A second part of the changed landscape makes Murdoch’s bid even more imperative: the announcement that News Corp. is opening a competitor to my employer, CNBC. Don’t expect a competing bid for Dow Jones from CNBC or anyone else for that matter. Only Murdoch needs the Journal and Dow’s other businesses. Despite the rejection by the professionals, the public still regards the Journal as synonymous with business news. Murdoch can afford to pay $5 billion if he thinks it can help bring in advertisers to his new station because purveying financial news on TV, unlike print, is still a huge moneymaker.
Then, there’s the main reason why I think Murdoch wants the Journal: He loves the editorial page. In fact, he’s gaga over it. That was one reason he gave me back in 1996, and that’s one reason why he wants it now. I think he would like to elect a president, Kane style, with it.
Initially, of course, the family opposed Murdoch’s bid. What made them turn? I think a couple of realities dawned on them. The economics of the news business have gotten so bad that any protestations about journalistic integrity seem hollow. There’s no faster way to compromise the journalism than to run out of money.
Another reality? The Journal’s been fabulously successful at getting people to migrate from its print version to its electronic one. The digital Wall Street Journal is the most successful paid newspaper site in the world. But every customer who moves from print to electronic hurts the bottom line. Print’s more lucrative even as it dies than the Web is as it thrives. The advertisers just won’t pay as much for digital display as they will for broadsheet.
I also believe that the older Bancrofts, well represented on the board, and Michael Elefante, the trustee for the family, both must have recognized that they could be sued—perhaps successfully—by the younger Bancrofts for a dereliction of their fiduciary duty if they didn’t at least explore Murdoch’s offer. Dow Jones’ stock price would be cut by two-thirds if Murdoch walked away. The stock resided in the 30s, not the 20s, before the bid because there was always the hope of a takeover. You reject Murdoch, you reject any bid for all time. The older Bancrofts found themselves in a box—or a trap, set by Murdoch.
Finally, the only successful, growing public journalism entities also have television stations to buoy them (Gannett and Belo, for example) or are part of larger conglomerates (Money and Fortune to Time Warner and BusinessWeek to McGraw Hill). Dow Jones has no side business that can throw off that kind of cash. Perhaps the old guard is facing up to that.
So, what would a News Corp.–run Dow Jones look like? Murdoch’s much more a visionary about the Web than people give him credit for, and that means he can better monetize Dow Jones’ news content than any other media entity could. An organization that had the vision to pay $580 million for MySpace might be able to ungate the paid Wall Street Journal Website and get hundreds of millions of dollars more in advertising globally. A paid site can’t generate anywhere near the eyeballs that a free site produces, and advertisers covet viewers. The additional ad revenue would dwarf the subscription fees, which are puny to begin with. Dow Jones hasn’t been able to afford to go free without corrupting the price of the print publication. News Corp. could care less about that.
Will Rupert dumb down or slant the Journal’s news coverage? He’s certainly no fan of long-winded stories. And he might even find clever ways—through an ombudsman, say—to dial back on what he perceives to be negative stories about China. That said, I don’t think Murdoch will do anything that fundamentally tarnishes the brand. He knows that’s a bad business strategy, and he plain-old relishes the Journal too much. In our meeting eleven years ago, Murdoch spoke lovingly of how much he enjoyed reading the paper cover-to-cover. I can’t help but believe that some of the hands-off Bancrofts, on the other hand, don’t even bother to read the darned thing. If they did, maybe they would better understand how difficult it is to generate quality journalism in the face of ceaselessly declining fundamentals.
Anything can happen with a deal this high-profile and this complicated. The Bancrofts could decide not to sell, or other purchasers could emerge. But as I write this, I believe Murdoch has the inside track to get this deal done, probably with some tweaking to please the more recalcitrant board members. Murdoch was willing to pay $74 a share more than a decade ago. Today, the company is more vulnerable, and he can get it for less. This time, he won’t be denied.