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Dec. 2, 2012, 10:43 p.m.
Business Models
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The Newsonomics of Rupert Murdoch’s long game

The pieces might be aligning — a new CEO at News Corp.’s publishing spinoff, Tribune leaving bankruptcy, and a possible policy change at the FCC — for Murdoch’s influence to grow even further.

Get ready for Thomson vs. Thompson.

The weekend’s news, now confirmed by The Wall Street Journal, that Robert Thomson will become CEO of the new News Corp. news spin-off sets up the new company for spirited competition worldwide. Sure, there are lots of competitors for the company — the FT, Bloomberg, Reuters, and the BBC, among others — but the main target in the Murdoch crosshairs lately has been The New York Times.

The other Thompson’s uneasy arrival as New York Times Co. CEO three weeks ago today was well chronicled. Mark Thompson faces a profound set of business challenges and opportunities, his start only complicated by the ongoing scandal at the BBC, which he headed for eight years. Hearings have already forced his return to London and will likely do so again. (“The New York Times and the Thompson Effect: Blowover or Blowback”). Further, over the weekend, News Corp.’s Sunday Times broke a (hard paywalled) story saying it has emails proving Thompson knew more about the child rape accusations than he’s said. That story, picked up by the News Corp.-owned New York Post was headlined “A ‘smoking gun': E-mails contradict Times CEO on BBC perv scandal.”

Expect the Thomson vs. Thompson battle — both within the bounds of newsprint and the web and well outside it — to have a long life.

The Thomson appointment is the first big step as News Corp. formally divides itself into two by some time mid-year. Thomson replaced Marcus Brauchli as The Wall Street Journal’s top editor, when Rupert Murdoch bought the paper and its parent Dow Jones five years ago. Since then, he’s led a serious remaking of the Journal and its further integration with other Dow Jones news assets, as the WSJ Digital Network becomes the global brand for the Journal, Barron’s, Marketwatch, and All Things Digital. He’s taken America’s authoritative business daily and given it a bullet-nosed edge for the 21st Century. Reporting resources have been beefed up, more beats added, and efforts at competing for national and global non-business news advanced. Sure, some of the Journal’s quirky personality has faded, but the Journal is a meaner, leaner global news enterprise. In its embrace of video, of global, and of mobile, it’s the clear leader of the News Corp. pack of newspapers on three continents, and a leader among its peers.

So Thomson’s ascension is no surprise (“Nine Questions as Murdoch Splits The News Corp. Baby”). Sure, he’s an editor — but he’s a News Corp. editor, and has been for a decade. Robert Thomson has been well schooled in the College of Murdoch. He’s a strategic news executive with a good sense of how emerging editorial and business models mesh, or sometimes collide, in the digital age. Further in the U.S. and Australia, News Corp. has put innovative and strategic business leaders in place as Dow Jones and News Limited move forward — so he has a bench in place. In the U.K., the business questions are more profound, as are concerns about the economy and the deepening business model gloom of the U.K. press overall.

Importantly, there’s little space between Murdoch as chairman of the new company and Thomson as CEO. They have long worked closely, and, in that sense, this is a continuation of that partnership. Further, the newsroom transition at the Journal should be a smooth one; Thomson-picked deputy Gerard Baker will succeed him.

Thomson’s elevation also reinforces the fact that The Wall Street Journal is the center of the new Newsco. The Journal is the both its center of digital innovation — in video, in tablet, in ad inventiveness — and home to by far the greatest growth potential, even though it contributes less than a third of publishing profits. It’s a global business player, while all the regional papers, each in differing ways, is constrained by being non-global. While the Australia papers have thrown off the greatest profit for the publishing division of News Corp., it is the Journal — and that brand as a lead combined with other Dow Jones properties — that will get significant new Newsco investment. Thomson has been building toward that end, and now he can lead the enterprise.

As someone who has worked on all three continents where News Corp. has news holdings, and who was a leader in FT’s own global expansion, he’s got the experience for the next stage of News Corp.’s move into publishing.

Finally, making an announcement now solidifies what the new Newsco will look like. The announcement comes just before the Tribune Company formally exits bankruptcy and better sets up a possible News Corp. bid for the Los Angeles Times and/or Chicago Tribune. It’s now becoming more of real entity and more capable — with lots of caveats, of course — of entering what may be competitive bidding.

He takes on the leadership of Newsco at an intriguing point. Newsco will contain the publishing assets of News Corp., largely its newspapers in U.K. (The Sunday Times, The Times of London, The Sun), the U.S. (Wall Street Journal/Dow Jones and the New York Post) and Australia, where it controls 70 percent of the daily newspaper market, plus the HarperCollins book business.

Financially, that set of assets — known as the publishing division of News Corp. — has been little more than a drag on overall News Corp. returns. But it still accounts for about 24 percent of overall News Corp. revenues, it contributes only 11 percent of its profits. For investors, then, it has moved from an unneeded distraction to a diseased orphan, as Hackgate hearings besmirched the News Corp. name.

Make no mistake, though: As Robert Thomson takes on this CEO role, he’ll head the largest worldwide news company by revenue — larger than Gannett, which is second globally, but first in the United States.

We have several quite watchable related stories to play out:

  • Thomson vs. Thompson: Forget Kramer vs. Kramer — though, ironically, Larry Kramer is the CEO of the third (and only American) among the U.S. national news players, after Thomson’s Journal and Thompson’s Times. The New York Times and Wall Street Journal are fighting over lots of turf. There’s national news, business news, New York City news, luxury advertising, and global expansion (The Newsonomics of The New York Times’ Expanding Global Strategy”), just to name the top of the list.
  • The Thomson/Fenwick dance: Until this week, Robert Thomson has reported to Lex Fenwick. Now Fenwick, CEO of Dow Jones, will report to Thomson. Early odds on who might get the job Thomson’s gotten were on Thomson, Fenwick, or Kim Williams, head of News Corp.’s News Limited newspaper operations. Fenwick’s appointment as CEO in February surprised many. He’d build a highly successful business builder at Bloomberg, but his expertise has been in B2B, not the consumer-oriented business that drives most of Dow Jones. His impact has been substantial, with lots of drama (“The Lex Factor roils Dow Jones”), heads turning and rolling. One wouldn’t expect the switch in reporting relationships to be an easily learned pas de deux, and it well may not last.
  • The Tribune bidding table: So now the (still-unnamed) Newsco has a CEO. That puts a well-known face on what’s been a question mark of an enterprise. It also tells us the News Corp. is moving — maybe more quickly than mid-year, as originally announced — to put the new company into place. With a known CEO, a News Corp. bid for Tribune properties like Chicago and L.A. becomes more possible. I expect that Tribune will finally emerge from bankruptcy within days or at most weeks. Expect the bidding war for the papers — the least valuable part of the post-bankruptcy, broadcast-tilting Tribune — to be formally shopped, collectively and individually, soon after the bankruptcy court finally lets go, four years after the company’s filing.

Most intriguing in this confluence of events is the policy switch now being advocated by FCC Chairman Julius Genachowski. It would broadly relax cross-ownership of newspapers and TV stations in the top 20 markets, allowing companies — such as the Robert Thomson-led Newsco — to greatly expand their share of media in America’s top markets. We’ve seen a lot of pushback from advocacy organizations like Free Press, and its leaders Craig Aaron and Josh Stearns and a well-headlined piece by Esquire (“Rupert Murdoch’s Whopping Christmas Present”). We’ve yet to see much in-depth mainstream media coverage (NYT, Nov. 14: “F.C.C. Takes on Cross-Ownership”) or debate about the proposal. That’s in part because we don’t yet know the details, though they could be presented as early as at the Dec. 12 FCC meeting. A shift would likely have the support of FCC’s two Republicans appointees; Genachowski is Obama-chosen; three votes on the FCC make a majority. (Ironically, industry speculation had centered on the likely FCC tilt on this issue and others if Mitt Romney had won.)

The merits of cross-ownership aren’t simply an abstract argument — Genachowski is certainly right in noting the relative weakening of newspaper institutions and that the status quo is unlikely to hold. But the debate misses the real world of mediapolitik. The power to fund broader and deeper media operations, in L.A. or Chicago for instance, is more than the power to support more reporting. It’s the ability to dominate the public debate, and that issue’s been largely left to the blogosphere.

It shouldn’t be.

Certainly, News Corp. denied the L.A. Times and Reuters report of the company’s definitive interest. That was so 2012, though. A Thomson-led Newsco allows a re-assessment in 2013. This particular set of events (Thomson’s appointment, the Tribune bankrutpcy exit, and the FCC rule change) play perfectly to Rupert’s long game. He’s among the best at three-dimensional media chess, seeing moves down the board that others don’t.

Maybe we’re giving him too much credit, and these dots aren’t really all connected. In any event, Rupert Murdoch shows no signs of shrinking away, even as bribery charges against his top execs deepen the Hackgate outrage. In fact, he’s been broadly moving his act and company to the U.S. for years (“The newsonomics of Rupert Murdoch, American publisher”). The establishment of the new Newsco isn’t simply a defensive action caused by Hackgate and shrinking newspaper fortunes: It’s a foundation for Murdoch’s lifelong news and political influence interests. The entertainment businesses of News Corp. have brought him huge commercial success, but it is the newspapering that makes him who he is.

POSTED     Dec. 2, 2012, 10:43 p.m.
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