Murdoch’s grumpy agenda in N.Y. news war
George H.W. Bush, who parachuted to safety when his Navy aircraft was shot down in World War II, marked his 75th, 80th and 85th birthdays by jumping out of planes for the fun of it.
In celebration of their milestone birthdays, other octogenarians and near-octogenarians have been known to take a world tour, take up with a tootsie or take a nap. If you get that far and you have a couple of bucks, why not? You earned it.
But some octogenarian adventures are more elaborate than others. And one of the biggest and most expensive of all time has got to be Rupert Murdoch’s decision to mark his 79th birthday on March 11 by launching a New York edition of the Wall Street Journal to compete with the New York Times.
Inasmuch as no meaningful business advantage can be gained from this epic octo-quest, the initiative amounts to nothing more than an expensive ego trip aimed at kicking the NYT while it’s down.
If Murdoch could put the Gray Lady out of business and pick up the pieces – or if the exercise opened the way for him to buy her – there might be a business rationale to the undertaking.
But a New York edition of the Journal will not fatally damage the Times. And even if Murdoch forced the NYT into play, he would be blocked by antitrust regulators from buying the paper because he already owns the Journal and the New York Post.
This almost certainly will be the last great newspaper war in history, in no small part because we rapidly are running out of multiple-newspaper towns in which to wage them. But the fight won’t be fair. While sales climbed 6% to $30.4 billion at News Corp. between 2007 and 2009, the revenues in the last two years slid 24% to $2.4 billion for the parent of the NYT. Although Murdoch’s pretax profits fell 27% in the two-year period, earnings dived 42% at NYT.
Like every grumpy old man, Murdoch is well within his rights to blow his money on anything he wants. But he happens to be using the money of News Corp., the publicly held international media company where he bears the fiduciary responsibility of being its chief executive. Given the time, talent and money being plunged into this un-strategic, no-win grudge match, his shareholders ought to be alarmed – especially since those resources could be better used to advance the company's MySpace-blighted digital strategy. Here’s why:
If you are a rational individual, the only reason to make a business investment is to make money. You can do so in the publishing business by building a bigger audience or selling more advertising – or both. You can achieve these ends either by creating a new product or taking business away from a competitor. Now, let’s see how the New York initiative stacks up against these concepts.
With respect to audience, Murdoch has little chance of creating a consequential new market for the Journal by adding a New York section. Not only is the newspaper business itself in secular decline, but most of the people who take the Times probably would not see enhanced metro coverage in the Journal as a sufficient reason for switching. Further, most of the Times readers in New York who are inclined to read the Journal probably buy it already. Therefore, a beefed-up Journal is unlikely to either generate a significant new audience for the Journal or take a material number of readers away from the Times.
While Murdoch presumably will employ aggressive discounting to try to get traditional NYT advertisers to shift some of their budget to the Journal, he will find himself fighting over a pie that has been shrinking steadily for the last several years. Assuming advertisers believe the Times delivers for them, there is no reason for advertisers to experiment with shifting a substantial share of their buy to the Journal.
To be sure, Murdoch may starve the Times to a degree. But there is no reason to believe he can starve it to death. In the meantime, the costs of starting, staffing and sustaining his new metro edition almost certainly will be far greater than whatever revenues he brings in.
Given the questionable commercial rationale for this high-stakes initiative, why is Murdoch taking it on? In a word: ego.
Murdoch is a throwback to the days when people bought newspapers for the power and status of being able to tell others what to think.
By making the Times defend its home turf in New York, Murdoch hopes to force the paper to divert more of its dwindling newsroom resources away from its distinguished national and international coverage. In so doing, Murdoch hopes not only to supplant the Times as the nation’s newspaper of record but also to give himself even greater influence than he enjoys today in setting the national agenda.
Even this rationale isn’t rational. Murdoch already wields considerable influence on Wall Street and in Washington with the formidable and well respected Journal. His Fox News cable network exerts disproportionately large power over the national dialogue despite an audience that attracts fewer than a million viewers on most days. He also is already a full-on player in New York with the feisty, outspoken and never-boring Post. How many media pulpits does one bully need?
As the last of the red-blooded newspaper barons, Murdoch wants to be right even more than he wants to be rich. Unfortunately for the Times, his absolute control over News Corp. and his personal net worth of $6 billion means he will continue be rich for a very long time, giving him ample ammo to pursue his petulant agenda.
posted by Newsosaur at 6:00 AM
31 Comments:
Two points:
1. I see Murdoch's NY move as a response to the NYT's decision to add pages starting in San Francisco and Chicago for local news. In other words, I think this is a national fight, not just a New York fight. The NYT is clearly aiming at taking away circulation from USA Today and the WSJ.
2. I can't think of a paper that has a more well-heeled readership than the WSJ. By defintion it is a readership that has money and probably is currently overwhelmingly male reflecting the overwhelmingly male composition of the financial industry. If Murdoch's move to provide more NY coverage brings more female readership, ads will follow in droves.
The WSJ must already have a couple of hundred thousand readers in the NY Metro area out of its 2 million total. This looks to me like a packaging exercise to go after NY advertising. If it gives NY advertisers a local buy with good reach, why wouldn't some revenue slip towards it, and perhaps even enough to pay for the 30 or 40 reporters being hired.
I read the Wall Street Journal. Is that bad?
Alan . . . you put all the right elements on the table and stopped one paragraph short of drawing the most essential conclusion:
The Times needs a bigger, deep-pocketed owner. The revenue comparisons you cited are very striking. There's still enough prestige left to owning an elite newspaper that someone with comparable economic might and non-dollar ambitions should and will own the Times before long.
Then the tycoons can battle in whatever weird press-baron ways they feel like, which will be fun for the rest of us. I predict that once this starts, they will compete to see:
1. Who has the best deep-core thermometers in Greenland, which can resolve the global-warming controversy after all? Visit the NYT and WSJ webcams to see the latest temperatures!
2. Whe can find Barack Obama's real obstetrician/midwife from back in 1961? Look for a search on three continents.
3. Celebrity endorsements, etc., with up to $10 million paid to Warren Buffett, etc. to endorse one paper or the other.
The one really bad misstap the Times has made is to sell a blocking position to Carlos Slim. He's not the eventual owner. He knows it. The Times knows it. But he now owns the tollgate en route to someone else owning the Times. Look for him to make a sinful amount of money when the cashout finally happens.
I stopped reading the WSJ when this blowhard bought the paper. While the New York Times' writing has not improved, the WSJ's content and tone has slid.
This guy throws his money after Fox Business. Why not throw down this rat hole? Corrupt money chasing after bad money.
"Further, most of the Times readers in New York who are inclined to read the Journal probably buy it already. Therefore, a beefed-up Journal is unlikely to either generate a significant new audience for the Journal or take a material number of readers away from the Times."
Two more points:
1) At some undetermined point in the future, many of those readers who receive both papers will certainly drop the paper version of one of them. Which will it be?
2) Every dollar that the city's up-market retailers spend with The Times must now be considered up for grabs. Saks or Tiffany's are unlikely to significantly increase overall spending, but if they can now put just 20 cents or 30 cents of ever local ad dollar into the first up-market competitor The Times has had in a half century, they'd be foolish not to. They will buy the better demographics of The Journal and, for the first time, actually have negotiating leverage with The Times.
This is not a tough decision. The cost to News Corp. of building a local news presence is paltry compared to the opportunity for new revenues and the very real potential for taking the top demographic in the biggest, wealthiest U.S. market. Meanwhile, The Times is paying 14% interest to Carlos Slim.
As for the journalism: The Journal's national and international reporting resources already vastly outweigh The Times'. The Journal's arts, lifestyle and cultural coverage gain heft week by week. Sports is building. And now local news is starting.
Finally, the vast majority of the rich people who now subscribe to both papers are far more likely to feel an affinity with The Journal's editorial positions and worldview than with The Times'.
Back to my original question: At some point, readers will drop one of the papers. Which one will it be?
Haven't been reading you long enough. Have you similarly gone after Zuckerman for subsidizing a loser just so HE has a voice in NY?
This is a national fight in print and online for the future of the mass market. He's striking at the Times while they are down ... because it's most cost-effective. Build up your reach before those tablets get popular, online fees are introduced and people choose their major content providers for some kind of fee.
Murdoch is no dummy. He may be getting an ego boost, but I'll bet there are dollars and cents behind this.
And I'll bet that Murdoch may win in the end.
P.S. As disclosure, my little paper was somewhat recently absorbed by an elderly egotistic man.
I tend to agree with anonymous, this could turn into an upscale version of the Fox vs. MSNBC fight. The Journal offers an intelligent conservative world view, the Times offers an intelligent liberal world view, and readers increasingly are self-selecting for one or the other. In other words, the Times is at risk of losing a substantial portion of its high-income audience.
I agree that no matter how good the Journal's New York coverage is, it won't attract many of those female readers it craves. One of the keys for the Times is their Sunday edition, which the Journal doesn't compete with in any meaningful way.
I still believe that in the long run the paper will end up worse off for its shift to more general news, at least in the United States. I just don't see how devoting the paper to stories that can be found elsewhere and are a more of a commodity is going to improve the paper's financial fortunes. I dropped my decade-old subscription precisely because of that; a great deal of the content I bought the Journal for has disappeared from the paper in favor of general news coverage.
Does anyone know how wide the circulation of this new metro section will be? Beyond NYC? Eastern corridor?
I agree with the other commentators who think this is mainly about advertising. Murdoch knows how to squeeze additional dollars out of markets where others fear to tread.
Plain and simple, this is an ad war, not necessarily a journalism war. The section is not marketed to readers as much as to top-flight NYC advertisers who no doubt will get fire sale discounts. Those rates will scare the hell out of the NYT ad dept, which will then be forced to drop its rates. It's not a death blow to NYT, but it will be a fiscal wound it does not need right now and one that can slow any growth it had planned. The journalism of the new section does not need to be a raging success; just good enough to justify its existence.
I agree with you. So Murdoch is adding sports, more general interest news and now, New York coverage. Meanwhile the NYT is beefing up its business coverage. Deep pocket or not deep pocket, who're you betting on: Andrew Ross Sorkin and Gretchen Morgenson or whatever novice reporter Murdoch assigns to NY. There's only one medium that Murdoch has never made money on in the US...the newspaper business. He just doesn't get it.
HouseDaddy, we used to subscribe to the WSJ until Karl Rove started getting full-page "editorials."
That was the final straw for us. Used to be one of the very best.
One of the great New York City oddities (among oh so many) is that the NYT gets most of the local ad revenue, leaving little to nourish the Post and the Daily News.
The result is that no NY daily covers local well. My favorite example: New York State has a proposed $134 billion budget under consideration for the fiscal year started next month. California's proposed 2010-11 state budget is $102 billion. Yet California has twice the population and arguably the same threadbare service level. The NYT writes endlessly about California, but has only two people covering Albany. It closed the Trenton bureau last year. Neither the Post nor the Daily News has the resources.
At the very least, adding the WSJ ad sales staff and joint ad buys to the NYP offerings could swing more ad volume the Post's way, and maybe fund some extra bodies in the newsroom.
Seems a low-cost, low-risk idea. It does not seem like Armageddon. And some of the ad volume Murdoch gets may very well be pulled from the ecosystem of weeklies and less-than-dailies in the city -- not from the NYT (although the lion's share has to come from the NYT -- that's where the money is now).
This strategy has already been tried -- cf New York Newday (RIP 1995)
It's exciting and I applaud anyone who is legitimately expanding their 2010 newspaper investments. There isn’t a newspaper in America that should be protected from honest and innovative competitive advancement. The New York Times has broken enough trust and (in several ways) exhibited liberal arrogance to the point of creating this Murdoch opportunity. Both organizations have the potential to end up healthier (news, audience and revenue) due to the competitive environment.
NY Newsday covered the city better than anyone else, but it struggled in what was then a four-way daily news race. At the time, publisher Stan Asimov taught a newspaper economics class at Columbia's J-school and I occasionally walked across the hall as a guest lecturer. Newsday's entry into the Manhattan market (it had previously expanded its readership area into Queens and Brooklyn), along with a weak economy in the late 80's and early 90's, had weakened the Daily News. In response to a student's question, I suggested that Newsday would do well to buy the Daily News and close it. Asimov went white as a sheet.
Afterward, I asked privately about his reaction, and suggested that I had come pretty close to the mark. Turned out that Newsday executives had indeed been considering that strategy.
The Daily News, of course, was eventually rescued by Mort Zuckerman (who had earlier relied on my computer model, built at McNamee Consulting) to buy US News and World Report after he had been cheated on the Atlantic purchase).
BTW, the up-and-coming great business reporter at the NYT is Louise Story, one of my former students. Her Yale MBA, Columbia J-degree, work ethic and reporting skills will carry her far. I told her I'd take all the credit, though. And here I am.
But the NYT culture always was that you do "local" for awhile until the national or international job opens up. Murdoch can compete.
There's a lot to consider in this thread.
Rather than respond to specific comments, at least right now, I'll simply make the following points:
1. I don't think it's an entirely ridiculous strategy, whether the goal is to hurt The Times and/or help The Journal by stealing readers or stealing its ad dollars. It's a hard market to make a profitable impact in, as Murdoch's experience with The Post shows, but if he can both add readers and take away or gain enough new ad dollars, which isn't really that outrageous to expect, it'll be worth it simply because it will strengthen the Journal.
2. It's helpful to think of this as part of a broader national newspaper war. As both The Times and The Journal did in San Fransisco, I expect both papers to continue to roll out local pages for specific areas. There are plenty of areas where this could work. Besides S.F., The Times did in Chicago and thought about doing it in Seattle. The Journal is thinking about doing it in Chicago and Los Angeles. Why not doing the same in Atlanta, D.C., Houston and Dallas, or any other area where there's a chance for add dollars and readers? I'm not sure what to expect from this, except to say The Journal may have an initial leg up because The Times appears to be leaning towards free-lance or non-profit work, whereas The Journal will probably hire them. Why? Because it has a larger corporation behind it. If The Times wants to compete like this, it might need to find a new source of revenue.
3. Perhaps the bigger question is how this distracts from the main business/finance purpose, at least in the past, of The Journal. Was the edition of an NYC/Albany bureau of The Journal the reason the Boston bureau closed? I'd think so. After a certain point, the main reason The Journal was so important will stop being true. What point that is, is not clear, but perhaps we will soon find out.
What goes around comes around. In the mid to late 1990's I was one of the long time WSJ display advertising reps assigned to getting various local news and advertising sections up and running. We had them in Northern Calfornia, S. California, Boston, Chicago, Atlanta and others I've forgotten during 12 years of retirement. Eventually some combination of managers in the NYC headquarters decided these were not profitable enough based on advertising sold versus salaries paid, and so they all were stopped. Now we have the Bay Area section here in the same market where I was selling ad space to local and regional companies.
One thing I learned during 30 years working for that company called Dow Jones, is that when someone comes into a new significant managerial job they immediately have to prove they earned it. And the fastest way to do that is change the product, the process, the people, or a combo of the three. So while I agree Mr. Murdoch's ego is involved, I suspect he has someone done the line who got a new job and resurrected an old product into a new package.
If I were Sir Rupe, one thing that would keep me awake at night is the prospect I would water down the WSJ so much with popular and local news that a competitor focusing on business might move into the WSJ territory. There is a prospect of this, namely the Financial Times. It is not written in American newspaper style, but once you get to understand it, it is a good, solid business paper. They are making oodles of money from the Economist, so they do have a bankroll. And it looks to me they do want an American foothold as London's role as a global financial center declines. Sir Rupe is walking a delicate line to keep the business community happy with what the WSJ is doing.
Aw, is that meanie going after the poor New York Times? Maybe it is time someone took on this newspaper, which used underhanded business measures to clean the New York field of any meaningful opposition, including the sparkling New York Herald Tribune, and its successor the World Journal Tribune. It was a great ride for the New York Times for 30 years after those papers folded, but the Times has become imperious and too much of a monopoly. What goes around, comes around. I see the NYT as the bully here, not Murdoch. I'm rooting for Murdoch.
There is a method to his madness, it's called advertising. All advertising is based on the "perception" and therefore numbers of readership. Advertisers pay for their ads based on total readership.
If Murdock is successful in grabbing a significant number of Sunday ads from the NYT, they are done. Without the Sunday ads, i.e the coupon section of the paper, few would buy the paper at all. I know that hurts your sensibilities as a journalist however, as a reader who buys the Sunday paper, I don't choose the competition precisely BECAUSE they have little financial insentive for me. This holds true whether you are in NYC, DC or Tampa. The paper with the biggest Sunday ad section is the paper with the largest circulation number. Go ahead and call me a Neanderthal but you have to face the cold dollars and cents fact that we Neanderthals are the bread and butter of the Newspaper business, anyone who fails to recognize this is going out of business.
dscott,
The WSJ only publishes on six says, with a Saturday/Sunday paper that is noticeably thinner than that of other days. Will it really be grabbing that many ads from the Sunday Times merely by trying to expand its New York coverage? To say the least, it doesn't follow.
But, in an indirect way, you make a good point: why not go after the Sunday edition? I'm not sure if there's an economic case to be made for a national Sunday edition of The WSJ, but if there is one, perhaps it'd be better to try to launch a Sunday edition whether or not there is specific New York content. After all, it'd probably be a bigger threat to The Times' advertising, but it'd also be a spot to place all of those long-form stories on a day where there might not be as much business news. And then, on every other day, the shorter, snappier articles could be emphasized.
The New York Times has left a real void in the coverage of New York State and New York City issues. Let's face the facts. The NYT has gone from having the best coverage to having marginal coverage.
Murdoch, always the opportunist, is trying to plug the gap and make money by doing it. Whether he will be successful is unclear but the real winners are New Yorkers who will get both better quality and better coverage of regional and local information from both newspapers going forward.
I lived in and around New York City for 30 years and never knew the Times to cover the region well. It had the well-paid staff, but paid my journalism students as legmen to do much of the local reporting. When Republican Christy Whitman first ran for governor, the Times endorsed her (over Jim Florio). The endorsement editorial quoted unnamed environmentalists in her favor. I was president of New Jersey Environmental Lobby and a trustee of the Association of New Jersey Environmental Commissions at the time, and couldn't find one, named or otherwise. I could go on, but it is ancient history. It was New York Newsday that covered the city well.
I predict a new and different round of newspaper wars around the country. The biggest city dailies have a model that is so disrupted (or broken) that a "significant" number will not remain viable. A handful of national and regional papers - NYT, WSJ, WashPo, KC Star?, etc - will figure out a major source of growth from current investment and infrastructure is deep penetration nationwide. They will partner with these city dailies, or acquire local talent so cost effectively that partnering with or acquiring local papers is not cost effective.
#1 with first hand knowledge of the situation. local advertisers in NY are rooting for a viable alternative to the Times, there are fed up with them using a "monoply" that no longer exsist to raise rates, force them into new ad positions and if they happen to work, force them out them. How did Key magazine look last month...? sorry Key pages.
#2 With the political climate as it is right now, it is the perfect time to start a war with the times. the times has been shown to lack journalistic integrity on multiple occasions recently and is vulnerable from both an advertising revenue and a reputation standpoint.
#3 newspaper wars are good old fashioned fun! who doesn't want to see this. it will be the first battle in a long war but this will be the Gettysburg. this will be the one you remember!
...Alan, you write " If you are a rational individual, the only reason to make a business decision is to make money.........."
..Well, that lets out the NYT. Their liberal editorial business model does not make money and is not rational, at least as a business decision. Murdoch's decision history is one of increased profits, the NYT history is one of losses.
..No more calls, folks. We have a winner. It's not Pinch.
Anonymous evidently believes that reckless disregard for the facts is the only route to riches. Works for bankers. Works for Fox. Works for MSNBC. Doesn't work for the NYT or the WSJ (except on its editorial page, where facts clearly don't matter; the editorial board there doesn't even read its own newspaper).
Post a Comment
<< Home