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Advantages of Dow deal still unclear

News Corp. needs shareholders' approval

Rupert Murdoch’s apparently successful maneuvering for Dow Jones yields a more fundamental question: Now what?

News Corp. still needs to win official approval from the full group of Dow Jones shareholders. But with the reported endorsement of well over 30% of Bancroft family shares — which News Corp. apparently secured by agreeing to pay the legal fees of some members of the family that controls Dow Jones, a sum that could reach $30 million — Murdoch looks to have finally locked down his long-sought deal to buy the parent company of the Wall Street Journal.

His reasons for coveting the Journal are self-evident, given the newspaper’s perch as one of the oldest and most prestigious institutions in American journalism. It’s also been made clear during News Corp.’s very public courting of Dow Jones that Murdoch sees an opportunity, if not a daredevil challenge, to take the Dow’s financial newswire, which lags its major competitors, and turn it into a powerhouse.

The main domestic synergy opportunity comes in cable television, with the long-gestating Fox Business Channel cabler set to launch in October under Fox News chairman Roger Ailes and veep and managing editor-anchor Neil Cavuto.

In the more staid province of business news, News Corp. won’t really have the advantage of offering an alternative political voice, as it did when it launched Fox News Channel to compete with CNN in 1996.

It could try to use Journal reporters to bring a diet of scoops uncommon in television reporting. The big catch there, however, is that Dow has an existing alliance with CNBC, the chief rival of the Fox Business startup, that runs through 2012.

CNBC’s public position is that it’s happy with its Dow relationship deal and will see it through to its completion.

The business news cabler said Tuesday in a statement that “CNBC and Dow Jones have an exclusive news-content-sharing contract, which has been in effect since 1997 and which will expire in 2012. CNBC expects the contract to be honored no matter who owns Dow Jones.”

But a situation where the cable net remains in business with the company that is launching its chief competitor is seen as highly untenable.

And it’s unlikely Murdoch would spend $5 billion on a news operation only to have it feed the cable net he is trying to take on.

More likely, observers say, Murdoch will try to buy out the deal.

There have already been some sparks between News Corp. and CNBC; in its statement, CNBC noted that the net “remains a global leader in business news, providing information that is fast, accurate, actionable and unbiased,” a possible knock on Fox News Channel.

CNBC is coming off a successful month — daytime ratings rose 25% in July, while the net saw primetime gains of 28%. A possible economic slowdown, fueled by bleak home-owning and lending news, has caused viewers to tune in.

The CNBC numbers could mean financial news is indeed a growth opportunity — or that Murdoch will have his work cut out for him.

As for the competition among financial wires, Dow Jones Newswires currently reaches only a small fraction of the audience — it has about one-third the market share of chief rival Bloomberg. Bloomberg, Reuters and Reuters suitor Thomson control nearly 70% of the market; Reuters and Thomson combine for six times the revenue of Dow Jones.

There are also questions about why News Corp. wants to make a big-ticket newspaper purchase at a time when print journalism is under financial duress, to put it mildly.

Skeptics have pointed to the fact that Murdoch’s only other U.S. newspaper holding has been a money loser practically since he bought it in the 1970s.

The New York Post is estimated to lose as much as $30 million annually, though its circulation of about a quarter of a million daily readers is higher than that of most newspapers, including main competitor the Daily News.

And integration with other News Corp. properties, whether the growing digital portfolio of Fox Interactive Media or the old-line franchises like the money-minting “The Simpsons,” is unlikely.

While it’s a matter of pride for the Murdoch profile and perhaps considered an important piece of his legacy, the newspaper biz has historically been an island within News Corp., never achieving the level of integration seen among the other divisions. And one of Dow Jones’ few synergistic opportunities on the newspaper side will likely involve the international market.

Murdoch is expected to use the company to buttress the operations of papers from London to Australia — and also use his media empire to boost numbers at the Europe and Asia editions of the Journal.

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