What’s next for News Corp. and its worlds

There’s no telling how the News Corp. saga will turn out, but I’ll try. Here’s a scenario that leads to the breakup of News Corp., the Murdochs out of power, the deflation of institutional journalism, a break in the too-cozy media-government complex, an unfortunate rise in regulation of media, and a fortunate opening for newcomers. This story of legality and morality will quickly shift to one driven by business.

A week ago in HuffPo, I speculated that News Corp. would need to get out of the news business. Not so crazy. Since then, the FT’s John Gapper speculated similarly, as did John Cassidy at The New Yorker.

And since then, News International head Rebekah Brooks resigned and was arrested; Dow Jones head Les Hinton resigned; Murdoch gave up on BSkyB; the Murdochs agreed to testify before Parliament; and the revelations of corruption between News Corp. and police and government get only worse, leading to the resignation of the head of the police. What looked so far out doesn’t look so far out now. So how could this progress?

* Start with the end of a Murdoch succession plan. Rupert’s defense aside, James Murdoch’s handling of the scandal has been irresponsible, short-sighted, cocky, and dangerous. The trail of scandal is lapping at James’ feet. Whether or not he is investigated or arrested for crimes, there can be no confidence in his leadership. None of his siblings is in any better position and they are feuding anyway. Rupert Murdoch is looking more lost and his testimony Tuesday at what will appear (to Americans, at least) like an impeachment hearing will only implode his stature yet further.

Meanwhile, more importantly, News Corp. lost more than $7 billion in market cap over four scandal-filled days. That number may go up or down but it’s ominous in any case. Shareholders are suing. There will be a call for professional and independent management of the corporation, sooner than later. If I were an “independent” director of News Corp., I’d be scared to death right now.

Buh-bye Murdochs? As unthinkable as that may have been only two weeks ago, it’s now quite conceivable.

* Off with the headlines! That professional management will quickly conclude that the news divisions of News Corp. are a costly drag and will try to divest them, starting with the UK properties and then spreading elsewhere. News Corp. is an entertainment company. Professional management will focus on that and get rid of Rupert’s bully pulpits. If they previously did bring clout and regulatory convenience to the Murdoch’s business strategies, now all they bring is grief and the attention of lawmakers, prosecutors, competitors, and detractors. News is clearly not a growth business; it is, as a friend in the trade said, profit-challenged. So stop the presses already.

I said in my post last Monday it may be difficult to find a market for the properties. But they become costlier to News Corp. by the day, so the desire to unload them will only grow as their value declines. In the UK, the Sun has been eclipsed online by the Daily Mail. Murdoch gave up on strategies of growth and advertising when he put The Times behind a paywall, its audience shrinking from millions to a reported 100,000. An egotistical oligarch might buy either.

* In the U.S., the right-wing depends on Fox News and is surely getting nervous about its fate. It is becoming — if one can imagine this — even more of a laughingstock than it already was as it ignores or defends Murdoch in the scandal. I could imagine Roger Ailes assembling rich Republicans to engineer a leveraged buyout and keep it safe for them in time for the election. Then there could be no doubt of its role as a propaganda arm of the right.

The New York Post loses tens of millions a year and lives only to give Murdoch his toy and pulpit. Professional management cannot justify that. It will die or find its egotistical oligarch (its Conrad Black or Robert Maxwell … I cannot imagine even the Murdoch heirs allowing their patriarch to hold onto it and eat into their fortune yet further).

The Wall Street Journal is in quite the pickle. Again, professional management will want to get rid of it because it is not a good business; its ROI, if any, is worse than The Simpson’s. But who would buy it? Recall that no one else but Murdoch would buy it for the price he offered, an overeager amount he soon had to write-down. Last week, I suggested that if Murdoch wants to rescue the last shred of his legacy, he should put the Journal into a trust, a la the Guardian and its Scott Trust. Past that, it’s hard to imagine its fate. Would Bloomberg or Reuters buy its financial data businesses? Is there a fire-sale buyer for the paper and its web site? They’d better hurry before it is ruined by delusional editorial such as this one defending Murdoch.

News Corp. is also in the business of coupons and circulars distributed in newspapers. That business, too, will shrink as those transactions go digital and mobile. I’ve been told by major marketers that their need for FSIs (free-standing inserts) will disappear within two years — another blow to newspapers’ kidneys. Someone will buy that business to consolidate the trade. Though it, too, has News Corp. cooties. David Carr says this division has paid out $655 million to get rid of charges of espionage and anticompetitive behavior.

In publishing, that leaves HarperCollins. Murdoch tried to sell it sometime ago; no such luck. Who’d buy it now? I couldn’t imagine. (Disclosure: My last book, What Would Google Do?, was published by HarperCollins. My next book, Public Parts, was set to be but I pulled it when I found myself being highly critical of News Corp. as the antithesis to a company that operates openly.)

There’s been much speculation that illegalities abroad — or, if they are found, in the U.S. — could lead to News Corp losing its domestic TV licenses. I don’t think that would happen. If professional management replaces the Murdochs and the scandal-ridden news divisions are ejected, then it’s hard to imagine the FCC — which basically never revokes licenses and would take a decade to try — pushing News Corp. out of the local TV business. Besides that, there is nothing I’d call news on Fox stations. They are entertainment distribution outlets.

* The only thing left in the publishing arm is Australia. Various politicians of lesser or greater power are calling for reconsideration of the incredible newspaper holdings Murdoch has there. I could see the company holding onto this for old time’s sake if there isn’t too much political pressure. Or I could see it being spun off to family, again for old time’s sake.

* So then News Corp. would be an entertainment company and a successful one.

* The next big impact will be regulating journalism in the UK. As I said here, I would lament that. The regulators didn’t bring Murdoch to the bar; journalists did — namely Nick Davies of the Guardian. We don’t need more controls on journalism. We need more journalism.

In the US, you can bet we’ll hear more about regulating media consolidation. But that’s not the issue. Morality is.

* I believe the biggest long-term impact of l’affaire Murdoch will be the diminution of institutional journalism and its cozy relationship with institutional government. That is good news. It opens opportunities for independents: for us.

* None of this could happen. Murdoch will hold on as long as he can — witness Murdoch’s “interview” with the Wall Street Journal claiming that the company has handled all this well and also the denial in the Wall Street Journal editorial just published, which tries to shift the blame for shoddy journalism to Murdoch’s competitors and critics. The longer Murdoch holds on, the less his empire will be worth. Just how stubborn is he?

: LATER: Bloomberg says News Corp is worth 50% more without Murdoch.

By valuing each of News Corp.’s businesses separately, the New York-based media conglomerate would be worth $62 billion to $79 billion, estimates from Barclays Plc and Gabelli & Co. show, indicating News Corp. trades at an almost 50 percent discount to its units. . . .

“There’s just sort of this generic Murdoch discount, which encompasses the concern that he will make decisions that are not consistent with other shareholder interests,” said Michael Morris, an analyst at Davenport & Co. in Richmond, Virginia. “The sum of the parts on News Corp. is huge compared with where the stock trades.”

  • lezah marrs

    You say the Republicans will probably get together to buy Fox. I’m hoping the product will be so exposed as a sham that all will back away from it. Surely, it will become so noxious no one will touch it. Fox is an animal–out to hurt people. The words they use give them away. The racism is like red paint splashed on a white wall. I have a family member that once was rational–he is educated & smart. Then he turned to the Fox channel–and changed. He believes with all his heart every word on the air. It is sad.

  • lezah marrs

    Have you thought of the Koch brothers? They would love to have another means to their agenda. Also a tax break to claim on thier tax’s, already means of not paying a fair share of needed revenue. Paul S Marrs

  • Steve

    So true. Just last night (true story) I found myself spontaneously screaming: “Get rid of the fercockte newspapers!” His need for pulpits will drag down the whole ship, including valuable entertainment properties.

    The newspaper nonsense is shrinking the value of the whole megillah, all the still salvageable assets.

    I can just hear the various potential heirs:

    “you mean, my eventual haul is draining away just so he can futz with his meshugenah money devouring newspapers? If he doesn’t throw the ballast out, and quick, I’ll end up with nothing.

    “but wait a minute, his very presence and personality is destroying the brand. Maybe, HE has to go if I ever want to inherit more than

    • Steve

      … a few keepsakes.”

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  • Marie-Christine

    You are right, we need more journalism – the fair and balanced one – :)
    I am sure you know what I mean…

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  • Tired of Right-Wing-Enabling-Pseudo-Left-Wingers

    So a former employee of crime boss Rupert Murdoch is decrying “regulation”?

    REGULATION is what makes hacking and bribery CRIMES.

    Except for Jeff Jarvis’s sociopathic defense anarchy, the article was interesting.

    _Truly_ moral people recognize that regulation is crucial in fighting hackers, bribers, and anti-competitive international predators like Murdoch that corrupt governments.

    Immoral predators whine about ‘regulation’ because it prevents them from committing heinous, immoral, predatory acts.

    Good to know who I’m reading.

    • http://www.buzzmachine.com Jeff Jarvis

      Oh, yes, police, government, legislature, and the PCC did a *wonderful* job of regulating, didn’t they?

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  • Matt DeRienzo

    You left out one part of Murdoch’s empire in the U.S., probably because it’s financial impact is a spec on the radar screen:

    News Corp. still owns the former Ottaway newspaper chain, acquired as part of the Wall Street Journal purchase:

    http://www.dowjoneslmg.com/

    It’s insignificant in terms of any discussion of the future of News Corp., but it includes papers that are very important to the communities they serve, including the dailies in Middletown, N.Y., New Bedford, Cape Cod and Nantucket, and the Poconos.

  • Langleyo

    Great piece Jeff, I kinda suspected this might be the way the empire crumbles. Seen it coming for a while. Insightful and informative piece.

    But… “The trail of scandal is lapping at James’ feet.” ???

    How does THAT work? Kinda like “The trail of bricks is boosting Leo’s wallet” mebbe… :)

  • http://schizotypalgrasp.blogspot.com/ StG

    This type of ignorance demonstrates the short-sightedness of the communist left.

    Do you seriously think a multi-billion-dollar-generating enterprise will simply disappear? If you do, then you think like a child – which in COMPLETELY consistent with the communist left.

    YOU are the reason corporations abuse systems. When you stop thinking like children and start holding your commie buddies responsible for THEIR abuses, then you can assume a high ground. Until then, you only parade your partisan ignorance.

    • al tabor

      Ummm…you did read the article, right?

      • Fred Diord

        Using all caps always makes me take someone more seriously.

    • http://www.buzzmachine.com Jeff Jarvis

      Since when is it commie to suggest maximizing asset and shareholder value? Hmmmm.

  • http://www.technovia.co.uk Ian Betteridge

    I wouldn’t bet against a Murdoch succession, still. James may have blown his chances, but Rupert has a backup plan having brought Elizabeth back into the fold. Not only does she have a track record which shows she can make a success of things without daddy’s patronage, but she’s been the one Murdoch to (unofficially) break ranks on Brooks. Unlike James, she’s also not tainted with association with the newspapers.

  • http://twitter.com/SpaceyG SpaceyG on Twitter

    I just can’t think about a future News Corp. anything. Not this early in the morning.

  • http://www.facebook.com/itn Randall Helms

    If anyone is interested, ITN is going to be livestreaming tomorrow’s parliamenrary select committee meeting with Rupert Murdoch, James Murdoch, and Rebekah Brooks on our Facebook page at http://www.facebook.com/itn.

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  • http://twitter.com/SpaceyG SpaceyG on Twitter

    What’s so freakish is that we have a near-identical kind of public meltdown going on in Atlanta within our public school system, and its bloated and corrupt hierarchy.

    And it’s taking down, by now, pretty much THE most powerful in the city along with it: executives and CEOs here (loads of them around Atlanta), who funneled vast amounts of money over the years to, and heaped praise and support on, the (allegedly) very corrupt school superintendent – allegations that are supported with a now wrapped-up state criminal investigation, that had subpoena power.

    I love being able to watch something of this magnitude close-up. With an eagle eye.

    And guess what? The level of media chaos surrounding the Atlanta public school system has FORCED them to, suddenly, embrace social media… in a way they never dreamed of before.

    Where else CAN an embattled institution go, when you think about it? As I say in a blog post, they’re, the school system, one of the largest in the country, even dabbling in transparency and honesty now. Who’d have thought?!

    http://bit.ly/n6WRE3

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  • http://tdarkcabal.blogspot.com MK

    I think that you all need to take a look at the coverage of this situation on Veteranstoday.com There are a couple of videos that you need to pay attention to.

    The fact is that Murdock is not just a publisher. He has been part of a concerted effort to take control of public dialogue here in the USA and in Britain. Listen to what Hugh Grant had to say about getting anybody to take an interest in his initial complaint. He had to get the evidence himself to get the police to even listen. Then there is the matter of 4,000 names being connected to the probe when it began and those names and the complaints being buried since 2009.

    American media needs to begin to learn to report again. The night before this story broke in Britain, most of England’s politicos were at a party HOSTED BY ELIZABETH MURDOCK AND HER HUBBY. Cameron has had to admit that he had 26 meetings over a 15 month period with the editors and staff of Murdock pubs. He has been to parties at homes of the family members.

    Remember the Contract “On” America? Behind the scenes, Newt Gingrich and his chums calculated that with $500 million in cost, they could effectively OWN the media and the MESSAGE in the USA and (England). What do you think that Murdock represented? Look at the dreck that he produced. Read the books that show that his reporters at Fox didn’t actually investigate.

    This is a scandal because it represents TREASON in the most literary and literal sense of that word. Murdock tried to help the business interests of this country and Britain OWN the countries. He defended derivatives…he bashed Bush’s detractors. He has acted as a kingmaker. THAT IS WHAT THIS STORY IS ABOUT—NOT JUST VIOLATIONS OF PRIVACY.

  • Scott Smith

    Jeff,

    How about an over / under poll regarding how much you and the posters here, on average, pay annually in taxes? $1,200.00 is my pick. Bonus question: what percent of the posters took at least a calculus course while in college. My pick is 5%. Food for thought…

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  • http://jamesacooley.wordpress.com/ James

    Maybe I am missing something here, but I had no trouble at all finding coverage of the hacking scandal at Fox News. Indeed, I found three stories on their front page.

    I am a right-wing guy and a former member of the press, but relish the idea that the media is facing a cold hard look at their ethics. For example, I assume there were multiple cries of outrage when the New York Times ran with an illegally intercepted cell phone call by then House Speaker Newt Gingrich. The Times was slipped the tape recording of the call by a member of congress.

    How many people in the press have been prosecuted for paying hospital staff for medical info on high-profile patients. Recall the hospital worker arrested for selling Farrah’s medical records and cancer prognosis to the National Inquirer. Did anyone from the Inquirer get arrested? Can anyone name a single case where tabloids who obtained private patient info were prosecuted?

    Then there are the paparazzi who regularly engage in trespassing, stalking, blocking celebrities vehicles, or even running into their vehicles. The privacy rights of celebrities are routinely violated to get these pictures — sometimes to the point of actual violations of law.

    The media opens checkbooks to buy interviews, to include in high-profile criminal cases. ABC News paid 200K to Casey Anthony. Where are the howls of indignation? Personally, I think buying interviews reeks and that media outlets should be shamed out of this reprehensible practice.

    Then there is wiki leaks, with media outlets lining up to publish materials that were also obtained in an illegal fashion.

    Add to this various high-profile cases of reporters quite literally making up their stories and we have a profession that looks pretty shabby.

    Be honest, would some of you be as keen on this if it was the New York Times or MSNCB caught with its hand on the phone tapping gear?

    If laws were broken (and some clearly were), then go after those responsible like the wrath of God. If ethics were trashed, then condemn from the rooftops. But, is the condemnation universal against all within the media who exhibit unethical behavior or specifically against Rupert Murdock?

    Are you going after sin in general or one specific sinner?

    On a side note, my fear is that the political world will grab this as a handy opportunity to find ways to impose new restriction on the press — even though what occurred is already illegal and people will undoubtedly go to jail.

    Indeed, this is exactly what is happening in Britain: http://www.huffingtonpost.com/2011/07/09/phone-hacking-scandal-british-media-regulator-press-complaints-commission_n_893788.html

    This should send a chill down the spine of anyone who believed in freedom of the press. Even more scary are comments from Huffpo readers calling out for things like licensing members of the press.

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  • Tired of Right-Wing-Enabling-Pseudo-Left-Wingers

    Jarvis, I’m against dumb “regulation”, but without context, complaining about “regulation” is right-wing enabling nonsense.

    You are essentially saying that the crimes that Murdoch committed shouldn’t be crimes.

    That’s either an anarchist’s worldview or a sociopath’s.

    You’re welcome to add context or specifics to your right-wing enabling broadside against “regulation” and governments, but it’s the kind of right-wing enabling nonsense that allows predatory criminality like that which Murdoch’s companies have been clearly engaging in for a very long time.

    Part of the problem is that Murdoch essentially owns, by proxy, the Republican Party. Murdoch directly pays Republican leaders and indirectly provides Republicans free propaganda to the tune of billions of dollars a year.

    Through Murdoch’s corruption of governments all over the world, Murdoch literally has the laws changed when he breaks laws or is allowed to buy the silence or intimidate into silence the victims of his crimes.

    That’s fine with sociopaths and anarchists masquerading as “moral”, but _actually_ moral people find it reprehensible and support strong laws against such corruption.

    • http://www.buzzmachine.com Jeff Jarvis

      I’m saying I do not want official censors in any form; I don’t want government interference with speech. I do want Murdoch to be answerable to the law; that’s what is happening in this process. The company broke laws that exist for all.

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  • Rick

    Perfect example of the fallacy of the “if you’ve got nothing to hide, you’ve got nothing to worry about re: police surveillance of citizens.” Nothing to worry about, except when the police are corrupted. Proportions of Fox News fans among police and military are much higher than the gen pop.
    Wonder what Rupert’s got on Dick Cheney …

  • Charles George

    Such an obvious hatchet job as to be hilarious. An anti-Murdoch rant is not reasonable analysis, rather wishful thinking. Disappointing, but not surprising coming from Jarvis.

  • http://mymediainfo.com/ Renee

    The changes in the last week are incredible. I can’t imagine the Murdoch’s lackluster performances at the 3 hour hearings today will help anything either. It’s a sinking ship.

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  • http://top10jewelryshop.blogspot.com/ Melissa

    Murdoch owns the WSJ so you are not going to see any critical reporting in the WSJ on one of the nost corrupt men on the planet. Not only should he lose his part ownership in a tv broadcasting company in the U.K, he should lose his license here for his equally corrupt FOX news.

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