WHAT'S NEXT: INNOVATIONS IN NEWSPAPERS

Shares of Dow Jones gained almost 2% to close at $59.01 Friday on news that Pearson, publisher of the Financial Times was seeking partners for a joint counteroffer for the company that would compete with Rupert Murdoch’s $5 billion bid.

One company Pearson has approached is General Electric, which owns business news channel CNBC.

If, on the other hand, Murdoch acquires Dow Jones, the Journal will compete more directly with the FT in Europe and Asia, and News Corp.’s plans for a Fox News business channel — which would compete with CNBC — will gain traction.

The Bancrofts, who are reluctant to put the Journal’s editorial integrity in Murdoch’s hands, are expected to warm to a Pearson approach, but it is viewed as “a long shot” because of the difficulty of three-way mergers, the lack of a leader, and the expensive problem of cashing out the company’s shareholders.

This is part of the dirty Dow Jones war.

FT?

No way!

If they are not able to fix their own circulation and advertising problems, how are they going to fix Dow Jones’?

Good news for quality papers:

The Financial Times is raising its UK weekday cover price from £1 to £1.30, while in the US, The Wall Street Journal has elected for a 50% rise to $1.50.

The FT’s Saturday edition is also going up from £1.50 to £1.80.

Next?

The New York Times.

Jim Cramer writes in thestreet.com about the 10 Stories You Won’t Read About Dow Jones’ Merger Missteps

I keep thinking about what The Wall Street Journal would write about the following company’s takeover trials.

1. The company gets the takeover bid and the senior officers sit on the bid and disclose it to no one as the stock goes up, making it likely that there will be trading on inside information. That’s why the law wants timely dispersal of material information. Can you imagine the field day the Journal would have with that?

2. There’s an incredible amount of call-buying after the receipt of the bid — but before it is announced as a scoop, no less. Who knows how long the company in question would have sat on it?

3. The board turns out to be a total nonentity and doesn’t even take a position on the bid. Can you imagine what the Journal’s reporters and editors would do with that?

4. The controlling shareholder family’s spokespeople, before the bid is even cold, say the word is “no.” Without even polling the family? Can you get more duplicitous? The polling turns out to be wrong.

5. The scion of a subsidiary chain without any reputation for greatness or even goodness turns out to be the most vociferous board member against the bid. (OK, by now you’ve figured out that I’m abstracting the Dow Jones situation with this News Corp. bid from Rupert Murdoch. Frankly, I would rather work for the worst Murdoch property than the best Ottaway paper. Nobody takes Ottaway to task for that “irony.”)

6. There seems to be only one kind of independence the Journal cares about: reporting independence. How about editorial independence? Why doesn’t anyone there talk about how the editorial page’s view would be preserved under Murdoch but not other owner in the media? Why isn’t that pointed out? Ron Burkle sure wouldn’t preserve that. I think that’s a great point in favor of Murdoch.

7. The resumes are flying out of the bid-for company, yet it never gets reported. (And everyone knows it.)

8. The numbers are so bad since the year began that the hypothetical company in question would be laying off people right now, but management wants to wait because it would look bad and make the need for a deep-pocketed bidder much more evident. (Wouldn’t do to look like they need Murdoch, would it?)

9. The paper seems reluctant to report on the myriad failures to diversify away from anything except for newspaper. (So what? The reason you needed the diversification was to pay for the paper. Instead, all we hear about is the need to preserve purity. You know how preserve purity? You make money away from it.)

10. The new travesty: How could all of these promotions be made today fully knowing that the paper and the company will most likely be sold? What the heck? Where’s the questioning and reporting of that?

Nah. Too close to home.

This story, if it had been any other business, not just the press, would have produced an endless series of stories about how rogue this company has been, how anti-shareholder, frankly, how disgraceful this whole episode has been.

Fortunately for Dow Jones, its executives, its board members and the clueless controlling family, the company owns the most important business newspaper in the country.

What a break.

He is right.

And politically incorrect.

Murodoch or Bloomberg could do it better.

And one of them will.

For sure!

Robert Thompson is the editor of the London Times.

Rupert Murdoch hired him when he was in New York working for the Financial Times.

The FT’s circulation in the U.S. was just 45,000 copies a day.

By 2002, U.S. circulation had increased to 150,000 copies.

He knows business media.

And he is the key editor behind the Murdoch bid for Dow Jones.

Today’s Wall Street Journal has an interesting profile of Robert Thompson that includes these paragraphs:

Mr. Thomson and Mr. Murdoch have an unusually close relationship, said people who know them both.

They share Australian roots and a birthday (March 11, 30 years apart).

Both married women from China and have young children. Wendi Murdoch and Mr. Thomson’s wife, Wang Ping, get along well and speak Mandarin to each other, say people who know them.

The two families have vacationed together.

Kim Fletcher, a British media commentator and former editor of the Independent on Sunday newspaper, said that sharing vacations represents an “astonishing closeness” between the newspaper owner and his editor.

“When Thomson was appointed [Times editor], he was seen to have come from nowhere because he wasn’t on the general newspaper scene — he was from a business-newspaper background,” Mr. Fletcher said.

Mr. Thomson grew up in a working-class family in the Australian bush and got his first full-time job at age 17 in 1979 at Melbourne’s Herald, an evening paper once edited by Mr. Murdoch’s father, Sir Keith Murdoch.

Mr. Thomson missed out on a position as a trainee journalist and became an errand boy instead.

A year later, he became a reporter.

At night, he studied for his journalism degree at the Royal Melbourne Institute of Technology.

In the early 1980s, he moved to the Sydney Morning Herald. Through a sharing arrangement with the Financial Times, the paper sent him to Beijing as a reporter.

In 1989, Mr. Thomson covered the crushing of the Tiananmen Square democracy protests by the Chinese army. He was in the square when a group of soldiers started beating up another reporter, Jonathan Mirsky of Britain’s Observer newspaper.

Mr. Thomson helped pull away Mr. Mirsky, both men recall.

(…) In 2004, the Times had an $89-million loss, according to a person familiar with its accounts. Next year, the paper is expected to make a profit, this person said.

“Rupert Murdoch gets little credit for seeing the Times through the difficult years,” Mr. Thomson said in an email. “It’s fair to say that we are famous for being a not-for-profit” organization, he jokes.

The Times has lost money for most of the time it has been owned by Mr. Murdoch, according to several former editors.

Tall, thin and with a slight stoop because of a back problem, Mr. Thomson is approachable and rarely shows anger, said people who have worked with him.

With a soft voice and an eccentric style of dress — he is fond of thin ties — he stood out in the newsroom, said people who have worked with him.

Not a bad editor.

For the old Times of London…

Or for the new Wall Street Journal.

Roy Greensland liked my last comment about Murdoch.

Well… here’s another cheap shot.

This one is from an art director (a very bad one if this is what he produces) from The New York Times.

Let me just add one thing:

The Bancroft family is the same one that, for decades, produced a very poor Wall Street Journal.

The credit for the most recent one belongs to Barney Kilgore, who, in the 50′s, changed this newspaper for ever.

He was a great editor.

Dow Jones earned more than $13 million in 1966, the last full year of Kilgore’s tenure, compared with some $211,000 in 1945, when he officially became chief executive.

So… the Bancrofts and the Wall Street Journal don’t need to be afraid of Rupert Murdoch.

They need to be worried about bad editors and bad publishers.

Rupert Murdoch is not an outsider.

He is us.

As good and as bad as all of us in this industry could be.

But he speaks our language.

Not the language of the financial or real state moguls who want to control Dow Jones now.

It’s clear to me that, in general, U.S. journalists, editors and publishers don’t like Rupert Murdoch.

Why?

The U.S. newspaper industry is very parochial.

Go to the participant list of any big international newspaper conference outside the United States and you will find only a few people from this country.

Go to any of their domestic conferences and you’ll find hardly any speakers or presentations from other markets.

Our beloved Leo Bogart used to explain the reasons:

This has been a monopolistic business.

Making a lot of money.

Producing very mediocre news products.

Ruled by advertisers.

Selling the papers almost free.

So…

When somebody comes here and wants to buy The Wall Street Journal, the industry pundits make astonishing “revelations” like this one: “He will control the editorial voice of the paper.”

Oh yes?

Excuse me, but I have been reading the WSJ for many years and the “editorial voice” of the paper was, and is, one of the most right wing voices of the newspaper world.

But more than that: do you know, my friends, ANY newspaper owner that doesn’t control the “editorial voice” of his paper?

C’omon!

The Wall Street Journal under Rupert Murdoch will NOT be able to be more right wing than it is now.

But The Wall Street Journal under Rupert Murdoch will perhaps have a better multimedia and online strategy and business management.

And perhaps he will invest and re-invest some of the money that the Bancroft family is pocketing today from profits and dividends.

If I were a journalist or an editor at the WSJ I would not be worried about who controls the “editorial voice” of the paper, but about if the people who run the company have a serious multimedia and online strategy, are ready to invest a lot of money in that vision and keep the newsroom doing its job as well as it has been — including the “editorial voice” of the editorial pages.

Rupert never has been as right wing than they are now… thanks to the Bancroft family.

The New York Times reports about the face-to-face meeting.

Richard Perez-Peña’s lead:

Mr. Murdoch made clear that he would not accept the terms of the Bancroft family’s proposal, which would give a board of independent overseers the power to hire and fire top editors, according to people who were present or were briefed by participants, but, they said, Mr. Murdoch floated an alternate arrangement in the meeting, which lasted almost five hours.

“Both sides laid out the way they thought it should work, and neither side agreed with the other, but they’re eager to keep talking,” said someone who was briefed on the meeting but who was unauthorized to speak on behalf of the participants. “It was all very pleasant on both sides, but there’s still plenty of distance between the two.”

It will take time, but the deal is under way.

(Picture by David Karp/Associated Press)

The Bancroft family said today:

We will meet with Rupert Murdoch to discuss his $5 billion bid for Dow Jones.

We will consider other bidders and options for the company.

“After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the Family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization which may include News Corporation.”

Well, they want more money.

And they will get more money.

From Murdoch.

Or from The New York Times.

Be ready for the white knight.

And if you have shares of Dow Jones, keep them.

You will make more money than you expected.

At the end of the day, this is Wall Street.

This is business.

Not charity.

Money talks.

Journalists listen.

Following a special meeting of the Board of Directors of Dow Jones & Company held at the request of the Bancroft Family directors, the Family today issued this statement:

“As we have been since 1902, the Bancroft Family remains resolute in its commitment to preserve and protect the editorial independence and integrity of The Wall Street Journal, as well as the leadership, strength and vitality of The Journal and all of the other publications and services of Dow Jones.

“Since first receiving the News Corporation proposal, the Family has carefully considered and discussed among ourselves and with our advisors how best to achieve that overarching objective, while serving the best interests of the Company’s various constituencies.

“After a detailed review of the business of Dow Jones and the evolving competitive environment in which it operates, the Family has reached consensus that the mission of Dow Jones may be better accomplished in combination or collaboration with another organization, which may include News Corporation.

“Accordingly, the Family has advised the Company’s Board that it intends to meet with News Corporation to determine whether, in the context of the current or any modified News Corporation proposal, it will be possible to ensure the level of commitment to editorial independence, integrity and journalistic freedom that is the hallmark of Dow Jones.

“The Family also indicated its receptivity to other options that might achieve the same overarching objective.”

Joseph (Joe) Nocera is a first-class columnist for The New York Times business section.

A former editorial director of Fortune magazine, Nocera writes some of the best analysis about the media industry.

Last weekend Joe Nocera did so, explaining why the Bancroft family has been manipulated for many years by the news management of Dow Jones.

Some key paragraphs of this brilliant and controversial analysis:

I have a theory as to why Dow Jones management has been so inept over the years. It is a company that has long prided itself on being run by journalists.

That was also part of preserving the integrity of The Wall Street Journal. Journalists, after all, would be less likely to damage the paper or cater to advertisers.

But journalists tend to be terrible businessmen; they lack the risk-taking mindset that marks a good chief executive.

Making the kind of big, bold bets that C.E.O.’s have to make all the time in industries undergoing wrenching change, like the newspaper business, just does not play to their strengths, which are observing, critiquing and finding out things.

[…]The one thing Mr. Phillips and Mr. Kann were good at — indeed, great at — was placating the Bancroft family.

They did so, in part, by paying an enormous dividend — more than the company could really afford.

But they also did so by telling the family, again and again, what a great thing they were doing in protecting the independence of The Wall Street Journal.

Indeed, it was Mr. Phillips who came up with the idea of two classes of stock, which would allow the family to sell some shares and still retain control.

An inept chief executive couldn’t hope for a better deal.

No matter what move Mr. Phillips made, neither the family nor the trustees were ever going to question him. It just wasn’t their style.

[…]To the Bancroft family, Rupert Murdoch has always been the devil — the epitome of the meddling down-market mogul who would wreck the paper if given half a chance.

Or at least that’s what they’ve been taught to believe all these years by Mr. Phillips and Mr. Kann.

And no matter how many promises Mr. Murdoch makes, their opinion is not likely to change.

If they do wind up selling to him, they will do so holding their noses.

There was a time, not so many years ago, when they could have sold to Bloomberg or the Washington Post Company or possibly even The New York Times Company.

But Mr. Kann wouldn’t pursue those deals, and now those buyers are on record as saying they are no longer interested. It’s Rupert or nothing.

Even now, Mr. Kann and Mr. Phillips are trying to persuade the family, one last time, that it’s all about The Journal’s independence — and not their own incompetence or the family’s unwillingness to act as a true steward over its asset.

Last week, Mr. Kann, who did not respond to my phone call, was quoted in The Wall Street Journal as saying how much he admired the family “for taking the position of maintaining Dow Jones as an independent public company.”

On Thursday, I did get Mr. Phillips on the phone. “If they are as determined in their support of The Journal’s independence as they have been in the past, then I think the paper is in good hands,” he said.

Would that it were so.

But it’s not.

“We had to destroy the village in order to save it,” was the famous phrase that came out of the Vietnam War.

With the path they’ve been on, the Bancroft family seems intent on destroying Dow Jones in order to save it.”

The Wall Street Journal has a great story this weekend about the owners of Dow Jones, the Bancrofts, including some old pictures of this low-profile family.

With their roots in Boston, the Bancrofts have lived in a world of show horses, sailing and mountainside estates.

They have done so while being fiercely protective of Dow Jones and its independence from suitors, memorialized in a family maxim: “Never sell Grandpa’s paper.”

Please click on the graphic to see it bigger.