MOST OF MY HIGH FINANCE knowledge comes from movies, and Rupert Murdoch’s absorption of newspapers evokes the 1951 classic “A Christmas Carol,” when Scrooge and Marley seize control of a struggling company with an offer the board can’t refuse: Let us take over, or go bankrupt.
Whether the News Corp. chairman is contemplating another Charles Dickens’ remake, his latest foray into newspapers appears equally shrewd strategically, leaving federal regulators and ailing owners with a distasteful choice: Allow him to further expand his media empire — especially in the influential New York market — or watch some of those entities potentially shrivel and die under the aegis of others.
In addition to buying the Wall Street Journal, Murdoch is seeking a deal — challenged by New York Daily News owner Mort Zuckerman — that would add Long Island’s Newsday to his portfolio. With the New York Post, publishing giant HarperCollins, two Gotham TV stations and Manhattan-based Fox News and Fox Business channels in his quiver, the mogul would possess a daunting array of assets with which (if history is any indication) to bludgeon and poke at competitors.
Beyond consolidating back-office functions, part of Murdoch’s overarching scheme involves capitalizing upon the blessings of synergy, which hasn’t worked out nearly as well as companies like Tribune and Time Warner planned. Nevertheless, Fox (or at least its fearless leader) remains a believer that 2 plus 2 can occasionally yield 5 — whether that involves eventually featuring Journal reporters as experts on Fox TV outlets or Jim Carrey shamelessly plugging “Horton Hears a Who!” on “American Idol.”
ON ITS FACE, Murdoch’s philosophy makes more sense than Sumner Redstone’s decision to split Viacom and CBS, which took 2 plus 2 and came up with 3. Viacom’s announcement about launching a movie channel alternative to Showtime and CBS’ decision to embark on movie production, absent ties to Paramount, underscores the duplicative efforts each half has undertaken in seeking to become whole. From that perspective, talk of the two entities competing seems less significant than the money and energy expended just returning to square one.
Murdoch’s interest in newspapers hasn’t thrilled the investment community. Former Merrill Lynch analyst Lauren Rich Fine, for example, argued that News Corp. shareholders should be “angry,” since acquiring newspapers hardly looks like a forward-thinking move.
Long-time Murdoch-ologists, however, have seen this movie before. He is that rare mogul willing to set short-term earnings considerations aside in pursuit of larger game — such as when he stole NFL football rights for Fox, luring major-network affiliates to switch allegiance to his maturing network.DESPITE THE LATEST “pass the hemlock” circulation figures for major dailies — the only ones to eke out any growth during the six months ended March 31 were the Wall Street Journal and USA Today — Murdoch appreciates newspapers’ agenda-setting role. Indeed, with cable and broadcast operations increasingly relying upon studio-bound pundits that simply chatter about events instead of covering them, TV news is growing even cheaper and lazier, content to follow enterprise reporting done elsewhere while embedding themselves in Miley Cyrus’ bra straps. (Of course, when the New York Times exhaustively detailed how TV’s military analysts served as propaganda tools for the Pentagon, that they ignored.)
Murdoch’s wide-screen view has always placed a premium on influence — a more nebulous but no less precious asset than bottom-line profits.
By doing so, Murdoch also throws down a gauntlet to the Federal Communications Commission and Congress, especially after a Senate committee approved a “resolution of disapproval” regarding the FCC’s plan to relax media cross-ownership rules. Sponsor Sen. Byron Dorgan (D-S.D.) said concentrating ownership in too few hands isn’t healthy, but FCC chairman Kevin Martin told reporters that the changes are meant to address a shifting marketplace, “particularly the challenges that the newspaper industry faces.”
Both are right. Further corporate consolidation is a serious concern. Yet given the drip of depressing news about dismal earnings and downsizing, the traditional newspaper model is broken. And as new Los Angeles Times editor Russ Stanton conceded at a recent Los Angeles Press Club forum, “There hasn’t been anybody in our industry who’s figured out how to get out of this mess yet.”
Murdoch is presenting himself as a white knight, but like Scrooge, his pitch comes as a tacit ultimatum: “Give me these properties to run my way,” he’s essentially saying, “or watch them die.”