From AJR,   June/July 2008

Stirring the Pot   

Say what you will about Murdoch, he deserves credit for his willingness to invest in newspapers.

By John Morton
John Morton (mortoninc@msn.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.     

One thing you can say for Rupert Murdoch he sure knows how to stir the pot.

Fresh from acquiring Dow Jones and its Wall Street Journal for what I consider a bargain price and the controversial ouster of the Journal's managing editor, he negotiated with Tribune Co. to acquire its prosperous Long Island newspaper, Newsday, for $580 million.

That move triggered two other bids, from New York's Daily News and Cablevision, owner of cable systems on Long Island as well as Madison Square Garden, the New York Knicks and the New York Rangers. Cablevision, which bid $650 million, prevailed after Murdoch withdrew his offer. But there may be more jockeying to come.

Cablevision's acquisition raises the prospect that the cable company could strike a deal with either Murdoch's News Corp. and its New York Post or Mortimer Zuckerman's Daily News to achieve what both had sought in acquiring Newsday combining some production and distribution functions to save money and collaborating on ad sales to raise revenue. Neither the Post nor the Daily News has a strong presence on Long Island.

Whatever happens, it is clear that Murdoch's moves have changed the overall character of the New York metropolitan area's media landscape.

And then there's the Wall Street Journal. When Murdoch was about to take over the Journal late last year, there was much wringing of hands and gnashing of teeth about what he might do to the paper's honored legacy, a concern only partly assuaged when he agreed to an independent committee to pass on the hiring and firing of principal news executives.

There was never any doubt in my mind that ultimately the owner of the Journal, committee or no committee, would make all important decisions at the paper. This was underscored by the resignation in April of Marcus Brauchli, appointed to the top editor's job in mid-2007 by the previous management, to take a well-paid consultancy at News Corp. It was said by some staffers that Brauchli had come to feel irrelevant in the presence of a Murdoch-appointed News Corp. veteran as publisher whose duties, unlike those of typical publishers, are solely news-oriented. The Journal reported the resignation came after Brauchli was summoned by two top executives and told it might be better to have their own editor running the paper. And so Murdoch got what he wanted.

And what Murdoch clearly wants now is a Journal that is more of a general interest newspaper, the better to compete directly with the New York Times, rather than the business and financial newspaper it has always been. This strategy carries with it some risk of alienating the Journal's traditional readers and advertisers.

The new publisher, Robert Thomson, asserts that space devoted to business news has not been reduced; instead, news pages have been expanded to accommodate greater coverage of political and other non-business news. Still, the new emphasis is apparent on the front page. An analysis by the Project for Excellence in Journalism found that on average business news has half the space on the front page as before and that political coverage has tripled.

But whatever fears might linger about Murdoch's motives, he deserves credit for his willingness to invest in expanding the Journal's news product at a time when most newspapers are cutting back. Indeed, Murdoch's investment in the traditional newspaper business has brought criticism on Wall Street, whose analysts continue to believe that the $5.2 billion he spent for Dow Jones was too much. This just shows how much smarter he is than Wall Street analysts, who tend to value business strictly based on profit-and-loss statements.

Murdoch understands that the real value of Dow Jones and the Journal resides in the information they produce and their brand names, which can be used in myriad value-enhancing ways throughout News Corp.'s other endeavors in print, broadcast and cable, and on the Internet. The truth is, he got a deal.

Reaching an agreement with Cablevision would likewise be a bargain for Murdoch, enabling him to achieve the same benefits in cost-cutting and revenue enhancement that would have stemmed from acquiring Newsday. That would strengthen the Post in its struggle with the Daily News, without the burden of forking over $580 million. The same, of course, could be said for the Daily News.

Whatever the outcome, Rupert Murdoch has certainly become the center of attention in New York the object of irritation, fear, resentment and even admiration in some quarters for his penchant for putting money into the newspaper business instead of taking it out.