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Murdoch and Immelt: Business Is Business

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According to a Los Angeles Times story by Joe Flint, News Corp.'s Rupert Murdoch and GE's Jeff Immelt met in June to discuss the vitriolic on air sniping back and forth between the Fox News Channel's nasty conservative Bill O'Reilly and MSNBC's nasty liberal Keith Olbermann.

Here's what Flint wrote:

The on-screen and behind-scenes feuding between rivals Fox News and MSNBC, which has erupted in recent months like two kids squabbling, has gotten so loud that their parents are trying to tell them to knock it off.

Rupert Murdoch, chairman and chief executive of News Corp., which owns Fox News, and Jeffrey Immelt, chief executive of General Electric Co., which owns MSNBC, met up at the Microsoft CEO summit in Redmond, Wash., to figure out how to defuse tensions between the two channels, according to people familiar with the situation.

Apparently any cooling-off agreement that Murdoch and Immelt might have made hasn't trickled down and stopped the vitriol. Both cable TV channels continue to allow their hottest personalities (O'Reilly, Olbermann, Rachel Maddow, and Glenn Beck) to escalate, not tone down, their on-air insults and feuds.

The situation brings to the fore several business, journalistic, strategic, and entertainment issues.

First, continuing the on-air spats reinforces the fact that Fox News and MSNBC are not in the news business, they are in the entertainment business. The most important element in the entertainment business is storytelling, and the fundamental element in a story is conflict. The second most important element in entertainment is star quality. An entertainment company cannot succeed without either great stories or popular stars, and a hit requires both.

Therefore, Fox News and MSNBC, as purveyors of entertainment, require a constant infusion of stories full of conflict, delivered by popular stars. With the ready-made conflict of a political campaign over, new conflict needs to be either found or invented.

It takes a fair amount of time and lots of promotion and exposure to create a star, and these elements require the commitment of significant resources, the most valuable being air-time in the form of prime time, hour-long exposure and on-air and off-air promotion.

Thus, Fox News and MSNBC have huge investments in their stars O'Reilly, Beck, Olbermann, and Maddow. They created these venomous snakes, they have long-term contracts with them, and most importantly, they depend on them for ratings, which have gone up, in part, because of the feuding.

During a recession in which most media companies' ad revenue is declining, newspaper and magazine advertising revenues are falling off a cliff. Therefore, if the print divisions of large conglomerate media companies such as News Corp. are to survive, they need the revenue from the Web and TV businesses to keep them afloat.

News Corp. in particular needs the Fox News revenue because its main Web business, MySpace, is not doing well -- revenue is off -- and Murdoch's current pet project, the Wall Street Journal needs lots of money while it is in the process of a make-over in preparation of going after The New York Times.

If there is any doubt whatsoever in anyone's mind that Rupert's strategy is to attack the weakened Times, one only has to read the house ad on page A8 of the Monday, August 3, print edition, the headline of which reads: "All the news that's fit to read. Every day."

To compete with the Times Murdoch desperately needs O'Reilly and Beck's ratings and ad revenue generation, so he's not likely to tone them down. Immelt, for his part, probably understands Murdoch's needs and, I suspect, is sympathetic. MSNBC's profits are a mere pimple on GE's income statement, so they are not vital to GE's survival. Immelt's concern is whether Olbermann's and Maddow's sniping becomes so outrageous that it affects NBC News's credibility and, thus, GE's credibility, which is very important to Immelt.

Immelt's problem is that if it appears that he has muzzled Olbermann and Maddow, then it becomes "corporate interference" which, in turn, means that if he can influence Olbermann and Maddow, he can influence Brian Williams and NBC News and steer them clear of criticizing GE. Such interference would become a huge story that every self-righteous journalist, columnist, and blogger (in other words, virtually all journalists, columnists, and bloggers) would jump on and eviscerate Immelt.

So, Immelt is not going to say anything to MSNBC or its stars, and Murdoch is not going to tell Roger Ailes to muzzle anyone (Ailes runs the highly profitable Fox News and the profitable Fox Television Station Group). The only thing Rupert might say is "keep it up," which they are doing.

I suspect that when Murdoch and Immelt met they reassured each other that the vitriolic on-air feud among their valuable stars would not affect their personal relationship, the relationship between NBC and Fox on Hulu, or on any other business relationships they had.

The one thing we can be absolutely certain about in regards to these two industry giants is that above all else they know that business is business.