Murdoch will get the Wall Street Journal

This blog will concern itself mostly with the tactics and strategies of working with journalists, but sometimes, it's going to be important to comment on upheavals in the media business. This is one of those situations.

I've been watching Rupert Murdoch for decades, and I continue to marvel at his ability to take his business where it needs to go. I don't like his brand of journalism at all -- he's the prime example of a media cheerleader for the rich and powerful, always ready to put his resources in the service of those who are already winning the game. And he has consistently positioned his media outlets to not only support the powerful, but to actively bully his political opponents and those who would challenge the status quo. He's done it in New York for the better part of 30 years with the Post and on a national stage for more than a decade with Fox News Channel.

Now he has set his sights on Dow Jones, publisher of the Wall Street Journal, Dow Jones Newswire, Barrons, Marketwatch and other media properties. It has been said that this is a play for legitimacy, to own one of the crown jewels of American journalism. But I don't think that's the real reason he's made this move.

It has been widely reported that Fox wants to start a business channel to challenge CNBC. Unlike broad-based conventional news, which he successfully upended when he started Fox News Channel to challenge CNN, there isn't nearly as much of a market for business news, and hence, for two strong business channels. After all, CNN has already tried and failed with its CNNfn channel.

So Rupert needs a brand name to get his product over the top. And what better names are there in business news than Dow Jones and the Wall Street Journal?

That's the real reason why Rupert wants Dow Jones, and why his is willing to pay about $2 billion more than the company was worth before he launched his bid.

The perfect analogy is his daring bid for the rights to broadcast NFL game in 1993. From Wikipedia: "FOX offered a then-record $1.58 billion to the NFL over four years for the rights, significantly more than the $290 million CBS was willing to pay. FOX was only seven years old and had no sports division..."

Why was he willing to "overpay" for NFL rights? Because it bought his fledgling FOX network instant credibility and legitimacy, which he leveraged several times over in building the network into what it is today. This is precisely what he wants out of the Wall Street Journal brand, and he's willing to pay $2 billion for it.

OK -- now we know why Rupert wants to buy. Why would the Bancrofts, the controlling family of Dow Jones, sell?

Duh -- The Money!

Right now, the Bancrofts are setting up some pretty high obstacles to Rupert's bid. Basically, they have said, "we want your money, but we don't want to give up editorial control or control of how the brand is used." Clearly, these terms will not be acceptable to Rupert. He certainly wants control of the brand and won't pay his money for an editorial product of which he has no control.

But the important thing is that the Bancrofts kept the door open. Wide open. You see, while they have all gotten rich from being part owners of Dow Jones, they've starved the company of capital by taking a lot of the profits out in the form of dividends. There have even been years when the dividends to the Bancrofts actually exceeded the company's annual profits. So now, with the company under assault (like all other media companies) from online technologies, it is does not have enough money to fight back and win.

So it is almost inevitable that Dow Jones will be sold, and that Rupert will be the buyer, because he's the only one who has a business reason to overpay by $2 billion.

Obviously, this is just speculation on my part, but here's how I see it playing out:

• The Bancrofts and Rupert will keep talking about the obstacles (editorial and brand control)


• Eventually, a compromise will be reached in which the Bancrofts feel that they have preserved the integrity of the Journal and other DJ properties, but which gives Rupert enough control to satisfy him


• Rupert takes control of Dow Jones and in short order figures out how to marginalize the Bancrofts and do whatever he wants (while, of course, launching the Dow Jones or Wall Street Journal Business Channel)

If and when this happens, it will have a profound impact on American business journalism, from top to bottom, from dead tree pubs to online. I'll write up my thoughts on this development, and how it will impact 21st century media relations, in a follow-up post.