The O'Murdoch factor

Rupert Murdoch's bid to take over the Wall Street Journal is a dramatic illustration of why public ownership is a disaster for newspapers.

Editor's note: This story has been corrected since it was originally published.

By Gary Weiss

Read more: Rupert Murdoch, Fox News, Opinion

May 9, 2007 | Imagine an asteroid plummeting toward Earth. You are an astrophysicist, so you have done the calculations. You know the trajectory and azimuth and mass of the thing, and you know that this speck in the sky will soon be turning all of humanity into carpet sweepings.

That describes the predicament facing the reporters and editors of Dow Jones & Co., publishers of the Wall Street Journal, as they watch asteroid Rupert Murdoch stream their way. The mogul is offering $5 billion to make Dow Jones part of his News Corp. media empire, sandwiched somewhere between the New York Post and "The O'Reilly Factor." While the rest of the world struggles to make sense of that dark blotch in the sky, these unemotional business and financial reporters have it all figured out. They know what's going to happen because they cover this kind of thing all the time -- stodgy, family-owned, "mature" businesses about to be made more "efficient" and "lean," all in the name of God, country and shareholder value.

They know that it is Dow Jones' turn to be put on the Shareholder Value Slim-Fast diet. With 52 percent of the voting shares opposing the merger, that means that just 3 measly percentage points stand between Murdoch and his prize. The sheer power of his money is very likely to pull in the shares that he needs. And Wall Street expects the Dow Jones board of directors to fall in line. As CNBC's Jim Cramer put it, "They are not on the board to protect the newsroom. They are on the board to assess whether Dow Jones can get to $60 on its own at some time in the future without the Murdoch bid."

The reporters at Dow Jones know that you can forget about all the spin you see from the Murdoch camp -- about how he will continue the Journal's lofty journalistic traditions and how he beefed up the foreign bureaus of the Times of London when he took over that paper. If and when Murdoch gets Dow Jones he is going to make money on it, and that will require drastic cutbacks -- entire "inefficient" divisions shuttered, employees thrown into the streets. Employee union negotiators, who had thought current management was hardheaded, are likely to look back on the pre-Murdoch days with nostalgia. "He's paying 40 to 50 times earnings, and he is going to get a return on that. He is going to crank down on costs," said one longtime Dow Jones journo who knows his way around a balance sheet.

And why not? Dow Jones opened the door to Murdoch -- or anyone with sufficient bucks to buy the company -- when it became a public company in 1963.

The Murdoch-Dow Jones face-off is only the most dramatic illustration of what has been obvious for a long time, which is that public ownership and newspapers do not mix. Investor interests can be balanced against the interests of journalism, and compromises in either direction can be rationalized, but at bottom it is an irreconcilable conflict in which journalism will always lose.

Public ownership has been a disaster for newspapers not just because it invites hostile takeovers. Quite simply, much of what newspapers do has no clear investment rationale. Entire segments of the business -- such as foreign bureaus and investigative reporting -- are inimical to profitability, particularly when viewed on the quarter-by-quarter basis favored by Wall Street. Cramer nailed down the shareholder value view of the newspaper biz a few weeks ago, when he said, "These are diminishing assets. They don't need to exist. Younger people rarely read them."

Cramer is not wrong or cynical; he is simply being realistic and refreshingly free of hypocrisy. Viewed from a shareholder value perspective, the newspaper business is a dinosaur. And that is why the shareholder point of view needs to be eliminated from the newspaper business. The shareholders, not the newspapers, are the ones who don't need to exist.

A free press has a purpose in society. Shareholders, bless their hearts, deserve to make money without being screwed. But they should find another way of turning a profit. Columbia Journalism Review put the case against public ownership mildly in a recent editorial, saying, "Public ownership of newspapers no longer makes the kind of sense it made when the industry was rapidly shedding labor costs thanks to new technology, and when the money that stockholders poured in was invested partly in editorial."

This is not to say newspapers don't benefit from infusions of capital and fresh ownership at the top. The Hartford Courant is, in many respects, a better paper now than it was when I worked there in the 1970s, before it came under Times Mirror (now Tribune Co.) ownership. But the same cannot be said for the Norwich Bulletin, which was stripped of its distinctive local character after being bought by the Gannett chain, publisher of USA Today and other, less glorious properties. A newspaper that once presented dull but exhaustive coverage of local news has been homogenized, stripped of individuality and turned into a wire-service-dominated McPaper.

While it's true that today's Courant is always in the running for top awards, it has lost much of its down-home spirit. When I began working there, in a long-disbanded bureau next to a riverfront bar in a smelly section of Groton, Conn., I produced three to four daily articles of local interest to the Courant's readers in nearby New London -- all 650 or so subscribers. That would have been an insane waste of shareholder resources for a public company. But the Courant didn't worry about that. It was privately owned. Covering New London and other low-readership towns was viewed by management as a duty for a statewide newspaper.

My competitor in New London was a feisty little paper called the Day. It is still one of the best small newspapers in the country because it has not been gobbled up by a chain, and it has not been gobbled up by a chain because it is owned by people who don't have to answer to shareholders. It is owned by a public trust established by the man who ran the paper from 1891 until his death in 1938, an immigrant from Düsseldorf, Germany, named Theodore Bodenwein. Bodenwein was no Joseph Pulitzer. "He emphatically opposed muckraking, which he felt was unnecessary and out of character for a small New England city," observed Gregory Stone in his book, "The Day Paper," about the independent newspaper. But the ownership structure Bodenwein created means that New London will always have a competent, non-chain-owned newspaper devoted to covering southeastern Connecticut.

So while the Courant folded its New London-Groton bureau, and the Norwich Bulletin was Gannett-ized, the Day, heedless of profit motives, has continued to do a great job as a useless, doesn't-need-to-exist newspaper.

Next page: The only solution is to get rid of the shareholders