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This commentary originally appeared in Forbes.

Rupert Murdoch, the chairman of News Corp. (NASDAQ:NWS), recently threatened to cut off his media empire's pages from Google's (NASDAQ:GOOG) search engine and link up with Microsoft's (NASDAQ:MSFT) Bing instead. He wants to stop sites like The Huffington Post from repackaging stories from his outlets without paying for rights. He is mad, and he is letting everyone know.

Murdoch's rant is odd because he is normally so smart about the media business, as one of the few people who have recently made newspapers profitable enterprises. He shouldn't be complaining about upstarts and new technologies. He should be confronting the changing marketplace and evolving his business model. Examples abound of companies like Kodak or Wang Laboratories that failed to adapt quickly enough.

With the financial crisis shaking up industries, Murdoch's News Corp. and other companies that are threatened should focus on three things to avoid facing eventual extinction.

The first thing they should do is adapt to changing consumer tastes in defining their brands. Take The Huffington Post. It is getting more hits than traditional news Web sites like the The Washington Post (WPO) and the Los Angeles Times.Why? Because it steals content, as Murdoch argues? No. It succeeds because it delivers what its evolving core target market wants and embraces new forms of technology. Its editors realize that people who like to see pictures of Tiger Woods' alleged mistresses also want to be informed about world events, and that serious folks like to dive into the salacious sometimes. It links to videos of the comedian Jon Stewart. It gives us columns by the sexpot actress Jessica Alba as well as by the economist Jeffrey Sachs. It knows that its readers want more opinion pieces from regular Joes, not just from the media elite. This may sound all over the map, but in reality The Huffington Post's content mix is tailored to a very particular readership.

In other words, The Huffington Post defines its niche by giving readers brain candy without going too lowbrow. Murdoch's own Wall Street Journal defines its niche by being indispensable to businessmen, by offering timely and in-depth analysis not found elsewhere.

Contrast that with the Washington Post. It is struggling because it hasn't defined itself for the digital age. We can't tell if it's a world news publication or an entertainment paper or a broadside only for people within the Beltway. Right now it's trying to do too much, and without the resources to compete with niche publications. The result is that is does a little of everything, but nothing terribly well.

Second, aside from understanding how their consumers are evolving so they can properly define their brands, companies need to check their business models to see if they still make sense. What worked in the past doesn't necessarily work anymore.

Blockbuster (BBI) is an example of a company that failed to evolve fast enough. Its market share has been eaten up not only by Netflix (NASDAQ:NFLX) and its online subscription and delivery model, but also by Redbox, which has emerged as a threat simply by offering DVDs for a buck at kiosks. Redbox now has nearly 17,000 locations, four times as many as Blockbuster. Blockbuster has responded by installing kiosks, but it was slow to see that consumers would rather have less selection at cheaper prices in convenient locations than go out of their way to expensive movie stores.

International Business Machines (NYSE:IBM) is an example of a company that saw when things changed and moved on at the right time. It invented the personal computer in the 1980s, but in the last decade it recognized that PCs had become a commodity business and shed its final portion of that business to Lenovo (OTCPK:LNVGY). Now it is focused on services and software and enjoys fatter margins. It acquired the software company SPSS in 2009 and is enjoying solid growth.

Finally, companies need to be the first to embrace new technologies, rather than the first to complain about them. Blocking Google from linking to Murdoch's empire would just be a temporary fix, for some other game-changing technology down the road will undoubtedly leapfrog ahead. Instead, Murdoch should try to figure out how to use Google to his advantage--as Eric Schmidt, Google's chief executive officer, recently recommended.

Companies need to be the early adopters of new technologies. If your competitors embrace new technology and you decide to use it too, you're already just playing catch-up, and the added expenses don't help you. You need to move before your competitors do. The companies that were first to launch marketing campaigns on Twitter and Facebook got great brand exposure. When those campaigns appeared, they were so novel they garnered huge numbers of hits. Twitter and Facebook are still useful, but at this point consumers have become so used to them that they don't make such a big splash.

Or you can do what Hulu (in which News Corp. is an investor) did with the advent of online video. Rather than trying to stop the technology, Hulu coopted it and created a place where viewers could see high-quality full shows online rather than the short clips on YouTube. Hulu created a very different value proposition from YouTube's. It is still experimenting with revenue models, but it has undeniably changed the game and is a site to watch in the future.

Instead of ranting about what The Huffington Post and Google are doing, Murdoch should have his various media outlets adapt to new realities. In times like these, you need to adapt or else go out of business.


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Source: Rupert Murdoch Needs to Evolve