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March 29, 2024

News Corp Bid Proves Out Dow Jones Strategy

Important Details: News Corporation’s bid for Dow Jones, made to its board more than two weeks ago, became public last week. The size of the offer amazed markets and observers of the earnings-challenged newspaper industry: $5 billion or $60 per share, a 65% premium over Dow Jones’ trading price. That offer equals about 40 times Dow Jones’ projected 2007 earnings. News Corp CEO Rupert Murdoch called the DJ flagship Wall Street Journal “one of the world’s great newspapers” and vowed to retain its editorial independence. But the immediate response to Murdoch’s offer was negative, as the Bancroft family – who control 64% of voting shares – indicated no interest in the “friendly” unsolicited offer.
The bid recognizes assets beyond the Journal. Those assets include:

  • Consumer Division: The print Journal, with its 2 million plus circulation, the online Journal, with its 900,000 subscribers; Barron’s, the open-web Marketwatch; as well as a stake in Smart Money magazine (with partner Hearst).
  • Enterprise Division: Corporate-facing Factiva (DJ bought out 50/50 partner Reuters last year), serving news and information, the Dow Jones Wires and Indexes in addition to other B2B and licensing product lines.
  • Community Division: More than two dozen smaller city dailies.

Recent financial and circulation reports have shown that the business-oriented Consumer Division is struggling for growth, but beating general news newspaper companies overall in reader retention and growth and in ad revenues. The Enterprise Division has been the company’s growth engine.

Implications: Contrary to an immediate market reaction that Murdoch’s bid indicated a turnaround for newspaper companies generally, Outsell believes that the offer just underlines the rate of change in the news industry and the value of niching. Though the Journal is indeed printed on newsprint, no one should mistake Dow Jones for just another newspaper company:

  • In the company’s last report, CEO Rich Zannino said that only 60% of revenue is now driven by print and that he believed that would be a minority contribution by 2009. Contrast that to a 90% or more print reliance for most general news publishers in the U.S.
  • Dow Jones’ assets are well-positioned to benefit from two growth areas in the news business – cable and the internet. In those terms, its assets enable formidable business lines in business/finance/personal finance news and information, a hot high-priced web advertising category and one News Corp plans to grab with the global cable distribution of its Fox Business News Channel, due to launch in the fourth quarter.

Whatever the result of this offer, Murdoch’s shot is a new indication that the race to own the business/finance vertical globally is on. And that just ups the stakes – and the anxieties – for companies from Bloomberg and Reuters to the New York Times, the Financial Times, and Time Inc., as they each struggle to end on top of the pack.