Rupert Murdoch's Price War   

Australian press baron Rupert Murdoch fired the first shot in England's bloodiest newspaper price war. And now everyone is waiting for the next bomb to drop.

Murdoch, owner of Britain's most upmarket newspaper – the Times – and its most downmarket – the Sun – instigated the price war a year ago. That's when he slashed the price of the Times from 45 pence (67 cents) to 30 pence (45 cents), undercutting the other three "quality" broadsheets by at least 22 cents.

Journalists, media analysts and especially the rival Daily Telegraph, the largest-selling broadsheet in England, waited anxiously to see what would happen next.

They found out. Murdoch's plan was as simple as Kmart's "Blue-Light Special": Lower the price and people will buy. Sure enough, the Times' circulation began climbing and others' began falling. The Daily Telegraph, panicked at seeing its circulation dip below 1 million for the first time since the 1950s, cut its price from 48 pence to 30 pence last June.

The Times immediately responded by putting a 20- pence (35 cent) price tag on its paper, a move the Daily Telegraph could not afford to follow. In fact, the Times couldn't have afforded its price cut if it weren't subsidized by Murdoch's vast media empire.

Murdoch also lowered the price of the Sun, a right-wing tabloid that features topless "page three girls" and enough sensationalism to make the National Enquirer look classy, from 25 pence to 20 pence.

With 12 national papers, England is one of the most vibrant journalism markets in the world. But a price war the likes of this one hasn't been seen this century. What exactly is Murdoch trying to do? To some it's simple: He hopes to kill off his rivals.

In an editorial headlined, "A Price War with Murder in its Sights," Colin Myler, editor of the left-leaning national tabloid, the Daily Mirror, launched a full page attack on Murdoch in another London newspaper, the Evening Standard, the city's largest afternoon newspaper.

Murdoch is practicing nothing less than "predatory pricing – selling his newspaper at a figure that his rivals cannot match, even in the case of the Times, at a loss," Myler wrote.

Indeed, while the Times showed a 244,000 circulation increase during the month of August, it also suffered a loss of 45 million pounds ($67 million). The Daily Telegraph managed to crawl back up to its 1 million circulation following its price cut, but lost 1 million pounds ($1.5 million) in just two weeks of selling at the lower price.

Bolstering the view that he is seeking to destroy all competitors, Murdoch has been quoted as saying that his vision of the future in England is an industry with only three newspapers. Murdoch's spokespeople, however, vehemently deny that the media mogul ever made such a statement.

"Originally he wanted to prove that the newspaper market was price-sensitive," says Liz Wright, a spokesperson for News International, Murdoch's UK publishing company. "People were saying it wasn't true that people bought newspapers based on price."

Wright says overall circulation figures for the four other quality newspapers are up 10 percent, which indicates some readers are now buying two newspapers instead of just one.

But the Independent, another quality newspaper, which initially resisted cutting its price, doesn't believe Murdoch's aims are so benign. The paper's circulation dropped by 11 percent – to 289,000 – between August 1993 and August 1994. In June it ran a front page editorial denouncing Murdoch's tactics and then cut its price to 30 pence, a drop it could ill-afford.

The paper also has filed two complaints with the government Office of Fair Trading, charging that the Times' price cuts are anticompetitive and amount to predatory pricing. The government office rejected both claims.

Some believe that while Murdoch may not shed any tears if he pushes his rivals over the financial edge, that is not his primary goal.

Nick Garnham, director of the University of Westminster's Center for Communications and Information Studies, speculates that Murdoch is planning to inflate the Times' circulation figures as much as possible and then, if the paper still proves to be a huge money loser, sell it off. As Murdoch's interests move from newspapers to satellite television, he says, "he faces the question of staying in the UK newspaper market."

Proof that even Murdoch can't maintain lower prices indefinitely is his decision last August to raise the Sun's price from 20 pence to 22 pence.