd built such significant traction."

Aside from bringing together online and on-air production, significant savings will come from outsourcing the back-end Internet operations. "Clearly, such infrastructures are not our core competencies," adds Richmond. "The decision to transfer these capabilities to Loudcloud [an Internet operations provider] came prior to decentralizing."

How will long-term strategies be affected? "We're still very bullish about broadband. But original broadband programming will probably take a backseat for the time being until the consumer demand grows to support it," Richmond says.

The biggest change from the reorganization is in expectations for the profitability of Internet businesses. "The key for us on the corporate level is that the monetary savings will be significant," says Butcher. "This becomes an overriding concern given our findings that the advertising-based ad model is not viable now. We do see that there is a tremendous future for the Internet, especially when combined with Interactive TV."