article

12.09.08

Murdoch Now Seen as Wall Street Journal's White Knight

A year after Rupert Murdoch took over The Wall Street Journal, some of his harshest critics—including James Ottaway Jr.—admit that the business may be stronger now that the Bancrofts are gone.

When Rupert Murdoch set out last year to purchase the Wall Street Journal from its controlling shareholders, the Bancroft family, there were howls from many insiders and board members.

But as this Saturday's anniversary of the takeover approaches, amid the worst newspaper recession ever, some of the takeover's most vocal critics are recanting. Chief among them: James Ottaway Jr., whose family owned 6.2% of Dow Jones's controlling shares.

"Things that I spoke about publicly that I feared Murdoch would do, that would be bad for Dow Jones and for the Wall Street Journal, have just not happened," Ottaway affirmed. "Yet, anyway."

"I think he's done a much better job than I thought he would," Ottaway told The Daily Beast. "The Bancroft family controlling shareholders would have been reluctant to cut dividends and make new investments of their own money that might have been necessary to keep the journal going at its present level of quality.

"In that sense, it's better for the Journal, its employees, and its readers that Murdoch owns it today rather than if the Bancroft family owned it today," he said.

Ottaway originally begged the Bancrofts not to sell, describing Murdoch's offer in 2007 as a bid "to boost his personal prestige." In a statement published by the Wall Street Journal, he added, "Dow Jones has no good reason to be sold to anyone. It is in a much better business and financial position than it was after the Internet market bubble burst in 2000."

Today, according to Ottaway, Murdoch has not sought to control the editorial page and has impressed him by expanding the paper's size as well as boosting subscriptions. (Circulation had also been ticking upward under the previous ownership.) Of course, one year of relative editorial independence is not a guarantee.

"Things that I spoke about publicly that I feared Murdoch would do, that would be bad for Dow Jones and for the Wall Street Journal, have just not happened," Ottaway affirmed. "Yet, anyway."

He added:

"He has done more to keep it going as, what I think now is the best newspaper in America while other publishers have been cutting staff much more vigorously and reducing their coverage and quality."

But Jane Cox MacElree, a member of the Bancroft family who opposed the Murdoch deal, said that she had not changed her opinion.

"I was not in favor of it," she told me, "ever."

Asked whether the fortuitous financial timing of the move had given her second thoughts, MacElree said it had not:

"No—what's the point in rehashing and rehashing? It's over and done with."

So where would Dow Jones stock be priced were it still a public company?

Mark Fitzgerald, who tracks financial performance of newspaper groups for Editor & Publisher, estimated the company would probably trade around the $9 to $11 mark today if the company had remained independent, an analysis based on the drops in share prices seen at newspaper peers. Dow Jones shares were trading in the mid-30s before Murdoch made his $60 a share offer in May.

"Dow Jones would have had to do something to increase cash flow or they would have really had a rebellion on their hands,” surmised Fitzgerald, who opposed the deal at first as an editorial writer for E&P but who now, like Ottaway, has changed his mind. “They would have taken the pressure out on the staff, which is what's been typically happening at newspapers." Gannett Co. shares have dropped 70 percent since May 2007; The New York Times Co. has shed over 60 percent.

"I think you can make a pretty good argument that of all the devils, [Murdoch] was the better devil than, say, [Tribune Company owner] Sam Zell or some of these other folks,” says a reporter who was one of many Wall Street Journal staffers critical of the Murdoch deal. “It was so unthinkable a year and a half ago that this would happen. It's just such a sorry reflection of the horrible state of the industry that this guy is a rescuer."

Indeed, at the time, one of the most pessimistic critics argued that the $60-per-share offer undervalued the company.

"No one looks at business with clearer eyes than the reporters and editors at Dow Jones,” Steven Yount, president of the Independent Association of Publishers' Employees, Local 1096 which represents Journal employees, wrote in a piece for Salon. “Because many of us are shareholders too, we would even make some quick money off the sale. Yet we think the takeover is bad business. Not just bad for journalism, bad for readers, bad for advertisers, but bad for the long-term interest of shareholders, most of all the Bancrofts."

Yount declined to comment on the current of the state of the Journal for this article.

Benjamin Sarlin is a reporter for The Daily Beast. He covered New York City politics for The New York Sun and has worked for talkingpointsmemo.com.