The future of Murdoch’s newspapers
As News Corp starts its new life as a separate company, Raymond Snoddy examines the impact the split will have – and asks if the media mogul has one last fight in him as he continues his love affair with newspapers.
It would be really lovely to know what Rupert Murdoch really thought about the hatchet that has been taken to the empire he created. But just as it will take time for a full blow-by-blow account of his third divorce to make it into the public domain, so we have to fall back on surmise to try to work out the full story behind 21st Century Fox and the new News Corp.
In public he expressed delight at the rare opportunity granted to him to be able to do it “all over again.”
We can assume the split wasn’t wholly voluntary and that it was forced in some fashion by pressure from US shareholders who greet Murdoch’s continuing love affair with newspapers with incredulity. The News of the World affair must have been the last straw for the American shareholders of old News Corp.
The remaining and very important question for the future of the Murdoch newspaper titles is whether the grand old man of the media business has suffered a serious defeat or whether we are seeing a tactical retreat across terrain of Murdoch’s choosing in the sure and certain expectation that he will live to fight another day.
All the signs are that Murdoch is as serious as he ever was about newspapers and that he has done as much as he reasonably could in the circumstances to give them an independent existence – given the realities of the undivided business. Television accounts for seven times the revenues of Murdoch’s newspapers and rising, even more of the profits and almost all of the expectations.
In the terms of conventional corporate capitalism it would have been entirely unsurprising if Murdoch had cut the newspapers free to sink or swim as an historic, and increasingly embarrassing relic.
That is not what has happened at all. The signs of continuing care are many and various. The new News Corp is debt free and indeed comes with a dowry of $2.7 billion (£1.7 billion) and Australian pay TV assets are thrown in as make-weights.
Naturally the shares of 21st Century Fox, the really new News Corp, surged while the newspaper News Corp received at best a tepid response – although optimists will note that at least there wasn’t a rush for the exit. That could yet come as those who only want the television shares start dumping their shares in the unwanted paper business. Which is why the dowry includes $500 million (£328 million) to buy back unwanted shares to help create a floor to avoid embarrassing falls. The rest of the kitty is earmarked for reconstruction – a euphemism surely for more job losses – and acquisitions.
The launch of the new company dubbed, no longer News International in Britain, but News UK, could herald a deal with the independent national directors of the Times. The INDs have done their duty and refused to be steamrollered over new editors for the Times and Sunday Times but it’s time now for both papers to have editors rather than acting editors.
It is also likely that as Andrew Knight, chairman of Times Newspapers hinted last week, there could easily be a degree of modest integration at the Times and Sunday Times which falls short of full seven-day operation.
Full integration would surely not be acceptable under the original 1981 deal that enabled Murdoch to acquire the papers in the first place. A lot has changed since then but the company is hardly likely to go to Parliament cap in hand asking for the 1981 agreement to be formally renounced.
While in theory Murdoch could use 21st Century Fox to have another go at buying the majority stake of BSkyB he does not already own, in practice this is unlikely to happen. Murdoch, who is chairman and chief executive of the TV and film company and executive chairman of the new/old New Corp, would still be seen as the master controller of both.
News Corp may now seem like a rump but at a market capitalisation of around £6 billion the group which includes the Wall Street Journal and the New York Post it is still the largest newspaper group in the US and could be a magnet for other distressed newspaper sales.
In particular Murdoch would obviously love to own the Los Angeles Times and if it came down to a matter of the paper’s survival or not, then Murdoch monopoly fears might fall away and the octogenarian could get what he wants.
There is no doubt that News Corp will, in future, remain the runt of the litter with the television businesses already worth close to $70 billion and the gap between them is likely to keep expanding. But what if, in a more modest way, News Corp could be successful and might actually start to, if not actually flourish, then at least progress on its own growth pattern?
The are some signs already from the US that the very worst of the newspaper declines may be over or at least bottoming out, albeit with historically low levels of employed journalists. Subscriptions from tablet and app use could over time create a new stream of revenue.
What Murdoch has done is given his newspapers a breathing space, a time to reorganise and become more efficient, however painful a process that will be.
There is still a danger in the UK that unthinking, meddling politicians will cause a new threat to the viability of newspapers by playing about in a careless way with crude percentage caps on media ownership.
The ultimate threat to News Corp however, will come from the finite nature of Rupert Murdoch.
His heirs and successors may have none of his sentimental attachment to newspapers and if News Corp is not decently profitable by then the business already in the convenient form of a neat bundle could go to the highest bidder whether they can provide a good home or not.