Rupert Murdoch had an office built for him at The Wall Street Journal (WSJ) within days of buying it 14 months ago, and he has made ample use of it—ordering up a wave of changes in the once-staid paper’s content and culture, from the addition of a weekly sports page to general news displacing financial news on the front page to the thinning of its layers of editing.
But Murdoch, as much old-fashioned press baron as 21st century multimedia mogul, faces a depressing reality: his lifelong fondness for newspapers has become a significant drag on the fortunes of his company, News Corp.
The company recently took $8.4 billion (Rs41,916 crore) in write-downs, including $3 billion on its newspaper unit, which includes WSJ’s publisher, Dow Jones and Co.
Man of instinct: A file photo of Rupert Murdoch, chairman and chief executive officer of News Corp. He has a well-earned reputation for making deals that appeal to him personally, whether or not experts agree. James Estrin / NYT
Meanwhile, News Corp.’s stock price has fallen by two-thirds in the last year, a sharper decline than at media conglomerate peers such as Time Warner Inc. and Viacom.
In more vibrant economic times, investors and Wall Street analysts were more willing to look past Murdoch’s attachment to newspapers—now the company’s biggest single source of revenue, about 19% in the most recent quarter. But they find that a tougher chore these days, as other media struggle and newspapers suffer through their worst slump since the Great Depression.
“The thing I hear from investors is that they wish News Corp. was everything but newspapers,” said David C. Joyce, media analyst at Miller Tabak + Co. Llc. “Investors are more forgiving when they are in a better mood. The hope for a turnaround in the newspaper business is looking elusive.”
The declining economy and the sinking fortunes of print publications have placed in stark relief Murdoch’s love of newspapers and his deal to acquire Dow Jones just before the recession set in.
Murdoch, chairman and chief executive of News Corp., paid more than $5 billion for an asset that generated about $100 million in operating income last year, a price that now looks like a staggering overpayment. Murdoch declined to comment for this article.
On the surface, News Corp.’s 5 February earnings report, for the quarter ended 31 December, appeared to show a nearly $90 million increase in newspaper division revenue from a year earlier. But that was an illusion created by the addition of Dow Jones, which News Corp. owned for only 18 days of the year-ago period.
The company revealed in a later filing with the Securities and Exchange Commission that Dow Jones had $535 million in revenue in the last quarter, more than one-third of the total for its newspaper segment.
Subtracting the effect of Dow Jones, revenue at that segment fell about 25%—due partly to weaker currencies in Britain and Australia, where News Corp. has many papers—compared with an 11% drop for the rest of the company.
The company does not disclose details on WSJ’s performance, but executives there say that like the rest of the industry, they have seen a significant decline in advertising revenue.
In another area, however, WSJ has outperformed almost all its competitors by maintaining its paid circulation of more than two million, in print and online, in the most recent reporting periods, while nearly every other major paper declined. Some of those subscribers receive only the online addition, making WSJ one of the few papers to successfully make its online readers pay for content. Some of that success, however, could be due to heavy discounting, a practice that predated News Corp.’s takeover.
According to the most recent figures in the paper filed with the Audit Bureau of Circulation, for the six months ended 30 September, on an average day WSJ sold 501,000 copies at less than half the basic price, up from 420,000 in the same period in 2007, and 214,000 in 2006.
Murdoch has a well-earned reputation for making the deals that appeal to him personally, such as the Dow Jones purchase, whether or not experts agree. The instinctual, from-the-gut aspect of Murdoch’s business persona was once appreciated—he was lauded when he swooped in to buy MySpace in 2005 for $580 million, outbidding Viacom—but now seems to be a mark against him in Wall Street’s eyes.
“Emotional biases and attachments play into our strategic decisions in really significant ways,” said Sydney Finkelstein, a professor at the Tuck School of Business at Dartmouth. “And with Rupert Murdoch, there’s a general attachment to the newspaper business because that’s where he got his start, and he really has a feel for it, and also an attachment to the idea of owning The Wall Street Journal.”
WSJ has an exclusive content partnership in India with Mint.
At WSJ, the imprint of Murdoch and Robert Thomson, the managing editor he installed, is visible on the front page, where there are bigger headlines, more political coverage, and fewer of the long, sometimes whimsical yarns that were one of the paper’s signatures. They have also made articles shorter and pushed some business coverage deeper into the paper.
But some journalists also described a certain relief that the new regime has meant an end to the factionalism and politicking of Dow Jones’ last independent years.
Reporters and editors also say that Murdoch and his crew have loosened what was once an exceedingly careful culture, where multiple, lengthy memos were required to initiate a reporting project, and an article went through several rounds of editing.
“There’s this kind of attitude that planning is overrated, and memos are for wimps,” said one WSJ reporter, who insisted on anonymity for fear of antagonizing his new bosses. “They aren’t as interested in the time-consuming, in-depth projects, either.”
And while the new boss has been a frequent presence at WSJ, he will soon be able to keep an even closer eye on his new prize; the company plans to move WSJ from its financial district offices downtown to News Corp.’s Midtown Manhattan headquarters.
With revenue falling, Murdoch has not followed through on his early talk of expanding WSJ’s news staff. In fact, it recently laid off some journalists, but the reduction was minimal by recent industry standards.
“I have great faith, and if we continue the way we are going, we may even get lucky and not have so much competition at the end of it all,” Murdoch said in a recent conference call with Wall Street analysts. “We are in good shape on the newspapers.”
While Murdoch’s personal attention has lately been on WSJ, the financial performance of News Corp.’s other newspapers is undergoing stricter scrutiny these days.
For years, Murdoch has stomached tens of millions of dollars in annual losses at The New York Post, in exchange for the power the paper afforded him. But given the economic times and the shift of his attention to WSJ, there is a sense of urgency in News Corp. executive suite about stemming the Post’s losses.
Executives briefed on the matter, who spoke anonymously to discuss private conversations, said Murdoch remained committed to the tabloid, but is seeking ways to save money by combining back-office operations, purchasing, printing and delivery with WSJ and the Post’s rival, The Daily News.
There have also been discussions with Newsday, the Long Island newspaper owned by Cablevision Systems Corp., about sharing certain costs with the Post.
And recently, the company said it would lay off 65 people at its British newspapers, which include The Times of London, The Sunday Times, The Sun and News of the World.
Some analysts and investors have suggested that News Corp. separate its newspaper businesses from its other entities, such as film and satellite television.
In a research report in late January, Rich Greenfield of Pali Research summed up one of the prevailing sentiments on News Corp., writing, “Previously we had focused on the fact that News Corp.’s so-called “bad assets”, including newspaper and TV stations, would become such a small part of News Corp. story that they would no longer impact growth.” He continued: “Our fear is that News Corp. is so committed to its existing businesses that it will be willing to sustain businesses that slip in to negative profitability for years (similar to its approach to the Post.)”
News Corp. still has significant strengths, including the Fox film studio, which appears poised for a better year than it had in 2008, with cash reserves of $3.6 billion, and the Fox News Channel, whose revenue and profit are growing. The company’s operating income in the last quarter, $818 million on revenue of $7.9 billion, was down 42% from a year earlier, but hardly anaemic.
It seems Murdoch’s greatest hope, when it comes to his newspapers, is to wait out the downturn and anticipate a future with many fewer papers to compete against.
“That’s in his blood,” Joyce, the analyst, said of Murdoch’s devotion to newspapers. “That’s how News Corp. started 50 years ago.”
©2009/The New York Times