Newspapers present one of the great opportunities for innovation in the modern media industry, James Murdoch said yesterday, as he accused the industry of failing to attend to customers' changing wishes.

In some of his first comments since taking control of News Corporation's European and Asian business last year, Mr Murdoch admitted that its newspapers in the UK were facing pressure from declining advertising spending and said it was reviewing every link in its supply chain.

However, speaking at the Monaco Media Forum, he said News Corp did not share others' growing gloom about the prospects for newsprint.

"The newspaper industry has spent so much time wringing its hands about things that are exogenous and not enough time thinking about customers' daily lives."

The group was now using titles such as The Sunday Times to promote other, non-print businesses, he said.

The Sun was benefiting from retailers wanting to advertise price cuts, he said.

The title had become the largest short-break holiday company in the UK and was reaping tens of millions of pounds a year from its online bingo game, he added.

He hinted at the possibility of large, if not imminent acquisitions, predicting that some competitors, including some in the once-booming Indian market, would collapse.

A "dislocation" of market valuations from corporate earnings would make previously impossible deals possible, he said, but he sounded a wary note on spending News Corp's $5.5bn in cash while markets remain volatile.

"What you don't want to do is be strong now and blow it in the first part of the storm," he said.

Mr Murdoch said the group was focusing on how to double the size of its European and Asian businesses within five years, in spite of recent losses on investments in the ITV and Premiere television companies in western Europe and aborted auctions of assets in Russia and Bulgaria.

News Corp announced yesterday that Marty Pompadur, who helped Rupert Murdoch build his eastern European media empire, would leave the company. The move consolidates Tom Mockridge's grip over the group's European broadcast assets.