News Corp loses its news

By Felix Salmon
June 27, 2012
Jeffrey Goldfarb today, "the scandal may have been the best thing to happen to News Corp", on the grounds that Hackgate is likely to end up forcing Rupert Murdoch to spin off his newspapers, along with HarperCollins, into a new, separate company.

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“In a way,” says Jeffrey Goldfarb today, “the scandal may have been the best thing to happen to News Corp,” on the grounds that Hackgate is likely to end up forcing Rupert Murdoch to spin off his newspapers, along with HarperCollins, into a new, separate company.

I can see what Goldfarb means: it’s probably fair enough, if you’re writing for a service like BreakingViews, to assume that whatever is good for a company’s share price is good for that company. But from a journalistic perspective, the news at News is much less good.

I was at the Loeb Awards gala dinner tonight, where the WSJ’s Jerry Seib won the Lifetime Achievement Award. He’s been at the WSJ since 1978, and in his acceptance speech he talked about the culture shock which descended upon the newspaper after it was bought by Murdoch. At the same time, however, he welcomed it: “there’s a reason it’s called the News Corporation,” he said — and he’s right. Murdoch, at heart, is a news man, and although most of his wealth is attributable to sports and entertainment, it’s clear that his heart is very much in journalism. Moreso, it should probably be said, than most of the Bancrofts who sold him the Journal.

In the short term, this makes sense. It would give the entertainment company more latitude to operate without the reputational baggage associated with News International, and if anything it would allow Rupert Murdoch to further consolidate his control of his newspapers, since the valuation of the spun-off company would be low enough that he could quite easily take it entirely private, if he wanted. Rupert Murdoch won’t be any poorer after this deal is done — in fact, he’ll be richer, thanks to the eradication of the “Murdoch discount” — and so his newspapers’ charmed lives as playthings of a billionaire who doesn’t care much about ROE is likely to continue either way.

But so long as the print properties remain public, shareholders are going to be even noisier about making them pay than they are right now. At the moment, News Corp shareholders mostly just want the newspapers to go away. But after the spin-off, shareholders in the new company will be agitating noisily for profits. Murdoch will ignore them, of course — but that kind of thing is difficult to ignore entirely.

Up until now, Murdoch has never really needed to worry very much about his newspapers’ profitability, because the rest of his empire was throwing off such enormous profits. That’s going to change. Even if he does take the papers private, none of his heirs particularly wants to inherit them. There’s a big question mark over the papers’ future, now, which will only grow as Murdoch gets older.

There’s also the fascinating question of what’s going to happen with Fox News. When News Corp loses most of its news properties, only Fox News and Sky News are likely to remain — and when big broadcast companies own news operations, those news operations tend not to perform very well. The fact that news is part of News Corp’s DNA has surely been a crucial factor in Fox News’s success; now that’s coming to an end, Fox News’s new overseers might view the channel in a significantly different light.

Again, nothing is going to happen overnight: Murdoch will continue to have personal control of both companies, and both will be run exactly the way he wants them to be run. But in the world of journalistic business models, I’ve always been a fan of being owned by a benign gazillionaire, who cares about more than just profits. Both Bloomberg and Reuters fall into that category, as do outfits such as the Atlantic, CondĂ© Nast, and The New Republic. But Murdoch has always been the first billionaire you think of when you think “press baron”. And it’s foolish to believe that a change as big as this at the corporate-structure level will have no effect on his individual properties.


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The problem for The Empire is that the Leveson Inquiry in the UK is shining light onto more than just how News was handled, but on the behaviour and cover ups of the people at the top. Splitting the company will not change the accusations of not being ‘fit and proper people’ to run the company.

From Murdoch’s point of view though, he obviously likes steering people’s views in the direction he wants them to go in, and that’s not going to change. These days this can be done perhaps even more effectively through managing the entertainment schedules, and ensuring issues he wants to influence are scripted into the more popular shows so as to have people subconsciously follow the one sided arguments that, for instance, Fox have become known to offer.

I suppose one question will be, are shows such as Rush Limbaugh’s classed as News/Opinion, or Entertainment/Invention?

Posted by FifthDecade | Report as abusive

I know it was a little off-topic, but you fail to mention that you won a Loeb Award yourself last night at that ceremony. Such modesty. Congratulations, Felix.

Posted by knoblet | Report as abusive

Might give them a chance to clear up the bizarro split voting structure that you have long ranted about too I guess. James Murdoch never seemed to me as much a news man as Rupert, and he must hate it even more now. Best do this now while the news portion is still worth something…

Posted by JustinCormack | Report as abusive

Indeed, congragts, Mr Felix. You’re doing God’s work.

As for Mr Murdoch, I dont’t care how much he is or is not a “news man”. He’s still a greedy, arrogant, corrupt, lyin’ you-know-what.

Posted by krimsonpage | Report as abusive

Leaving aside, for the moment, the question of whether ANY “gazillionaire” can be truly “benign,” one wonders how you could possibly put Mr. Murdoch in that category.

Elaborate, please.

Posted by Eericsonjr | Report as abusive

Why do you think the Murdoch discount will be eradicated? Both companies will still be controlled by Rupert.

I also find it farfetched to think Fox News relies all that much on News Corp’s presence in other (print) news media. CNN succeeded for a very long time in a stable of Turner entertainment channels.

Posted by right | Report as abusive

(none of what I have to say about Murdoch is printable, so won’t comment, but I wish to congratulate you on the blog award Felix)

Posted by youniquelikeme | Report as abusive

I think that the shareholders, and perhaps Felix, miss the value of Newscorp’s “news” operations.

The newspapers and the news channels allow the other side of the operation to derive regulatory and political benefits.

If Murdoch did not own those newspapers, do you think that his proposed takeover of BskyB would have progressed as smoothly or as quickly?

His papers are how he rewards his friends, and punishes his enemies, and it creates an environment where bureaucrats, and politicians, are much more likely to do his bidding.

Remove that, and much of his success goes away.

Posted by Matthew_Saroff | Report as abusive

Think the Antipodean print operation will go to Lachlan. And congratulations, Felix!

Posted by crocodilechuck | Report as abusive

Congrats on the award Felix. There are quite a few regular commenters to your blog that deserve some recognition too for the interesting discussions your articles generate. Your readership is (for the most part) of the highest quality.

Posted by FifthDecade | Report as abusive

Congrats on the award, Felix, always interesting around here!

Posted by TFF | Report as abusive

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