Dow Jones, The Wall Street Journal and Rupert Murdoch

Business is cyclical. Innovation changes environments and, unintentionally, destroys profitable status quos. When that happens stronger and more innovative firms pounce to buy up the assets of weaker firms and maintain their competitive advantage.

Customers and society win as inefficient products are removed from the market and the base standard rises. There are losers, of course, but the overall benefit to society is vast. This capacity to slough away dead tissue and rebirth itself is what terrifies most people about business. And one of our greatest businessmen, with an astonishing capacity for renewal, is Rupert Murdoch.

End of the Print Era

The newspaper industry is in a period of trouble and strife. Editors’ lock on opinion and breaking news has been degrading for a generation. How can a system of physical printing and distribution beat the ability of 24-hour network television news, digital radio and the army of independent Internet bloggers to break stories? How can journalists offer top-notch analysis when the most highly qualified business, technology, political and social analysts all run their own blogs, podcasts and radio stations? How can newspapers compete with the visual delight possible on television and the Internet? How can they encourage participation that compares to the interactivity of blogging or talk-radio?

Advertisers have taken note and followed their consumers. Newspapers around the world have suffered. And, despite the protests of politicians seeing their favourite mouthpieces undermined, newspapers have huddled together for mutual support and commiseration.

Except for Rupert. The Murdoch media empire does make money. It’s astonishingly profitable. News Corporation is even, as Murdoch was quick to point out when the Bancroft family protested his corporate ambitions, a family business. And now he finally has his prize: Dow Jones and The Wall Street Journal.

The Fear of Consolidation

Many have expressed fear about his ambitions. Senator Chris Dodd, Democrat presidential candidate, sums them up: “I am deeply troubled by the incredible amount of consolidation occurring across the American media landscape. The power of the media is swiftly being limited to a few controlling hands, which poses a serious threat to our democracy. The foundation of our democracy rests in our ability to hear from a diverse array of sources so that we can make informed decisions. The Wall Street Journal has provided a valuable and important news choice to the American public for years.

“With News Corp’s purchase of the newspaper, I am concerned that it will be very difficult for the Journal to offer fair and balanced reporting under the pressures of a giant-media conglomerate.”

Which is bullshit and a contradiction. If The Wall Street Journal is under so much threat from other forms of competition (the Internet, radio and television, as well as other publications) then it is difficult to justify a complaint based on Murdoch reducing balanced reporting and the availability of platforms for independent voices. One newspaper more or less isn’t going to change the availability of free speech. And, without a cash injection, there may be no Wall Street Journal within a decade.

The Beginning of Renewed Competition

As for The Wall Street Journal … has anyone read it recently? It’s a disaster. It’s boring, dense, hard to read and badly laid out. It looks like they’re using the same typesetter from 1902 when Clarence Barron bought it before passing on the shares to his stepdaughter, Jane Bancroft. Even their website is boring.

In comparison to The Economist, owned by the Pearson Group, and first published in 1843, The Wall Street Journal is seriously behind and losing ground. Yet, in their analysis, The Economist says that Murdoch has paid probably US$ 2 billion too much for the newspaper and that, just this once, Murdoch has put his passion for owning such a prestigious newspaper ahead of profits. The Wall Street Journal’s most significant competitor is The Financial Times, also owned by Pearson and another potential suitor for Dow Jones.

Murdoch has wanted Dow Jones for a long time. Do people seriously think that this consummate businessman is going to turn The Wall Street Journal into a Sun-style tabloid? With pictures of titties on Page 3? Where is the business sense in that? Murdoch wants to own a premium and respected business newspaper. He isn’t going to achieve that by pushing a tabloid-style agenda.

Unless, of course, you think that the people who currently buy The Wall Street Journal are amongst the thickest and least informed people in the world and won’t notice if their newspaper stops discussing Sarbanes-Oxley and the equities plummet in favour of nude pictures of Britney Spears?

Bring it on. I can’t wait. Murdoch is a genius and I am keen to see how his vision transforms The Wall Street Journal into the best business newspaper that we all know it has the potential to be.

18 replies »

  1. Gavin,

    Sometimes I read your stuff and think you’re just being contrarian for the hell of it, because it amazes me how you can be so smart and so blind at the same time. 😉

    The issue isn’t necessarily that Murdoch’s going to turn the WSJ into the Sun…he’s already got the Sun. No, the issue is that he’s going to force the reporting to compromise itself even further to ensure his business interests are given favorable treatment.

    The WSJ’s editorial pages are already several degress to the right of Dick Cheney, so if anything, I expect Murdoch’s influence to lighten them up a bit. But the news reporting will be tinkered with to ensure, for example, that Murdoch’s interests and businesses in China are not lit by harsh scrutiny.

    Moreover, he’s going to ravage the Journal’s online and on-air content to use for his Fox Business Channel, which, if you know anything about America’s Fox News, is pretty much a mouthpiece for the Republican party and corporate interests as it is, so expect more of the same.

    I don’t make use of any of Murdoch’s products in any way, so this is less of a problem for me. But to many friends of mine (and yours) in the media industry, this is another bad example of consolidation and reduction of actual news reporting to ensure profit, and that’s a shame.

  2. They’re supposedly setting up some sort of independent editorial panel to ensure independence. But – if it doesn’t remain independent – you’ve got to realise something, the top-end business intelligence market is very smart. They get their news off the wire-services like Reuters and Bloomberg. They read voraciously. They don’t get their news from one source.

    If Murdoch starts keeping information and analysis out of his papers (like on China) that is important for investors, they’ll stop reading it and switch to something else.

    Murdoch has spent a quite stupendous amount of cash on this deal, he’s got to make that money back. Sure, that involves restructuring, modernising of equipment and cutting costs. First thing to go will be most of the admin since he can roll that into his existing operations – all he really needs is the editorial staff. Chances are he’ll gut the place and retain only the core team.

    And because it’s Rupert Murdoch there will be a lot more scrutiny on what he does at WSJ than if any other investor got it. I’m willing to bet those circulation figures will be pawed over for months. Lots of long articles in the New York Times, Village Voice and Huffington Post will analyse the editorial content for signs of bias. Everyone will be wanting him to make a mistake.

    If he does then there are plenty of financial newspapers waiting in the wings to take that space. If anything Murdoch’s involvement has ensured some much-needed competition and scrutiny in the niche.

    He has shaken the place up. And that’s why I’m thrilled about it. If he gets it right standards will rise. If he gets it wrong standards will rise. It’s wonderful all round.

  3. Gavin: I’ll begin by noting that I don’t track the WSJ for news very often for a basic reason – as Martin notes, it’s already pretty far right. And I’ll also note that I don’t receive this development with as much alarm as most do, and for reasons you note. For me, the issue isn’t the assimilation of the WSJ per se, it’s the consolidation problem generally.

    And your assertion that Murdoch is a business genius is both accurate and beside the point. It’s possible for him to be a brilliant businessman AND for this purchase to be bad for America. Not an either/or there.

    Consolidation not only results in fewer perspectives and greater centralized control (and you’re WAY too smart to buy the “independent editorial board” argument – that’s actually a canard that makes it EASIER to intimidate critical coverage because all involved know you have constructed plausible deniability for yourself), but it results in less news coverage, period. Re-read Denny’s series of analyses on what’s happening in newsrooms across the country here for all you need on that front. Blogs are not an answer for this – what bloggers do is crank out lots of opinion and analysis, but the financial dynamics are such that it’s hard to actually do the legwork to generate original reportage.

    If you believe that news is and ought to be nothing more than a commodity – that’s it’s a business – then this is a wonderful development. If you believe that a culture and its government are helped by such a view, though, you’re being naive.

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  5. We’ve discussed news in general before, Sam, so let’s look at business news in particular (WSJ’s area) and your concerns re news being a commodity.

    Firstly, business journalism and analysis is expensive. The skills required are identical to those which consultants, ratings firms, auditors and fund managers require. Anyone running a proper business editorial team quickly realises that you have to pay the same rate to achieve a high-quality product.

    This means, immediately, that the news cannot be run as a non-profit charity for the benefit of society unless the owner is remarkably charitable.

    Secondly, the newspapers have competition from firms that are almost in the same line of work as them: consultants, auditors and ratings analysts. McKinsey, Accenture, Fitch, Moodeys, Standard & Poors, Deloittes, KPMG and so on all produce high-quality research on a wide variety of subjects and release these to the public.

    Most business news is not releasing stories about Enron. It is about the analysis of business and investment products, macro-economic policy, micro-economic trends and so on. Basically, data-analysis contrasted to strategic and policy decisions.

    The best people to do this happen to be firms who specialise in consulting. They are able to aggregate large-scale trends and then sell specific consulting services.

    On a much smaller scale that’s what I do. When Whythawk releases specific information on Zimbabwe’s informal market I do so in the expectation of raising my company’s profile and gaining work later consulting to firms who wish to invest in Zimbabwe.

    The successful business press – and I highly rate The Economist at this – have realised that selling newspapers isn’t enough. The Economist now has The Economist Intelligence Unit which sells detailed reports on all sorts of things, from countries, to fashion. They arrange conferences, lead debates.

    In other words, the future of news is commercial. Once you start realising how vast business news is then the newspapers themselves are only part of the information flow. Not the source of it.

  6. The WSJ fair and balanced?

    The FT is ten times the paper the WSJ could ever hope to be.

    “…In other words, the future of news is commercial…”

    That’s an inherently wrong assumption. That’s the difference between conglomerates telling the public what people want and people actually want. Investigative journalism stills matters, otherwise it’s just selling something. The problem with papers today is that they are run by businessmen, not newspapermen, and that’s where the problems begin. The Guardian in the UK is run by a trust, and that makes the difference compared to the US environment.

    As far as Rupes, he can own all the yachts he wants, but he’s still trailer trash in his mind.

  7. …and where does public service broadcasting fit into all of this?

    I have a penchant for watching and listening and reading the BBC. Rupert would love to kill off my favourite organisation for news and information.

  8. Information acquisition from Rupert Murdoch is much like food selection from McDonalds. While there is variety in a menu intended to satisfy most customer tastes, a steady diet from McDonalds is healthier for McDonalds bottom line than it is for the consumer.

    At the same time, judging from Bill O’Reilly’s inane commentary, working for McMurdoch organizations doesn’t do much for expanding the horizons of employees. If it isn’t already, working for a McWSJ will soon be relegated to being another McJob in corporate America.

  9. A couple of Democratic presidential candidates are weighing in here.

    John Edwards calls on Democrats to oppose the move, although he has not so far suggested the mechanism by which they should do so. His full statement is here.

    Chris Dodd says: “The very fact that the News Corporation felt the need to form this committee exposes the company’s gross misunderstanding of journalism – it should be a given that the Wall Street Journal’s reporting will not be affected by its parent company. This announcement adds to my concern that there are deep-rooted problems with this acquisition, and that at some point the Journal and its readers may be subjected to biased reporting as a result. That is why today I am writing a letter to the FCC expressing concerns about this proposed merger and asking what the effects on consumers and the public good will be as a result of these types of media consolidation. I would also urge the Department of Justice Antitrust Division to carefully review this merger when it comes before the agency.”

  10. Gavin: so, if I read you correctly, you seem to be saying that we’re evolving toward a moment where all biz news (or at least a big part of it) is essentially a function of the analystas. Maybe that’s true, but it certainly doesn’t do much to assure that culture is well-served. Few forms of news out there seem more susceptible to spin than financial, and that’s going to get worse, not better, as all pretexts are dropped.

    I know how American analystas work. If it goes this route, it will be a very short time before “news” = “sales collateral.”

  11. Political opposition – by Democrats, of all people – is starting to sound less like real interest in the public and more like political point scoring. Who would have thought?

    Firstly, WSJ was in trouble. Sooner or later it would either have to reduce it’s scale just to keep going, or be bought by someone else. On a competition level Murdoch doesn’t really own any premium business news and it is really hard (given the amount of competition in this area) to argue that he brings too much consolidation to this market.

    Read a financial paper some time; it involves journalists talking to analysts. If you don’t trust the analysts directly then why would you trust them when the journalists interview them?

    I agree that analysts have flirted too much with spurious info but – especially after the WorldCom, Parmalat and Enron disasters – analysts can’t afford to be seen to be offering stupid advice. Investors are more active, plenty do their own research, and they will sue. Sarbanes-Oxley gives teeth to the legal process.

    And the newspapers didn’t spot Enron until after either. I’m not sure what this mythical “culture” is that newspapers help create … after all, there are fewer being sold every year. Clearly consumers don’t want that “culture”. But Murdoch’s newspapers are successful, so maybe the public prefer his “culture”?

    Ultimately, no-one is forced to buy the WSJ (unlike taxes) and I’ve said repeatedly that top-end financial readers are a sophisticated niche. If the WSJ goes to pieces they will stop reading it.

    If Murdoch starts pushing opinions that are counter-intuitive to financial readers, or covering up stories that they need access to, then his readership base will move. That’s what happens in a free market.

    Governments should NEVER decide what people should or should not read. As long as the sale is between willing participants and there has been no force or fraud then I can’t see that it is anyone else’s business other than Rupert Murdoch and the Bancrofts.

    Their customers can vote at their favourite newsagent. And they will.

  12. Corporate censorship or government censorship, it’s still censorship.

    Media are often self-censoring to protect the bottom line. In fact, the purpose of media has routinely been described as making money rather than informing the public.

    News on the cheap is about the bottom line. Facts are conveniently ignored. Even if crime on the streets is down, crime on the nightly news can actually go up when sales reps have signed lucrative advertising contracts with burglar alarm installers! Stories of unsafe food handling practices by a grocery store chain tend to go unreported if doing so preserves the Thursday food ads.

    Concentrate media power in the hands of a few, and what might have otherwise been little gaps here and there can consolidate into a big black hole from which nothing escapes. At the same time, trivial issues get blown out of proportion. Titillation replaces substance because it sells! The peasantry must be pacified with a circus. It keeps them from wondering who’s stealing the country.

  13. There is no monopoly. A monopoly, pure and simple, means one company only, and no free access to the market for anyone else. The only people who can achieve real monopolies are governments who can legislate it.

    You’re going to have to do a lot better than making the statement “Murdoch’s Media Monopoly” and going on from there. I’m assuming you already get all your news and information from other sources. So your “monopoly” claims already fall down.

    As with any product or service. If you don’t like it, don’t buy it. But boycotting it simply because you feel it’s a monopoly means you should probably boycott government too.

  14. I disagree. The last two decades have seen unprecedented corporate media consolidation. For true democracy to work, people need easy access to independent, diverse sources of news and information. Murdochs bias and slanting of the news is well publicised. The very nature of capitalism is to move towards monopoly if not regulated and the idea that markets function better without state interference is nonsense. Without interference, markets turn into monopolies. Murdoch

  15. “Our governments are failing us in allowing our news sources to become so homogenised”

    You’re actually saying you’d like government to steer the news? Which government is that? And if the news is becoming homogenised isn’t that a market choice?

    The US is filled with various forms of media that think GWB is a prick, and just as many who think he’s a hero. What sort of homogenisation is that? Name an opinion, I’ll bet you anything you’ll find someone who supports it and writes about it in some publication (whether there’s enough commercial support for those ideas is another matter entirely).

    Free speech is crucial to any democracy, exactly as you say. Free access to markets (i.e. no ability to exclude someone who wants to start a business except the usual of trying to find customers who want the product and are prepared to pay for it) are just as essential.

    Murdoch does not own enough of the press to constitute even a partial monopoly. And even if he did, no rule prevents you starting a whole new newspaper to say whatever you like.

    Declaring that you would like governments – of all things – to decide what opinions should be voiced, and whether there are enough variant opinions to go round is a bad, bad idea.

    Has Murdoch, for all your claims of monopoly power, banned people from writing nasty things about him on MySpace?

    Purchasing some small circulation vanity press journal like the Wall Street Journal hardly counts as reducing press freedom or cutting down on your right not to like what he says.

    The proof in that is that you’re expressing your opinion and no-one is censoring you.

    However, when it comes to making a living out of their opinions, I’ll put my money on Murdoch over you.

  16. Stop spinning what I am saying. When did I say I would like government to steer the news??

    “Declaring that you would like governments – of all things – to decide what opinions should be voiced, and whether there are enough variant opinions to go round is a bad, bad idea.”

    What a ridiculous thing to say!!

    I said I would like government to prevent further media consolidation. As I said – for true democracy to work, people need easy access to independent, diverse sources of news and information. There comes a time when government needs to draw lines in the sand. Government