Posts about hackgate

PR and corruption theater

Today was about public relations — but not about the public.

What was exposed in Parliament during the Murdochs’ testimony wasn’t necessarily News Corp. — we shall see what happens to it — but instead the cozy, closed ties between institutional journalism and institutional government. The corruption of their close links was what was most shocking about today: news executives and politicians at lunch and spas and sporting events; news executives hired by politicians and police to give advice and spin their ex-colleagues; news reporters paying police; news executives sneaking through the back door to the seat of power; government officials being protected from hearing too much about the dirty work of news…..

Can this institutional incest survive the Murdoch affair? We’d better not allow it — we, the public.

Today was all about theater and manipulation, of course. The only question was, who wrote the scripts? Was Rupert Murdoch’s dottiness a strategy handed down from Edelman or was that him abandoning his libretto to declare himself suddenly humble (if that’s humility…)? Was James coached to be a parody of a droning MBA? Was it in the crisis-management script for Rupert to decline responsibility for the scandal in his company and to blame those below him and those below them? Was it in his PR script to lash out at his competitors to for causing him to lose BSkyB, and not at himself?

Among the day’s many ironies was Rupert Murdoch extolling transparency. The reason I pulled Public Parts from his publisher, HarperCollins, was because I use his company as the best example I could find of opacity as strategy: the company behind walls. The problem through his entire scandal is one of hiding the truth from the authorities and the public.

Transparency would be true public relations. Transparency would have cured News Corp.’s crimes years ago. But it didn’t.

Jay Rosen was trying to figure out the News Corp. PR strategy — and Edelman’s strategy for taking it on. Raju Narisetti, managing editor of the Washington Post and a fine tweeter, argued that “good crisis management can lead to good, not just spin.” Richard Sambrook, former BBC News exec now at Edelman, concurred.

I don’t buy the strategy, not anymore. David Weinberger, a friend of Edelman, says the secret is aligned interests. I argued in What Would Google Do? that two trades — PR and the law — could not be googlified because they depend on clients. They cannot be transparent. They cannot be honest.

True public relations — like marketing — must represent the public — the customer — and not the company. True government must work for and not rule the public. True journalism will not exploit its community. I was struck today by the class structure still evident in British news: poshish Rebekah Brooks pandering to the Cockney masses. No, true journalism will act as a platform for the public.

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.”