The Wall Street Journal is a journalistic giant. Alas, its owner, Dow Jones, is a stock-market pygmy. That contrast is why Dow Jones is so utterly vulnerable to the takeover bid being mounted by Rupert Murdoch's News Corp., and why Murdoch seems likely to add the Journal to an empire that includes Homer Simpson, the Fantastic Four, Fox News, MySpace and the New York Post.
Dow Jones's controlling Bancroft family is caught in a conflict between its obligations to shareholders (including themselves) and the stewardship of the public trust inherent in an enterprise like the Journal. It's a problem affecting lots of other family-controlled media companies, among them The New York Times Co. The newspaper industry's problems also affect private firms like Newhouse and Hearst, where the drama is playing outside public view.
The Dow Jones drama, however, is a public spectacle, made possible by the way Murdoch, 76, has transformed News Corp. from a small Australian newspaper company into a worldwide multimedia colossus with a stock market value of $70 billion. Wall Street loves him. By contrast, the Street despises Dow Jones. Before Murdoch's offer surfaced and ran up its stock, Dow Jones had a market value of only $3 billion, ranking it 487th among Standard & Poor's 500 companies. News Corp. ranked 48th. Hence Murdoch could easily afford the $60-a-share, $5 billion offer for Dow Jones that got everyone's attention.
From a business point of view, Murdoch is the logical buyer for Dow Jones. The Journal would add immense value to the business news channel Murdoch plans to launch this fall to compete with CNBC. That makes Dow Jones more valuable to Murdoch than to any other rational buyer. Besides, he's got a hot currency to pay with: News Corp. stock. At this price, I don't expect to see any serious rival—including my employer, The Washington Post Co.— mount bids for Dow Jones.
Before we proceed, you should know that I have a variety of conflicts when it comes to this story—I'm a fan of the Journal, I've got friends there, and I love business journalism. What's more, Don Graham, CEO of my employer, wrote a passionate April 23 op-ed in the Journal defending the Times Co. and family control of media firms through two-tier stock structures such as Dow Jones's, Times's and ours. My boss of bosses' views don't influence mine on this—we just happen to agree.
Now, back to work. This isn't a big deal financially: MGIC's pending takeover of Radian Group and Nestlé's of Gerber are in the same price range, according to Dealogic. But it's a big deal for anyone who cares about the news business. It also points up the limits of family control of a public company. If a company seems to be doing a good job—sorry, I can't quantify that—no one but a few purists will care about share classes. It's about money. (How else do you explain Wall Street's approval last month of News Corp.'s $11 billion deal to buy out dissident holder Liberty Media to cement Murdoch family control? The Street moons over Murdoch even as it bashes Bancrofts.) A family's journalistic legacy can end up taking a back seat to its financial and legal self-interest if a company doesn't perform well. That's happened plenty of times in recent years.
If the Times Co. doesn't get its act together—which it may actually be doing—sooner or later enough Sulzbergers will grow sufficiently frustrated to seize control of the dominant family trust and sell the company to some trophy hunter.
We journalists are supposed to be skeptics (but not cynics). Murdoch's current statements about not messing with the Journal notwithstanding, I don't see how anyone in my business who's watched him operate can fail to be skeptical about his promises not to influence the Journal's news pages should he buy Dow Jones. Murdoch's entire history says the opposite. I don't share many of Murdoch's economic and political views (as I understand them—I've never met the man, just watched him). My problem isn't his views, it's that I value journalistic independence. I hate to see any owner—be it Murdoch or an ultraliberal—impose political, economic and social views on anyone's news pages.
I hope Murdoch doesn't get control of the Wall Street Journal, but I think he will. Some Bancrofts seem willing to sell, and my bet is that Murdoch can prevail by raising his bid a bit and luring a few more family members to his side.
Family or no family, journalism or no journalism, the stock market's a place where money talks. With a $65 or $70 offer, Murdoch wouldn't just be talking. He'd be positively bellowing. I don't think Dow Jones's shareholders could fail to listen.