Tuesday, July 17, 2007

Slouching Towards News Corp.

It looks like Murdoch is going to win his bid to take over the Wall Street Journal. I work in Midtown about a 10-minute walk from News Corp. HQ, and I can hear the cackles echoing up Broadway.

I've done a one-eighty on my Murdoch-buying-the-Journal position. At first I was gung ho, and thought he'd inject some much needed liquid funds into a paper that, in the last five years, has been forced to close foreign bureaus, sell divisions at a loss, and trim the physical size of the paper to save on pulp costs.

Plus, there's something heroic in the old wizard that appeals to me. He's like the empire-builders of old, ceaselessly acquisitive, natives (aka Journal employees) be damned. More directly, he's like the press barons of the late 1800s, who essentially controlled public opinion and used it to build castles and dynasties.

As much as I find the guy exciting, he's bad for journalism. The Times, the New Yorker, and the Journal all have written pieces that investigate Murdoch's use of his media empire to further his business concerns. The most damning allegations - and the biggest risk for a Murdoch-owned Journal - is that he censors criticism of the repressive Chinese Communist Party in order to keep his lucrative broadcasting licenses there. Don't expect to win any Pulitzers writing about Hu Jintao's love of gardening.

I've talked to a few Journal reporters about the impending takeover; they're remarkably blasé about it all. I guess I would be too. The alternatives, at this point, are gloomy. The most hoped-for wish at one point was for a rival suitor to come along, like Warren Buffett. But even a jolly round guy like Buffett would put business first and foremost, slashing costs and staff like Zell will probably do at Tribune. At the very least, Murdoch will throw so much money at the paper it'll think it's an expensive stripper.

The other alternative would be for things to go back the way they were before, the Bancrofts in charge and the stock price at a little over 50 percent of what it is today. Unfortunately, the Bancrofts were never the benign owners we like to think they were; they used their supervoting shares to ensure hefty dividends to keep their pleasant, patrician little lifestyle intact. Journalistic independence came at a cost. A great piece in the Columbia Journalism Review casts light on the Bancroft's cash machine, noting that with average yearly dividends of a dollar a share and 20 million shares between them, the 35 Bancrofts make a cool $571,000 a year each for doing nothing. (Following through on the math, at Murdoch's offer of $60 a share, the average Bancroft take-home will be $34 million.)

Murdoch put it best when he said that “a year ago, they made $81 million after tax and paid $80 million in dividends. You can’t grow a company that way.”

So while I'm no longer gung ho about a Murdoch takeover, unfortunately it may be the lesser of three evils.

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