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May 01, 2007

Ken Auletta on Dow Jones bid: Murdoch wants power

I use the Wall Street Journal online as a source of business news, so I was particularly interested in the Charlie Rose interview of Ken Auletta which just finished.

Auletta said that Rupert Murdoch's $5 billion bid for Dow Jones including the Wall Street Journal, some 60% over the current stock price, is all about achieving more power. This coincides with upcoming Fox business channel which would benefit in having the WSJ as part of this cable business network.

Ken also said that in the past, he had interviewed members of the Bancroft family who own greater than 60% of the voting stock (the WSJ has 2 classes of stock, as does the NY Times and the Washington Post), and they had told him that Murdoch would be last on their list of possible buyers. Bloomberg and Gannett would be higher up on their list. It's interesting to note the Arthur Sulzberger of the NY Times had made a bid for the WSJ years ago.

The WSJ stock has not been performing well, and it is possible that non-family stockholders might protest if this deal was not accepted. A similar stockholder protest has occurred with the NY Times.

The online version of the WSJ has been doing well, and is one of the few including the Economist. People will pay for financial news, and they probably can ask for higher advertising fees. The NY Times also has fee-based plan for their opinion content.

Rose quoted Murdoch as saying to him, "I'd give up half my worth to get the NY Times." He purchase of the NY Post was certainly more about power, since he is still losing $40-50 million per year. But Rose and Auletta agreed that Murdoch is the smartest strategist. "He plays chess while the others play checkers," said Auletta.

Forbes thinks this is a safe bet for Murdoch and is consistent with his other strategic moves:

...the 75-year-old typically likes to make big bets on potential profits--hoping to get in on the ground floor of a growth business he can build from scratch. That's how he started Fox News Channel, where the payoff came a few years later, after the station grew into a ratings juggernaut. Murdoch followed similar paths in building his company's broadcast and satellite businesses, and looks like he will have pulled off the same trick with his 2005 acquisition of MySpace.

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