Sloan: It's Not All About Money

If all you care about is reported profits, you wouldn't want any part of owning The Wall Street Journal. The paper, for all its cachet and influence, is at best marginally profitable; the profits of its parent, Dow Jones, come primarily from electronic data distribution. But the Journal, financial laggard though it may be, is the primary reason that Rupert Murdoch and possibly other players are willing to pay $5 billion or more for Dow Jones.

Here's the deal. In a fragmenting world in which anyone with an Internet connection can become a "content provider" and start-ups like Google or Yahoo can lure tons of targeted advertising dollars, the Journal is still a central, trusted institution that's required reading for much of the business world. A journalistic megabrand, the Journal tries to make sense of what's going on in the financial world, then presents its findings in what I consider a highly professional, generally disinterested manner. (I'm talking about the Journal's news pages, of course, not its famously conservative editorial pages.)

No, the Journal's not perfect. What is? But I love the Journal newsroom's prickly independence. I saw the paper bend over backward in the 1980s to avoid favoring a member of Dow Jones's board; I saw a top Journal editor, my friend Barney Calame, recuse himself from the Enron story after being contacted by a longtime acquaintance, Enron chief executive Ken Lay, who didn't care for the paper's groundbreaking coverage, and last year, of course, the Journal broke the news about hundreds of companies' having improperly backdated stock options.

But although journalistic coups and strict attention to journalistic ethics are what have attracted the Journal's audience and built its brand value, the paper itself isn't all that good a business anymore. The Journal was fat, happy and nicely profitable in the latter days of the 1990s stock-market bubble, as evanescent companies flush with money raised in the stock market bought ads right and left. As did the Wall Street houses that floated those bubblicious issues. When the bubble vaporized, so did the ads. Even though the broad stock market has recovered from the bust, the Journal's ads still languish well below their highs. They're unlikely to ever be what they were, given the fragmenting world of national advertising that has affected many mainstream national print publications, including my employer NEWSWEEK.

One reason Dow Jones is so vulnerable to being taken over is that its cash cow—the electronic data distribution business—is threatened by the pending merger of Reuters and Thomson. Combine that prospect with the Journal's profitability problems, and you see why Dow Jones is toast—at least financially.

Murdoch and the other possible bidders aren't looking at the Journal as a mere stand-alone business. Murdoch has proved to be a brilliant businessman who has largely set aside short-term financial considerations—such as the impact of paying $5 billion for Dow Jones—while building long-term value. Putting the Journal brand on a business-news network like the one Murdoch plans to start would be invaluable. And if you're looking for power and influence—who with $5 billion-plus to spend isn't?—the Journal is a prime property, its finances notwithstanding.

I'll spare you my rant about how Murdoch's owning the Journal would result in its news pages' gradually shifting to favor his political and economic interests. Yes, the Journal's journalistic reputation is Dow Jones's primary asset. But that doesn't mean Murdoch won't try to skew its journalism. He is what he is.

The bottom line: in an ever-more-fragmented world where trust and dispassion are endangered species, the Journal's fairness and balance make its reputation enormously valuable. As someone who has competed against the Journal for almost 40 years, I hope its reputation—and excellence—remain intact. Whoever its new owner proves to be.

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