Media Curmudgeon

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May 5, 2007

Corporate Vs. Family Media

The unions involved with the Wall Street Journal don’t want the Bancroft family to sell Dow Jones to Rupert Murdoch’s News Corporation. Of course not, union members want their automatic pay raises every year regardless of individual performance. The union wants the majority owners, the Bancroft family, to continue to fund annual pay increases in the face of revenue and profit declines.

The argument against selling is that the sale would be bad for journalism (merely conjecture). The “bad-for-journalism” argument is, excuse the pun, a paper tiger. What the unions and other naysayers are really saying is that a sale to Murdoch might be financially bad for the union and financially good for the owners, but the owners should be willing to deplete their wealth on principle—the privilege of ownership.

Let’s see how much that privilege would cost. For example’s sake only, let’s say the Dow Jones Company is worth $1,000 today. Let’s assume that all costs for the company (labor costs, technology costs, newsprint costs, etc.) raise a modest three percent a year (an amount no union would be satisfied with and does not keep up with inflation) and that revenue declines three percent a year. That would mean a six percent decline in the company’s value, so that at the end of the year, the company is worth only $940. In 16 years and eight months the company would be worth nothing.

Now let’s look at families that have not been willing to support newspapers that have declining profitability and those families that have been willing. The Binghams of the Louisville Journal weren’t willing—they sold to Gannett in 1986. The Chandlers of the Los Angeles Times weren’t willing—they sold to the Tribune Company in 2000. The Sulzbergers of the New York Times have been willing, the Grahams of the Washington Post have been willing, and Rupert Murdoch has been willing. Murdoch loses an estimated $40 million a year on the New York Post, but he keeps it operating. You may not like the paper, but it does provide an alternative voice to the establishment New York Times and the Daily News. Murdoch grew up in the newspaper business in Australia and owns several newspapers, including the Times of London, and he takes some pride in ownership, a pride he's willing to pay for.

Who would you bet on keeping a declining newspaper going, the Bancroft family, who haven’t taken an active role in the ownership of Dow Jones in decades, or Murdoch, who seems to love the newspaper business? What other company would be willing to pay what Wall Street and rational investors think is an outrageous premium for Dow Jones—Google, Microsoft, Yahoo, Time Warner, Gannett? Shareholders of these companies would toss out management if they even considered paying as much as Murdoch is offering for Dow Jones, and rightfully so.

The only way to keep the newspaper business pure and untainted from the profit motive, is for some generous savior with virtually unlimited wealth and no profit pressure due to public ownership—Bill Gates, Warren Buffett, e.g.—to buy a newspaper and put its ownership into a non-profit foundation and have the foundation support its losses if there are any. This model works for the St. Petersburg Times, owned by the Poynter Institute, set up by the late Nelson Poynter, who owned the paper. The model works for NPR. The future of newspapers is either with large corporate owners such as Murdoch’s News Corp. that can leverage their brands and assets. Or with eeleomosynary foundations using an NPR model of community support (voluntary subscription fees) and underwriting instead of advertising.

I may be one of many people who contribute more to my local NPR station than I pay for access to the Wall Street Journal Online, so I and others might pay more for the WSJ if we had to. Such a model might work; however, I think I’d rather pay what I do now and have Murdoch own the WSJ, which I might like. Murdoch is quoted as saying he wouldn’t change it much, although he did say some of its articles are too long—he couldn’t finish them. I agree, but of course I’m almost as old as he is, so it might be a matter of age.

Posted by Charles Warner at May 5, 2007 11:42 AM

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