Why newspapers are buyout targets

Rupert Murdoch's bid for Dow Jones and The Wall Street Journal underscores tumult in the media industry.

from the May 3, 2007 edition

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Even the Sulzberger family, which owns The New York Times, has been under pressure recently from a dissident shareholder, Hassan Elmasry, a London-based portfolio manager at Morgan Stanley. Other large investors have discussed their interest in buying the newspaper – if a way could be found to wrest if from the family.

Indeed, many family-owned newspapers have a structure that makes it hard for investors to take control. Shares are separated into Class B voting shares, mostly owned by the families, and Class A shares, owned by the public. Class A shareholders are often precluded from voting on important issues relating to company management.

"The ownership structure of privately owned companies is based on the general thought that the business is not simply about making money, but is a public trust," says Richard Wald, professor of media and society at Columbia Graduate School of Journalism in New York.

From a pure business standpoint, the Murdoch bid of $5 billion, or $60 a share, might make sense for News Corp., whose media empire includes Fox Broadcasting. This fall, Fox plans to roll out a business news channel to compete with CNBC. Ownership of Dow Jones would thus give Fox access to reporters and information.

"Murdoch has a real problem. If he wants to start a financial news network, he needs the wherewithal," says Mr. Wald. "[The Dow Jones offer] is to make his bid for the financial network work."

But, Wald notes, shareholders have also long been muttering about improving the performance at Dow Jones. "The financial community has been saying The Wall Street Journal is a poorly run business," he says.

If Mr. Murdoch or another media company were to take over Dow Jones, some worry that it would mean yet more concentration in the industry. "We're seeing a decline in the commitment of resources for doing journalism," says Bob McChesney, professor of communications at the University of Illinois at Urbana-Champaign.

Mark Crispin Miller, who teaches media, culture, and communications at New York University, notes that some members of Congress are worried about this trend. But, he adds, "No one will go near it."

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