'WE'D RATHER sell at $60 a share. If you know any buyers, send them my way." That was Dow Jones & Co. board member Roy Hammer, speaking to a Fortune magazine reporter two years ago, when stock in the Wall Street Journal's publisher was trading in the mid-$30s.
Shortly after Hammer's quote appeared in print, Donald E. Graham, chairman and chief executive of the Washington Post Co., dismissed Hammer's offer. "Of course he would take $60 a share," Graham told me. "You would have to be out of your mind to offer that much."
But when I mentioned the price to Rupert Murdoch a few weeks later, the News Corp. chairman's eyes lit up. "Sixty dollars, eh? How do we get it done?"
I was reminded of both comments this week when Dow Jones, whose stock was still trading in the mid-$30s, received an unsolicited offer from Murdoch to purchase the company -- at $60 a share. Some investment bankers, hoping to get a bidding war going, mentioned the Washington Post as a possible rival suitor. But much as he would love to own the Journal, I have trouble imagining Graham, a cautious steward, making a competitive bid.
Don't let Murdoch's willingness to pay 67% above market value for Dow Jones stock fool you. It's Graham, not Murdoch, who is living in the real world. The newspaper industry is in decline, and there is no easy way to bring it back. The Washington Post is one of America's best newspapers, but its circulation fell more than 11% between 2002 and 2006. On average, daily newspaper circulation fell more than 2% just from October to March, according to the Audit Bureau of Circulations. Meanwhile, the Internet is shredding newspapers' classified advertising franchise. Readers of The Times have witnessed the efforts of its parent, Tribune Co., to sell itself over the last six months as its declining earnings drove down the price.
So buying a newspaper company these days is a gesture of love, or vanity, or both. Eli Broad, the Los Angeles businessman and philanthropist who tried to buy The Times and then Tribune Co., has told friends that "newspapers are for rich guys who didn't get the football team." He is right, and Murdoch, whose News Corp. is big enough to swallow Dow Jones without a hiccup, is one of those guys.
He started with a single newspaper in Adelaide, Australia, and now controls a giant media company that includes newspapers, television stations, cable networks, a film studio and satellite delivery systems. The addition of Dow Jones could help News Corp. launch a business-news cable channel, but that can't explain a $5-billion purchase or an offer equal to 40 to 50 times Dow Jones' projected earnings for 2007. The Wall Street Journal is Murdoch's favorite newspaper -- his world view is shared by the Journal's conservative editorial page -- and he has lusted after it for decades.
That kind of personal passion is largely missing from the American newspaper scene. Papers would be livelier and more interesting if a Murdoch controlled the Journal, or a David Geffen ended up owning The Times.
Most of the country's successful newspapers were built by families that cared about the communities they served. Their owners certainly wanted to make a profit, but power and prestige were seen as a fair trade for lower returns. It was only in the 1960s and 1970s that family owners began to sell out to media conglomerates as new generations of heirs became more interested in cashing out than in owning the presses.
Newspaper moguls haven't always produced great journalism. For every Sulzberger there was a Hearst. For every Graham there was an Annenberg. For every Chandler there was another Chandler. But the papers had stronger voices than the homogenized packages served up by many of today's newspaper chains.
Although News Corp. is a media conglomerate, Murdoch, through force of personality and stock-voting control, has done what he pleases with his assets. He loves news and newspapers and believes that business coverage can transcend dullness. He is also smart enough to recognize that the surest way to reduce the value of his investment would be to undermine the Journal's editorial independence and its commitment to quality.
Wall Street hasn't looked kindly on newspaper companies in general. As the newspaper industry's profits have begun to wane, the New York Times Co, Washington Post Co., Tribune Co. and Dow Jones all responded by cutting costs at their papers. Murdoch, in contrast, has increased the editorial budget at the Times of London since acquiring it.
Murdoch has said that if he buys the Journal, he will turn over control of much of News Corp. to spend a year remaking the paper. I doubt Murdoch can give up control of anything, even for a year, but there is no doubt that he energizes everything he touches.