Murdoch’s house of brands is crumbling

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The demise of the News of the World made headlines all over the world. But while there has been a concerted attempt by executives at News Corporation to bury the scandal by closing the brand, the reality is that this saga is only just beginning. This is the week that the stakes and implications of the crisis swirling around Rupert Murdoch became so much more significant.

This crisis began with failed ethical choices. It was intensified with a botched internal investigation. In recent weeks we have seen very poor crisis management propel the scandal to the heart of British consciousness.And yet I believe the worst is very much yet to come. To understand why closing the News of the World did not mark the beginning of the end of the crisis for News Corp, but rather just the end of the beginning we have to focus on the concept of brand architecture – the relationship between different brands inside a company’s portfolio.

A house of brands approach is the ideal brand architecture for News Corp for a number of different reasons. It allows the company to serve different segments (right wingers who watch Fox News have no idea that the same company also services the hippies who read Pure Health magazine). It also enables the company to hide an enormous market coverage which teeters on the edge of being over-dominant in some markets – the company owns more than 120 newspapers in Australia alone, for example. Equally important, when you are a big media company with high risk journalists working for you, the house of brands architecture ensures that should one brand get into a crisis the relative damage to the rest is limited because the connections between brands in the portfolio are hidden from the consumer.

Last week was bad for News Corp but this week is worse because the scandal has begun to spread

Unlike sub-branding (Ford Focus), endorser branding (Obsession from Calvin Klein) or a branded house (BP) where the risk profile of a company is substantially raised when a crisis hits one part of the business, the house of brands is famously fireproof in a crisis because there is usually no gunpowder to connect one brand in the portfolio to another.

When The Coca-Cola Company had to pull its mineral water brand Dasani from the UK because of poisoning fears in 2004, for example, it proved a major setback for the company’s British operations. But the impact on Coke and the other brands within its portfolio was non-existent because Coca-Cola, like News Corp, has a house of brands architecture.

But this was the week when all that started to change. Let me demonstrate the shift with a simple example. Guess which one of these pairs of brands is connected?

Land Rover and Daewoo Trucks. Philadelphia Cheese and Marlboro Lights. Guinness and Smirnoff. The News of the World and The Times.

The answer is, of course, all of them. Each pair is owned by a common holding company (Tata, Altria, Diageo and News Corp respectively) but all are supposedly separated by perceptual walls created by their parent company’s choice of brand architecture. Except, in the case of News Corp, where those walls have started to crumble.

Intense media attention combined with the actions of senior News International managers has begun to unite the disparate brands together in the public consciousness and link them all to a single, tainted core.

If you don’t believe me look at the way the references in the media have changed in recent days from a focus on News of the World to News International (the UK holding company) to News Corp. Look at the number of references to “Murdoch’s brands” that have started to spring up everywhere. Witness the new Twitter campaign calling for a ban of all “News Corporation” brands including even Sky.

Like ripples in a poisoned pond, the repercussions are spreading wider every day. News Corp’s bid to take total control of BSkyB is now in tatters. Sister title The Sunday Times is now struggling to survive its own scandal related to its alleged access of Gordon Brown’s personal financial information. Meanwhile another title in the group, The Sun, is facing questions over the source for its “scoop” regarding the former prime minister’s son’s diagnosis with Cystic Fibrosis.

James Murdoch, the appointed heir to the News Corp organisation, is tainted and apparently now unlikely to ever lead his father’s empire. Even Murdoch Senior now appears to be facing the crisis of his managerial lifetime. The forced smiles and casual walks with executives cannot disguise the tension in his eyes.

Last week was a terrible one for News Corp because it had to shut down one of its most established brands. But this week is worse, because the scandal has begun to connect the other brands in News International’s portfolio together. Contagion has begun. And the whole house could, quite possibly, burn down.

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