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.