July 24, 2007

Now that Rupert Murdoch has succeeded in his bid for The Wall Street Journal, what will he do with it?

Since the formality of shareholder approval remains, nothing is likely to happen immediately. Murdoch’s history with other acquisitions — as well as various developments in the media world over the last four months — lead me to the following predictions. Please add your own here as well. We’ll revisit this piece in 90 days and see who got what right and wrong.

Murdoch will make few immediate changes and won’t do any trashing: One of the jokes in the Journal newsroom last week, according to a New York Times article, was that Murdoch would start running pictures of topless women on page three, but in a concession to tradition, do them as dot drawings. Sure. That is one way of saying it makes no sense for News Corporation to pay a huge premium for a paper rich in tradition and class, and then take it down-market. Say what you will, but Murdoch is a smart businessman. Impulsively tinkering with a prized (and somewhat financially fragile) asset just doesn’t make sense.

Murdoch will invest and innovate: Murdoch has hinted that he will make significant new investments in both the newspaper and other Dow Jones enterprises. Possibilities include expanding the Washington bureau, making some changes abroad and perhaps ambitiously pursuing superstar financial journalists. I would look for Murdoch to make some of these moves within days of the deal’s closing. Astute at the arts of public relations, Murdoch will do well to be ready to roll immediately with some bold steps aimed at establishing good faith.

There will be some defections, but the sky won’t actually fall: Expect some stars to be plucked from the Journal‘s ranks amid the turmoil of the transition. Worst case in the short run is that stars will jump ship en masse, but I’ll be surprised if that happens. At the upper levels of business journalism, hiring away your competitors’ stars is standard operating procedure — that is how Conde Nast Portfolio was launched.

And just last week, The New York Times hired The Washington Post‘s economics editor, Justin Gillis. With the Journal under continued close scrutiny, even a few such moves will be reported as the sky falling. Murdoch bashers such as Slate‘s Jack Shafer and Columbia Journalism Review‘s Dean Starkman have been implying that no self-respecting journalist would work for the man. Easy for them to say, but the vast majority of staffers with livelihoods on the line are likely to stay and take their chances.

Murdoch will do some newsroom meddling and get blamed for even more: Journal watchers will have a sharp eye out for any whiff of a story or editorial tilted toward Murdoch’s business interests and for any showing of his work in the news pages. (Remember the New York Post exclusive on Richard Gephardt’s selection as John Kerry’s running mate?) Top media get second-guessed for what they do and do not cover under any circumstances, and even the biggest and best make the occasional blunder. As soon as that happens at the Journal, it will be time to blame Murdoch, blameworthy or not.

A feeble “special committee” won’t amount to much: Lengthy negotiations between the Bancroft family and News Corporation yielded an agreement June 27 to form a special committee to safeguard the Journal‘s editorial independence. The awkwardly worded document envisions “approval rights” to the appointment or removal of the Journal‘s managing editor and editorial page editor — though not of the publisher to whom they report. The committee would also have the power to investigate and “resolve” disputes, in theory on complaints brought by the managing editor or editorial page editor.

 Editor & Publisher‘s Joe Strupp surveyed senior journalists for reaction and found the structure largely ridiculed by such legends as Ben Bradlee and Gene Roberts. Once Murdoch owns the paper, of course, he will find a way to run it, and that’s appropriate. Consider the committee as a gesture at respecting family traditions as the Bancrofts exit stage left.

Bring on the Brits: Murdoch has been too polite to say so lately, but I read him to be a believer in the natural superiority of British and Australian journalists and the idea that they have a sharper edge and work much more quickly than American journos. I would be surprised if he doesn’t try to infuse some of that into the Journal, either from above or via some infiltration of the ranks.

That could prove a tricky exercise, though. The Economist and Financial Times are superb publications, but their U.S. audience is only a small fraction of the Journal‘s. The Journal has a strong, pure journalistic culture, as departing staffer Peter Waldman pointed out last week. The paper collects news internationally but tells it in an American voice. Introducing a foreign accent could provoke reader backlash.

Expect some bold business-side moves: Murdoch says he has fun dabbling with the Post and other tabloids. The real expression of his creativity, though, is in business. The most familiar stateside example is Fox News Network.  James Fallows argued in a long profile of Murdoch in The Atlantic several years ago that the network’s conservatism is not so much a reflection of strong political beliefs as it is brilliant positioning. Fox News was entering a crowded market in which the four big competitors (ABC, CBS, NBC and CNN) were all perceived as liberal.

So I’m watching for the business-expansion ideas Murdoch has up his sleeve, beyond the obvious match with the financial cable network he plans to start. He is more wholehearted than many newspaper executives in saying the future is digital and putting his money ($580 million for MySpace) where his mouth is. Does that imply that Dow Jones, already well up the electronic curve with more than half its revenues from digital, can go further, faster?

I know his mother is 98, but I would still look for Murdoch, 76, to make his moves quickly, in the space of a year or two.

My forecast may seem to talk around the question of just how sad a day this is for American newspaper journalism. Despoiling the Journal would be a disaster, but there has been more than a degree of unrealistic nostalgia in wishing Murdoch and his bid would go away.

The Journal has not been robust as a business since the tech boom went bust in 2000. Its profit margin for the first half of the year was just 5.8 percent, grouped in a division that includes the paper’s strong online edition and the prospering Barron’s weekly. A profit margin that low would not likely be tolerated by shareholders even in the near term. Such a margin leaves the company without significant capital for acquisitions and hard-pressed to continue paying the high dividends the Bancroft family has been receiving.

Murdoch has made no promises about maintaining current staffing levels, but the staff may have faced even quicker, deeper cuts had the Bancrofts sent Murdoch packing.

Impact will be limited on the rest of the business: Dow Jones is such an unusual organization — and its match with News Corporation’s international operations and Murdoch’s ambitions is so unique — that this deal may have little impact on the rest of the business. There is this, though: a $5 billion demonstration that someone sees value in the business and a great brand.

A final question is whether the deal may pave the way for an acquisition run at The New York Times or The Washington Post. Like Dow Jones, these are public companies with two classes of stock to allow the Sulzberger and Graham families voting control. Chairman Arthur Sulzberger Jr.’s stock in the company is worth a relatively modest $3.5 million (about a tenth of one percent of the shares). By contrast, Chairman Donald Graham’s stock is worth 100 times as much — $350 million. He owns a little less than five percent of the company, and 18 percent is in the friendly hands of Warren Buffett’s Bershire Hathaway Inc.

In the course of brief comments for Clark Hoyt’s provocative piece on whether the Times should examine family commitment to the paper, Sulzberger acknowledged that several younger family members are in training for operating roles (as both he and Graham were soon after graduating from college).

The Bancrofts didn’t let go without a struggle and considerable soul-searching. Perhaps nothing in the newspaper business is forever, but in my estimation, family control of both the Times and the Post looks rock solid for now.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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