In Defense of Rupert Murdoch

It seems as though sentiment is turning away from Rupert Murdoch in his attempt to buy Dow Jones. DJ stock is down $6.50 from the highs it hit immediately after Murdoch's bid was announced, and Murdoch is now reported to "regret" the fact that he needed to make the bid public.

On the journalistic front, defenses of Murdoch are vastly outnumbered by the attacks on him. The Journal's letters page today is wholly one-sided: it has William Cattey saying that he'll cancel his subscription if Murdoch buys the paper; Aaron Booker "appalled" by the attempted takeover; Joe Goldman saying he'd hate to see the Journal's "independence and excellence" "significantly undermined"; Chuck Clevenger saying that the Journal has a "sacred, moral obligation"; Charlie Phelps encouraging the Bancrofts "to reject Mr. Murdoch's bid"; and Judith Press saying that "to think that a publisher of Mr. Murdoch's bent could begin to understand the non-monetary value of Dow Jones's enterprises is to engage in self-delusion". Only a vaguely cryptic one-line letter from Tom Sciance ("If Rupert Murdoch gets you, maybe you'll change your open-borders policy, and I'll continue to subscribe") comes close to defending the barbarian at the gate.

Meanwhile, over at Salon, Gary Weiss has an anti-Murdoch screed which seems borderline unhinged, but is worth reading to try and understand what Rupert is up against. His main problem seems to be with cutbacks:

If and when Murdoch gets Dow Jones he is going to make money on it, and that will require drastic cutbacks -- entire "inefficient" divisions shuttered, employees thrown into the streets. Employee union negotiators, who had thought current management was hardheaded, are likely to look back on the pre-Murdoch days with nostalgia. "He's paying 40 to 50 times earnings, and he is going to get a return on that. He is going to crank down on costs," said one longtime Dow Jones journo who knows his way around a balance sheet.

This simply doesn't make sense. No one has ever paid 45 times earnings for a company and then got a healthy return by cutting costs. That kind of multiple can be justified only by future growth – and Murdoch has made it very clear that he wants to invest in the Wall Street Journal and turn it into a strong international brand. Cutting back is what current management has tried, with zero success. Weiss sees Murdoch not as the lifelong newspaperman he is, but rather as someone who sees the Journal as a wasting asset:

[James] Cramer nailed down the shareholder value view of the newspaper biz a few weeks ago, when he said, "These are diminishing assets. They don't need to exist. Younger people rarely read them."...
Remember that newspapers don't need to exist from an investor standpoint...
My Dow Jones journo friend recognizes the inevitable: Newspapers, he says, are in a "contracting industry, and in a contracting industry you want a rat bastard who will restructure the costs." That is likely to mean integrating the company's far-flung operations with the rest of the News Corp. empire. Or it could mean "restructuring" in the traditional Rust Belt slash-and-burn sense of the word.

Have Dow Jones journalists really been so beaten down by mismanagement and underinvestment that they can't recognize an optimist when they see one? Murdoch understands that in a world with an increasing appetite for financial information, the Wall Street Journal could be one of the strongest brands in the media universe, and hugely valuable for it. But Dow Jones management – and, it would seem, some of its employees, too – are so caught up in diminishing profitability that they can't even understand that vision when it's spelled out to them.