Sarah Ellison, War at the Wall Street Journal, on Murdoch

With The Wall Street Journal writing off billions amid the recession, all of a sudden the Bancrofts are looking like the smart money for selling to Murdoch for a premium, says Sarah Ellison.

Rupert Murdoch’s takeover of The Wall Street Journal was hardly a fight at all. The Bancroft family, which had controlled Dow Jones, the paper’s parent company, for 105 years, was outgunned and outmaneuvered at every turn. So how did the Bancrofts end up being the smart money in this epic newspaper battle, fleecing Murdoch for billions more than the company was worth?

“I feel blessed it happened when it did,” Christopher Bancroft, a Bancroft heir and former Dow Jones director who campaigned against the deal with Murdoch, told me recently. “I’m glad I didn’t get my way.”

Elisabeth Goth, who a decade before the sale led an early revolt against her family’s elders (her uncle Chris Bancroft included) and was always more or less in favor of unloading the declining company, says of the sale, “I personally feel fortunate. Very fortunate.”

“I feel like the Journal has gotten a little ADD and lost its focus.The journalism question is still out. He hasn’t destroyed the paper but he’s taken away from what made it great.”

Even Leslie Hill, a Dow Jones director who opposed the deal so passionately that she resigned her Dow Jones board seat in protest, says she doesn’t regret handing the company over to Murdoch. “Just look at how our family would have fared during the recession,” she told me recently. “We weren’t a team going into it and I think it would have been very tough.”

Murdoch is one of the last defenders of newspapers, and his belief in the industry (or at least his belief in his own ability to dominate it) is partly what led him to overpay so dramatically for Dow Jones. At $60 a share, Murdoch’s $5.6 billion offer was breathtakingly high. The bankers and lawyers who worked on the deal at the time said they had hardly ever seen a gap so large between what a company was worth and what a buyer was willing to pay for it.

Barely a year after the sale, Murdoch was obliged to write down some $3 billion of his investment, an admission that he had wildly overpaid for the asset he had coveted for more than 20 years. And the industry has only gotten worse since. Some market watchers say that if Dow Jones were an independent company today, it would be trading somewhere around $10 a share. According to the data released by the Newspaper Association of America, last year marked the lowest level for the newspaper-advertising revenue since 1986, plummeting 27 percent.

Now, as Murdoch pours more money into the paper to launch a new metro section in New York (and Chicago, San Francisco, and likely Philadelphia and beyond) it’s hard to imagine how Murdoch will make The Wall Street Journal and Dow Jones worth anywhere near what he paid for it.

In an interview with him back in November 2008, he told me of a trip he had taken with his father to the U.S. when the younger Murdoch was about to go to college. The Sulzbergers had invited him and his father to Sunday lunch at their estate. “I remember clearly being duly impressed by everybody,” he said, admiringly. He was 19 years old at the time.

Age has diminished his love for the Sulzbergers (now he openly mocks Arthur Sulzberger, Jr.) but his holdover memories of august American newspaper families blinded Murdoch to the realities he was facing when he bid for Dow Jones. Despite having spies all over the Bancroft camp and Wall Street’s M&A machine feeding him information at every opportunity, he missed a crucial point: The Bancrofts were desperate and divided, exhausted by the burden of Dow Jones, and ready to sell. He could have had them for billions less.

That is not to say that the Bancrofts did much to foster the impression of their competence. The Bancrofts were more lucky than smart. But that wasn’t true for the people who surrounded them—their lawyers and the executives running Dow Jones. Those people built up the Wizard of Oz image of the family to protect the paper they loved. They were just plain smart.

Roy Hammer, the lead Bancroft attorney at the powerful Boston law firm Hemenway & Barnes (which benefited greatly by the firm’s management of the Bancroft estate), helped quash dissent in the Bancroft family for years and keep offers at bay. Peter Kann, one of the most maligned newspaper CEOs of his generation, protected the journalism of Dow Jones and helped foster the myth of the fortress surrounding the company. He and Hammer famously rebuffed expressions of interest from The Washington Post and The New York Times without ever having to canvass the broader Bancroft family. All the while, the family was far less powerful than it appeared to Rupert Murdoch.

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Editorially, most in the Bancroft family don’t mind or don’t notice the changes Murdoch has made to the Journal, a great irony given that they spent months wringing their hands over how he might change their beloved paper. In one of his first moves as owner of Dow Jones, he quickly disregarded the editorial-independence agreement he had negotiated with the Bancroft family, forcing out the Journal's managing editor. Still, Chris Bancroft says, “I am not unhappy with what he’s done. I wasn’t that emotionally wed to any particular format [of the WSJ].”

Among a few, however, there is some uneasiness about the direction of the "new" Wall Street Journal. Goth calls the new paper, “um, a bit bolder” and notes the paper has switched from a more traditional approach to adopt “a more 'in your face' attitude.” Hill says that while the reporters are still excellent, “I feel like the Journal has gotten a little ADD and lost its focus.” She adds, “The journalism question is still out. He hasn’t destroyed the paper, but he’s taken away from what made it great.”

The Bancrofts were always protecting an idea more than a reality. They were accidental owners who turned their inattention into a virtue. “I saw the WSJ in my mother’s paper bin every day and I could never understand why she didn’t read it,” remembers Chris Bancroft.

Now, The Wall Street Journal arrives in Rupert Murdoch’s paper bin every day, and he reads it carefully, pen in hand, marking articles he both likes and dislikes. This is not the absentee owner the Wall Street Journal once knew.

Even if he can never get a good return on his investment, he may seriously harm his rivals at The New York Times, and that is probably enough for him. (Many in the Bancroft family look at the Sulzberger family with a touch of empathy: “They are having to change their lives because they are stuck with a business that is going through a terrible transition," says Chris Bancroft. "Our family slipped that problem because Rupert’s timing was great.")

The question for News Corp. shareholders, the American newspaper business, and the readers who depended on the great newspapers of the country to hold powerful interests accountable and cover the world, is will that be enough for Murdoch’s children, after the old titan has gone?

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Sarah Ellison led the Wall Street Journal's coverage of Rupert Murdoch's bid for Dow Jones. Her stories about the media business have been recognized by the Newswomen's Club of New York and the New York Press Club. She lives in Brooklyn with her husband and daughter. This is her first book.