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May 03, 2007
Murdoch’s Wall Street Journal Bid
Rupert Murdoch, on behalf of his News Corporation, bid $5 billion for the Dow Jones & Company, which owns the Wall Street Journal.
The press and the blogsphere have been going nuts with speculation: Is the Murdoch bid a good or a bad thing for journalism? What will a Murdoch Wall Street Journal look like if the Bancroft family, who own a majority of the Dow Jones voting stock, agree to sell? If the Bancrofts don’t sell, will Murdoch go away?
The last question first: No, Murdock and the News Corporation’s bid will not go away. Murdoch is the most brilliant corporate media strategist in the world and he knows exactly what he is doing. He’s as patient as he is smart; so he’ll wait. Even though many members of the family don’t want to sell to Murdoch as a matter of pride and many WSJ employees are terrified that their big-J Journalism integrity and independence will be compromised by selling to Murdoch, my advice to them is, “Get over it.”
The second question: A Murdoch Wall Street Journal newspaper (you know, that thing that kids call a “dinosaur blog”) will look and read virtually the same as the newspaper is now. It will probably have more resources and foreign bureaus. Murdoch is not only smart, he’s a long-term thinker. He’ll expand the WSJ’s reach globally slowly, prudently, and relentlessly. Murdoch has proven with his purchase of MySpace and SkyTV that he’s a visionary—he sees profit potential far into the future.
There are many things Murdoch can do when he controls the WSJ: First, he can combine some non-journalistic functions such as circulation, accounting, HR, etc. with the New York Post. The Post is losing about $40 million a year and by combing appropriate functions he can save money at both operations, or he could sell the Post and stop the bleeding. Next, he can not only eventually give an enormous boost to the credibility and resources of his new Fox Business Channel but also hurt its biggest competitor, CNBC, which has a partnership with the WSJ—a perfect double whammy (Dow Jones has a contract with CNBC that runs until 2012, but Murdoch can wait or afford to buy CNBC out.)
Third, Murdoch can improve the WSJ’s website dramatically and make it much more profitable and do some effective cross promoting among WSJ Online, My Space, Fox News, the soon-to-be-launched Fox Business News, and MarketWatch.com, which is one of the most highly trafficked financial websites and which Down Jones owns.
Next, cross-platform selling is beginning to take off and News Corporation would have an awesome number of brand-name, high-traffic, big-audience assets to bundle together to sell advertisers and their agencies who are eager for cross-platform deals in order to cut down the time-consuming complexity of buying advertising in a fragmented media environment.
The final question I asked: Is the Murdoch bid a good or a bad thing for journalism? But this elicits another question, “what is journalism today?” I remember when the legendary CBS News correspondent, Eric Sevareid, gave a speech in which he said, “I don’t know if I’m in the news business or the business of news.” The speech was in the 1960s, long before the fateful summer of 1986 when Larry Tish bought CBS and GE bought NBC and both new owners dictated that the news divisions had to make a profit, an unthinkable concept before that time. After 1986, there were no more doubts that news was a public trust; it was a business that had to make a profit.
Journalists who think that being a business—making a profit—doesn’t come first, especially in public companies, are living in the 1960s. Grow up, get used to it. Murdoch’s $60-per-share offer is a whopping 15 times estimated 2007 earnings, which is much higher than the average 8 to 10 times valuation for newspaper companies, according to Media Daily News.
The Bancroft family is not involved in running the WSJ anymore and they are out of touch with reality if they think anyone else will buy the company for anything near what Murdoch will pay. Eventually the family will come to the realization that newspaper stock prices are declining rapidly and that they better take Murdoch’s offer before the company is worth a quarter of what he’s offering.
No company but News Corporation has the assets that have such a good strategic fit and as many possibilities as News Corp. No one else will be nuts enough (or smart enough) to pay $5 billion dollars. The Bancroft’s will take the money and run eventually. If they are smart, they’ll take cash and News Corp. stock, which will appreciate. My advice to the journalists at the WSJ who are whining: Buy News Corp. stock, that way you’ll do well no matter what happens.
Posted by Charles Warner at May 3, 2007 01:31 AM
Comments
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at May 3, 2007 01:05 PM writes:
Bruce Braun writes:
"If the Bancroft family thinks that Murdoch's offer will trigger significantly larger offers, they should think again.
The big money rests with all of the private equity funds for these sorts of deals. However, there are three big problems with those guys.
First, private equity funds are all predicated on returning 30 to 50% returns over short time frames to their investors. Murdoch is a long-haul guy. His main concern is with the price of the News Corp stock, where he controls (I think) about 70% of the voting shares. While he certainly has a responsibility to the shareholders, he is the 800 pound gorilla of the shareholders.
Second, none of those big money private equity funds have the scope and magnitude of media assets to leverage the Dow Jones assets the way Murdoch can. Murdoch is the King of the Hill...no pun intended.
Third. as you pointed out, newspapers are some of the least attractive media investments these days. Unless you can leverage all of that print content across all other forms of media (TV, online, mobile, etc), or there are real estate assets (think, the NYT's building) that can be flipped in a couple of years, there is no upside to making those sorts of investments for the investment funds. Can anyone name all the private equity funds that rushed into the bidding for the Tribune Company? And Tribune has a lot of non-print media assets. Sam Zell is a real estate guy and Tribune has a lot of big old buildings located in prime major markets!
Any bets on what happens to the Tribune building on Michigan Avenue? The LAT's building in downtown LA?
JNCatlett at May 3, 2007 09:33 AM writes:
As a former manager of some Murdoch broadcast properties, I would argue that the "Murdoch agenda" is pretty purely a commitment to make money for News Corporation shareholders over the long term. His ownership of newspapers in the UK market that target several different points on the socio-economic spectrum are a strong indication that the Wall Street Journal isn't likely to begin to look like a national version of the New York Post, and his willingness to endorse New Labour after years supporting the Conservative party demonstrates that his politics are also malleable according--primarily--to what will be best for his business and its shareholders.
Paul Talbot at May 3, 2007 08:54 AM writes:
"As someone who is reputed to be more conservative than I really am, I get annoyed sometimes that subjects are not put out properly, explained properly."
So how annoyed will Mr. Murdoch be with the "Journal?"
Naturally the editorial pages are safe. But investigative pieces that take readers into the often unsavory backwaters of business may be under fire. Mr. Murdoch will have an interest in making sure tomorrow's Ken Lays are "explained properly."
Or not explained at all.
A vital newspaper is at risk of losing its ability to provide unvarnished business news.
Murdoch's business acumen is not being questioned.
But his agenda is. Consumers of quality business news, no matter what their political ideology, would agree the "Journal" is not an appropriate environment for the Murdoch agenda to take root.
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