NEW YORK -- Rupert Murdoch loves his newspapers. So even as the industry contracted in recent years following advertising declines, reporters and editors at Murdoch newspapers in the U.S., U.K. and Australia felt somewhat insulated within a $54 billion conglomerate making large profits off movies, sports and entertainment.
Murdoch's News Corp. pumped significant resources into the Wall Street Journal since buying parent company Dow Jones in 2007, and has long propped up the New York Post, a tabloid megaphone that's reportedly lost as much as $70 million a year. And while Murdoch's children, News Corp. executives and shareholders may have supported selling off the company's British newspapers following the phone hacking scandal, Murdoch himself flew to London to help launch a Sunday edition of the Sun, thus replacing the shuttered News of the World with another tabloid.
News Corp. still isn't unloading any newspapers, but Thursday's decision to split into two separate companies -- media/entertainment and publishing -- has raised concerns about the fate of Murdoch's beloved newspapers like the Journal, Post, Sun, and Times (of London) when no longer sheltered by more lucrative film and TV businesses, such as Twentieth Century Fox, Fox Broadcasting, Fox Sports, Fox News, FX and BSkyB.
"Instead of being part of this big diverse, cash-rich aircraft carrier of a company, we're going to be part of a car ferry," said one Journal staffer not authorized to speak on behalf of the company.
Another staffer suggested to The Huffington Post that the Journal would be more equipped without a safety net, but was concerned about being bundled with money-losing papers like the Post and Times. (Some other entities in the new publishing company, like HarperCollins, the Sun and some Australian papers, are profitable). One former Journal employee noted the irony that staffers who once feared being swallowed within the News Corp. behemoth are now worried about getting pushed out.
Changes won't come overnight, but rather will be rolled out in the next year. While Murdoch plans to be chairman of both companies, he will only be chief executive of the media and entertainment company. He has said that he will be an active chairman for the publishing company, but major moves are more likely to take place once a chief executive is installed. So far, speculation has centered around Journal managing editor Robert Thomson, Dow Jones chief Lex Fenwick, News Corp. executive Joel Klein, and son and former deputy chief operating officer Lachlan Murdoch.
But in the meantime, media watchers and News Corp. staffers were left reading the tea leaves as Murdoch made the cable rounds Thursday on Fox Business Network, CNBC and Bloomberg, and appeared on a conference call with analysts. Throughout the day, Murdoch brushed off suggestions that the split was influenced by the phone hacking scandal and spoke positively about publishing's future, even amid doubts about the success of less-profitable or unprofitable businesses all being herded under one company. Murdoch said that the two separate companies can operate more nimbly and focus on their specific areas of growth. For publishing, that means an increased focus in digital, he said.
Ken Doctor, an affiliate analyst for publishing research firm Outsell, wrote Thursday that the Journal and Dow Jones -- which includes Barrons, Marketwatch and Factiva -- will account for about a seventh of the new publishing company. Doctor wrote that he expects the publishing company, now generating about 10 percent of News Corp.'s total profits, could be expected to bring in about $8.3 billion in revenues and $600 million in profit next year.
In an interview with The Huffington Post, Doctor said that Dow Jones is "clearly the jewel" of the future publishing company and that on the newspaper side, Murdoch has been investing most heavily there over the past five years, both in journalists and in features like video. "They understand that content can drive revenue," Doctor said.
He added that News Corp.'s Sun and Australian papers, while profitable, are "managing the decline of print and trying to get to digital first like everyone else." The unprofitable Times and Post, he said, are in the worst position, and News Corp. "either has to cut back on those losses more significantly or move the properties outside the companies, sell them, or put them off in a trust." The Journal, however, would be the flagship of the publishing company and, in Doctor's estimation, could one day account for half of its revenues under the right leadership.
Murdoch suggested Thursday that staffers at the Journal and Dow Jones, at least, have reason to feel more secure after the split.
During an interview with The New York Times, Murdoch tried to assuage fears of losing the News Corp. safety net, saying that "Dow Jones is a very viable company and the Wall Street Journal is a very viable newspaper and no one has any reason to feel that way."
On Bloomberg TV, Murdoch said that that he expects to increase costs at the Journal, while acknowledging that News Corp. decided last week to make cuts in Australia and that "there’s some reorganization starting in Britain."
"But here at the Wall Street Journal, we're going to be as efficient as we can, of course," he continued, "but I would see net-net around the world we will be increasing our numbers and increasing our costs, and hopefully increasing our revenues by more than that.”
Against the judgment of analysts, Murdoch offered a whopping $60 per share for Journal-parent Dow Jones in 2007, eventually seizing the company for $5 billion. He significantly overpaid for it, which is clear from recent projections that the entire publishing company could be worth around $5 billion. "Boy, Did Rupert Murdoch Take A Bath On The Wall Street Journal," read a Business Insider headline on Thursday.
A few hours later, CNBC's David Faber asked Murdoch if he regretted the Dow Jones deal.
"No, that's going to be the center of this whole thing," Murdoch responded. "I think the Wall Street Journal, which we may call the WSJ, will be a really great, global brand."
Changing the name to WSJ? It appeared that Murdoch made a bit of news on CNBC. While the Saturday edition is prominently labeled WSJ up top, there's been no indication that the entire newspaper would be renamed WSJ, a re-branding move similar to Kentucky Fried Chicken and National Public Radio now being KFC and NPR.
However, it's unclear if a new name could be the first post-split change to come to the Journal. A spokeswoman declined to comment.
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