January 21, 2008
Toppling the Times: Rupert Takes On PinchBy Ed Lasky
The American mediascape is about to experience an earthquake, Rupert Murdoch is preparing to topple the New York Times from its position as the pre-eminent general interest daily newspaper, generating severe financial pressure on a struggling media company reeling from mismanagement. There is every indication he will succeed.
The New York Times has long enjoyed the status of America's leading and most influential national general interest newspaper. A wide range of advertisers, particularly purveyors of upscale goods, have paid escalating advertising rates to reach the elite readership presumed to read the nation's leading daily.
The paper has capitalized on its nationwide reach and influential readership to promote a liberal agenda (its public editor admitted the Times was ‘of course...a liberal newspaper" ).
While the company has suffered from poor management under its Chairman and publisher, Arthur Ochs Sulzberger, Jr ("Pinch"), he has been insulated from pressure by shareholders (including a hedge fund that accumulated millions of shares) because of an unusual voting class structure that vests enormous power -- but little ownership -- in the founding family.
However, Pinch will soon face a very formidable competitor. Legendary media baron Rupert Murdoch has just completed his purchase of the Wall Street Journal - a paper that also enjoys nationwide reach, but one that has heretofore focused on the world of business. Change is afoot. Murdoch is a man who makes no "small plans"; he makes "big plans".
Moving in on the Times
Murdoch's goal is to transform the Journal into a rival of the Times, and then surpass it, making the Journal the nation's preeminent general interest newspaper. Given Murdoch's history, zeal, resources and talents -- all qualities sadly lacking in the fourth generation of Sulzbergers, as symbolized by Pinch -- the Times will be toppled.
The downfall of the Times was almost pre-ordained once family members placed Pinch Sulzberger in control of the paper. He had no real world experience to prepare him to lead the Times. He had two brief sinecures working for other companies (he was a reporter with the Raleigh Times and the London correspondent for the Associated Press) before joining the family paper. Once he was "promoted" to be both the publisher and Chairman of the Board (duties that many believe should be divided between two people for ethical as well as business reasons), he was uniquely positioned to do double the damage to the paper. And damage he has done. Indeed, his greatest "accomplishment" seems to be his ability to drive the paper and his extended family fortune into the ground.
His managerial failings have been repeatedly chronicled in a series of American Thinker articles; the descent of the paper is graphically displayed by the decline in its market value. While all newspapers have been beset by a series of challenges (declining readership, advertising dollars departing for the web, the rise of other media outlets), the Times has suffered disproportionally more damage than its peers. As the last year came to a close the New York Times Corporation was hit by a flurry of rare sell recommendations by investment banks across the nation and (showing his investment prowess, Sulzberger has been selling his own shares as the stock hits its lows).
In contrast, another prestigious diversified newspaper, the Washington Post, has held up rather well. Donald Graham, also an heir to the family enterprise, has been an unassuming leader: he appointed someone else to be the publisher and CEO of the paper, the paper has diversified wisely (ironically, the paper has benefited enormously from its venture in private education -- a step that the Times would be unlikely take given its liberal proclivities), and the Graham family has welcomed the wise counsel of legendary investor Warren Buffett.
As shown by Pinch's cavalier treatment of activist investors who have pushed for change at the paper, he does not seem to have learned to accept criticism or guidance. There has been all too little of the type of checks and balances at the Times that the paper advocates for our government and for other corporations.
Sadly, the Washington Post has never chosen to challenge the Times on the national level as a general interest national quality daily. The Journal will. It already has a higher circulation base than the New York Times, but it has focused on financial coverage and has lagged in attracting advertising aimed at general conmsumerss. If it expands its coverage and becomes a general interest newspaper, it might make dramatic gains against the Times, which relies on subscribers outside New York City for half of its circulation. (Tellingly, the Murdoch-owned New York Post has a circulation greater than that of the Times in New York City.)
Rupert Murdoch has the potential to dramatically weaken the Times -- already a paper that has suffered from management mistakes. Murdoch has chosen an ideal time to launch his strike. The Journal is already well positioned. If anyone can make the Journal into the leading national general interest newspaper, it will be the media baron from Down Under.
The Journal already has nationwide printing and distribution network in place. Arguably, these have been underutilized: the paper had the reach, but before Murdoch either did not grasp the potential of these assets or preferred an entente cordiale with the Times, each paper sticking to its market segment.
Murdoch does see the hidden value. He has a profound talent for seeing potential where others have not. He also has a strong entrepreneurial bent. Murdoch inherited a very small newspaper chain in Australia and, unlike Pinch (who wrecked his much larger inheritance), built this into a worldwide empire. How? By finding underserved areas of the market and, through his wit and intelligence, finding ways to fill these holes. He did so in Australia, he did so in England, he did so through his satellite TV operations, he did so with the rise of Fox News to its number one position in broadcast news, and he will do so again now that he is in control of the Journal.
Murdoch will enhance the appeal of the paper and in modern business parlance "reposition" the Journal to become a general interest paper. While the paper has been traditionally known for its coverage of business, it has been running well regarded general news coverage, winning its fair share of Pulitzer Prizes. What has been missing is the capacity to capitalize on and enhance these assets that Murdoch brings to the table.
Expanding the Journal's readership
While some may assume that the Journal already has a conservative bent that will hold limited appeal for the people who want to subscribe to a high quality national newspaper, this stereotype is not generally warranted now and may be even less warranted in the future. A 2004 study shows that the Wall Street Journal news pages are far more moderate-or even liberal-than is commonly assumed.
The editorial pages may have a right-of-center perspective, but serve often as type of loyal opposition to the Republican Party, feeling free to criticize. The editorial page has seen round after round of attacks on agribusiness, corporate ethical improprieties, subsidies given to corporate America, and the failures of George Bush's foreign policy. The paper will not foreswear attacks on Republicans -- Senators Stevens and Grassley can attest to having tasted a bit of paper's bile.
Indeed, as the integrity of the Journal's editorial board becomes more widely known the manifest problems of the Times' editorial pages will be even more starkly visible and less appealing. Times editorials are all too often redundant and overly emotional -- empty of facts, but filled with Id and Ego-and anger.
When Murdoch first expressed his desire to buy the Journal, many feared that he would ruin the paper. His moves since then have shown he appreciates the jewel that is in is hands. Every media baron, it seems, wants a trophy property. He has shown that he will pour resources into the paper and capitalize on the breadth of his empire to bolster its national impact. Even the New York Times has admitted that Murdoch has taken steps to assuage the naysayers:
Murdoch also pledged to open his purse strings to expand The Journal's reach, a prospect many people welcome at a newspaper with years of stagnant advertising revenue. Already, The Journal has offered significant raises to journalists it wants to hire and to some who were considering leaving the paper, with Mr. Murdoch calling some reporters personally to ask them to stay.
The News Hole
Murdoch shows every intention of expanding coverage of the news. He has made a series of high profile moves not only to retain journalists but to add to the roster others who have achieved renown for their coverage of general interest news, politics and international affairs. (Reportedly, he has even toyed with, and rejected, the idea of erasing "Wall Street" from the title of the paper).
Rupert has begun to move his chess pieces. He has said that more resources might be funneled into covering politics, both in Washington and internationally. He is reportedly likely to assign a well-regarded journalist to cover homeland security and national affairs . These are areas that the Times where the Times long has had a strong presence, as can be shown by the steady stream of leaks that have fed the Times.
Murdoch also announced that he wants to add major coverage of arts, fashion and culture to the Journal. He has named one of his chief deputies, Robert Thompson, editor of the News Corporation's Sunday Times of London, as the new publisher of the Journal. This is another indicator that he wants to nudge the Journal into general interest coverage of the news.
These moves have already been telegraphed, but Murdoch has more tricks up his sleeve. Many more tricks, some of which can only be subject to speculation. But his history shows him to be a fearsome competitor who has become one of the leading innovators in publishing.
Murdoch has built a multi-media empire that spans the globe (indeed in a sort of accolade he was purportedly the inspiration for the media baron portrayed by Jonathan Pryce in the James Bond move Tomorrow Never Dies). The contrast between Murdoch and Sulzberger is startling when one compares their business strategies and totes up the scorecards.
Contrasts between the two men
Sulzberger purchased the Boston Globe, an old media property in a slow-growing region of America that he now hopes to unload (inevitably for a massive loss). Murdoch purchased media outlets in Asia, the fastest growing region in the world.
Sulzberger has been selling off various pieces of the Times: television stations, local papers, even furniture from its old headquarters, in order to fund the operations of the paper.
Murdoch has grown his company at an exponential pace, buying properties around the world, fashioning an empire that pours out money to fund further empire building.
Sulzberger spent nine figures on a 50% interst in the Discovery Times Channel, winning only a miniscule cable television presence compared to Murdoch's News Corporation (which has profited mightily) and eventually dumping the investment at a loss.
Sulzberger was late in staking out a position on the internet and, typically, overpaid for his paper's ownership of About.com, an also-ran, at best, in the internet world.
Murdoch scored a coup when he swooped in and purchase MySpace: one of the fastest-growing websites in the fastest growing sector of internet online communities. He paid 580 million dollars a couple of years ago for a property now worth far more.
Sulzberger tried to charge for internet access to his columnists (the infamous TimesSelect which now shares space with the Edsel in the Business Hall of Shame) and then sufferd an ignominious defeat when he found too few people willing to take him up on his offer. (Meanwhile, across town at the Journal, the paper has been minting money charging for internet access).
Perhaps Pinch Sulzberger, beneficiary of a family fortune, educated at exclusive schools, a Vietnam-era protester who had a golden carpet unfurled before him at a tender age, just did not want to sully himself in the grubby world of business. Perhaps he does not want to get ink on his hands (I wonder how often did he visit the printing plant he just closed down?).
Perhaps Sulzberger was just too busy engaging in his penchant for liberal politics to devote time to the real world of publishing. Regardless, Sulzberger has just not had the same verve as the self-made Rupert Murdoch.
Murdoch is a business genius; he is a visionary who has been building his empire for decades. He purchased the Twentieth Century Fox entertainment operations and has made it phenomenally and consistently successful, built a radio network, satellite operations, TV stations, newspapers and a long list of other properties that he has either purchased, built, or built-up around the world. http://www.newscorp.com/
All these media properties important provide Murdoch with funds that he can pour into the Journal. Murdoch's News Corporation's revenues dwarf those of the Times, 29 billion dollars compared to a bit more than 3 billion dollars. But more than just size, they provide all the resources needed when the convergence between the old media and the new media reaches fruition.
The new general interest Journal can be expected to seek advertising from a much wider range of clients. It can afford to cut prices in order to lure ads away from the Times and onto its pages. Package deals can be created, including ads and promos on broadcasting and cable properties, internet properties, and even product placement in films, for example. The Times cannot match this sort of razzle dazzle.
If advertising rates start falling for the Times instead of steadily rising, as they have in the last several years, this could put a financial squeeze on the company, forcing it to seek a capital infusion. Or worse, should the advertising revenue carnage become serious and continue.
Realizing Synergies at News Corp
One can envision something of what the future will bring when the Wall Street Journal enjoys all the benefits that other parts of News Corporation will provide. As it is transformed into a paper geared toward all the American people, features that are developed at other Murdoch properties can be easily "parachuted" into the printed pages of the Journal.
Entertainment news? No problem. News Corporation has wonderful connections via its Twentieth Century Fox operations.
More religious coverage for an increasingly religious America? News Corporation recently purchased Belief.Net, a key website for people who want to better understand their faith (an acquisition that would be unlikely to pass muster at the religiously secular New York Times).
More local news, more international news? Easy access with ownership of over 100 newspapers around the world and Fox radio and TV outlets throughout America. The News Corporation can be its own in-house Associated Press combining the people in place with the wherewithal to put even more of them in place) to report from outposts around the world.
Even more prosaic items might be placed into the pages of the Journal, if the demand exists. More crossword puzzles? Gossip? The New York Post stands ready. More consumer-oriented news, more travel coverage? The Journal is already moving in that direction, highlighted by its Saturday edition and its Personal Journal section.
Sports coverage (a very important area for many subscribers)? This is (excuse me for the pun) a layup. Fox Sports has a huge presence in the sport world. Fox has network news outlets throughout America whose stories, after a few clicks on the computer, can be routed into fodder for the printers of the Wall Street Journal.
Murdoch has also shown a much greater appreciation for the role that the internet can play in the media world than has the New York Times. The potential of the internet to leverage the resources of News Corporation is vast and Murdoch will be the one to capitalize on this potential. Even though the Wall Street Journal actually makes a profit by charging for internet access (a notable contrast to the Times), Murdoch has indicated he will probably lift these fees in a bid to expand the reach of the Journal, thereby dealing another setback to the Times, which will face new competition for online readers of free content.
As Myspace becomes even more popular, it is not too much to envision personalized news being electronically delivered to virtual communities, where it might engender discussion, or even to individuals with the news items being tailored to match a reader's interest.
Murdoch also has a sterling asset in the business coverage of the Journal; he intends to leverage this asset to help his fledgling business news channel. This will give him coverage of the investment world that will clearly dwarf that of the Times.
Murdoch is rumored to be in talks to acquire LinkEDIn -- a business networking site. Will he combine all these (or other) resources and capitalize on the internet to tailor the delivery of business and investment news to subscribers? As the population ages and investment concerns grow, the Journal will become an even more vital tool than it is now.
Opportunities abound for well-funded Murdoch, while his opponent has a weak hand, with fewer and fewer chips to bring to the game. The New York Times has been a wasting asset for years. Murdoch has made clear his intention to directly compete with the paper. As Michael Calderone wrote in the New York Observer, Murdoch has all but declared to the Times: "I will bury you".
This is a triumph I will celebrate. The Times has for far too long set the national agenda for other news outlets and has given a particularly liberal perspective on what, and how, it chooses to report the news. Murdoch himself has expressed his distaste for the role that Times has arrogated for itself when he spoke to Time magazine about his desire for the Journal to become a national counterpoint to the New York Times in setting the country's agenda: :
We should all be cheering him on and celebrate the transformation he will bring to the Journal. We will be the beneficiaries. Just as two parties competing with each other for allegiance of voters strengthens America, we will now have two national papers competing for readership and for influence.
Money manager Larry Haverty (who owns a position in Rupert Murdoch's News Corporation) in an interview with Bloomberg News foresees a future where the Wall Street Journal displaces the New York Times as the national paper -- one that will have a right-wing editorial approach versus the "ultra left-wing view" at the Times. He calls the New York Times "easy prey".
Will Pinch have met his match in Rupert? Will he continue to be coddled by his family while a resurgent Wall Street Journal eclipses the Times as America's Newspaper? The smart money in this battle is on Rupert. After all, who would favor the swaddled over the swashbuckler?
Ed Lasky is news editor of American Thinker.