Whether or not Rupert Murdoch succeeds in his audacious bid for Wall Street Journal owner Dow Jones ($5bn seems likely to be only a sighting shot), he has set in train a series of events which will have profound consequences for the world of financial journalism. And for none more so than the Financial Times.
Nervousness over the outcome of the bid was quickly reflected in the share price of Pearson, the FT’s owner. At first, the price jumped, presumably on the basis that Murdoch’s substantial bid premium would have a healthy knock-on effect upon the FT’s valuation. Then, almost as sharply, the gains were wiped out. Common sense had prevailed: a Murdoch bid for, to all intents and purposes, the WSJ could not possibly be good news for the FT. Why?
Though not everyone in the City agrees with her, Numis media analyst Lorna Tilbian has a strongly appealing theory. If Murdoch gets hold of Dow Jones, it means two out of three potential buyers for the FT will have been knocked out at one blow, leaving only DM & GT, owner of Associated Newspapers. Reuters is not an issue here: only 7% of its business is now in news services, as opposed to financial data management.
Worse, a triumphant Murdoch would waste no time in using the WSJ to ‘go for the FT’s jugular’, in what could soon turn out to be a very uneven contest.
Melodramatic stuff, particularly since Murdoch’s first overture has been ‘ignored’ by the Bancroft family, who own 64% of the voting shares in Dow Jones. But the threat, which must be haunting the FT’s corridors, is clear enough.
The nature of the threat
If the FT is a jewel in Pearson’s crown, it is but a solitaire sparkler compared with the Cullinan diamond in Dow Jones’. WSJ, though not entirely immune from the crisis affecting the US newspaper industry, has some towering strengths which put it in a class apart. With a circulation of 2 million (and rising, slightly), it is the second largest newspaper in the USA, after USA Today. Add to that the runaway success of WSJ.com, with its nearly 800,000 subscriber-only clientele and you have a uniquely powerful brand which is – unlike almost all other newspaper efforts to monetise the web – apparently internet-proof.
The FT, by contrast, is quite marginal to what Pearson, with its US educational focus, does these days (if we put aside its trophy status for a moment). It accounts for less than 6% of group revenues, and less than 2% of group profits. At the last count, FT worldwide circulation was a tad up, at over 430,000, with subscribers to the website FT.com rising 7% to 90,000. Like WSJ, the FT has experienced something of an uplift from increasing mergers and acquisitions activity in the capital markets, which has enabled it, after an interlude, to return to profit.
But it is the differences, not the similarities, between the two titles that are striking: not merely in scale and corporate focus, but also in potential. Suppose, for a moment, that Murdoch gets his wicked way with Dow, what might he do with WSJ? One obvious development that he himself has highlighted is a dedicated global television business channel, under the Fox aegis. Currently, WSJ has a content deal with GE-owned CNBC, home of Money Honey Maria Bartiromo, but, hey, things can change. Though the legal and regulatory hurdles to forging such an alternative business service should not be underestimated, that does not make them insurmountable. And the prize, in case of success, would be very great.
Just as important, Murdoch has signalled he will take the war to the FT’s heartland in Europe and to Asia, reinforcing WSJ’s presence there.
And, if it is not Murdoch who picks up this prize then someone else almost certainly will. $60 a share represents a handsome premium to the present market value of Dow. The Bancroft family has chosen to reject it; but at some higher level – who knows? – they may find they have a fiduciary responsibility to accept, given the eye-watering amounts that competing media tycoons are now likely to offer for such a rare asset.
Scale and willpower
Faced with this level of new investment and competition, it is difficult to imagine the FT having the scale or willpower to respond to such a multi-platform media threat.
True, under new editor Lionel Barber the FT has tidied up its act. But revamping the look, running an advertising campaign, unlocking the paper’s “hidden treasures” and giving it more “personality” are tinkering at the edges. Strategically what will be needed, among other things, is massive new investment. Although Pearson chief executive Marjorie Scardino has repeatedly scotched rumours that she is preparing to sell the FT, she is unlikely to stump up the necessary money – given how marginal the FT is to the core of Pearson’s business interests. A defensive alliance with Reuters, for the reason outlined above, seems unlikely. So divestment would become an increasingly attractive alternative.
The new FT strapline? “We live in financial times.” We certainly do.