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“We’d
rather sell at $60 a share. If you know any buyers, send
them my way.”
That was
Dow Jones & Co. board member Roy Hammer, speaking to a
Fortune magazine reporter two years ago, when stock in
The Wall Street Journal’s publisher was trading in the
mid-$30s.
Shortly
after Hammer’s quote appeared in print, Donald E.
Graham, chairman and chief executive of the Washington
Post Co., dismissed Hammer’s offer.
“Of
course, he would take $60 a share,” Graham told me. “You
would have to be out of your mind to offer that much.”
But when
I mentioned the price to Rupert Murdoch a few weeks
later, the News Corp. chairman’s eyes lighted up. “Sixty
dollars, eh? How do we get it done?”
I was
reminded of both comments last week when Dow Jones,
whose stock was still trading in the mid-$30s, received
an unsolicited offer from Murdoch to purchase the
company—at $60 a share. Some investment bankers, hoping
to get a bidding war going, mentioned The Washington
Post as a possible rival suitor. But much as he would
love to own The Journal, I have trouble imagining
Graham, a cautious steward, making a competitive bid.
Don’t
let Murdoch’s willingness to pay 67 percent above market
value for Dow Jones stock fool you. It’s Graham, not
Murdoch, who is living in the real world. The newspaper
industry is in decline, and there is no easy way to
bring it back. The Washington Post is one of America’s
best newspapers, but its circulation fell more than 11
percent between 2002 and 2006. On average, daily
newspaper circulation fell more than 2 percent just from
October to March, according to the Audit Bureau of
Circulations.
Meanwhile, the Internet is shredding newspapers’
classified advertising franchise. Readers of the Los
Angeles Times have witnessed the efforts of its parent,
Tribune Co., to sell itself over the last six months as
its declining earnings drove down the price.
So
buying a newspaper company these days is a gesture of
love, or vanity, or both. Eli Broad, the
Los Angeles businessman and philanthropist who tried to buy the Times
and then Tribune Co., has told friends that “newspapers
are for rich guys who didn’t get the football team.”
He is
right, and Murdoch, whose News Corp. is big enough to
swallow Dow Jones without a hiccup, is one of those
guys.
Murdoch
started with a single newspaper in Adelaide, Australia,
and now controls a giant media company that includes
newspapers, television stations, cable networks, a film
studio and satellite delivery systems.
The
addition of Dow Jones could help News Corp. launch a
business-news cable channel, but that can’t explain a
$5-billion purchase or an offer equal to 40 to 50 times
Dow Jones’s projected earnings for 2007. The Wall Street
Journal is Murdoch’s favorite newspaper—his world view
is shared by The Journal’s conservative editorial
page—and he has lusted after it for decades.
That
kind of personal passion largely is missing from the
American newspaper scene. Papers would be livelier and
more interesting if a Murdoch controlled The Journal, or
a David Geffen ended up owning the Times.
Many of
the country’s successful newspapers were built by
families that cared about the communities they served.
Their owners certainly wanted to make a profit, but
power and prestige were seen as a fair trade for lower
returns. It was only in the 1960s and 1970s that family
owners began to sell out to media conglomerates as new
generations of heirs became more interested in cashing
out than in owning the presses.
Newspaper moguls haven’t always produced great
journalism. For every Sulzberger there was a Hearst. For
every Graham there was an Annenberg. For every Chandler
there was another Chandler. But the papers had stronger
voices than the homogenized packages served up by many
of today’s newspaper chains.
Although
News Corp. is a media conglomerate, Murdoch, through
force of personality and stock-voting control, has done
what he pleases with his assets. He loves news and
newspapers and believes that business coverage can
transcend dullness. He is also smart enough to recognize
that the surest way to reduce the value of his
investment would be to undermine The Journal’s editorial
independence and its commitment to quality.
Wall
Street hasn’t looked kindly on newspaper companies in
general. As the newspaper industry’s profits have begun
to wane, The New York Times Co., Washington Post Co.,
Tribune Co. and Dow Jones all responded by cutting costs
at their papers. Murdoch, in contrast, has increased the
editorial budget at The Times of London since acquiring
it.
Murdoch
has said that if he buys The Journal, he will turn over
control of much of News Corp. to spend a year remaking
the paper. I doubt Murdoch can give up control of
anything, even for a year, but there is no doubt that he
energizes everything he touches.
Pearlstine was managing editor of The Wall Street
Journal from 1983 to 1991 and editor in chief of Time
Inc. from 1995 to 2005. His book, Off the Record: The
Press, the Government, and the War Over Anonymous
Sources, will be published in June. |
