The New York Times (NYT) won’t go private. Yahoo! (YHOO) should have bought Dow Jones (DJ) before Rupert Murdoch’s News Corp. (NWS) had the chance. And media companies looking to cash in and sell out for a hefty premium may now find it difficult, if not impossible, to do so thanks to Wall Street’s credit crunch.

Those were some of the conclusions of panelists speaking during a presentation about media industry consolidation at the Future of Business Media conference in New York Tuesday.

Steven Rattner, a managing principal with private equity firm Quadrangle Group, made the comment about the New York Times.

He said that Morgan Stanley Investment Management’s recent decision to sell its entire stake in the newspaper publisher means that the Sulzberger family that controls the company no longer has a big investor demanding a change to the company’s dual-class stock structure. Translation: pressure to sell the company or take it private will abate.

“I believe the New York Times will remain happily in its current ownership form for the indefinite future,” he said. Happily is a matter of debate, however, as investors who’ve watched the company’s stock fall 16 percent this year probably aren’t too thrilled.

Turning to the topic of one of the New York Times’ biggest competitors, Dow Jones, Alan Meckler, the chairman and CEO of Jupitermedia (JUPM), suggested that it would have been a bold move for Yahoo to buy Dow Jones in order to strengthen its Yahoo Finance offering.

Meckler said he thinks Yahoo needs to take advantage of the large number of visitors it attracts to its various properties and focus more on its media assets since he believes the company has fallen too far behind Google (GOOG) in Internet search.

“Yahoo has to face the fact that it lost the battle to Google in search,” he said.

But other panelists suggested that they weren’t surprised to see that Yahoo, nor anyone else for that matter, was willing to step up and make a serious offer for Dow Jones after Murdoch made his $5 billion bid for the publisher of The Wall Street Journal.

Lauren Rich Fine, formerly a media analyst for Merrill Lynch and now a faculty member at the Kent State University Communications School, said that Murdoch priced his bid for the company so high that it didn’t make economic sense for anyone else to launch a counteroffer.

Rattner agreed, saying that raising more than $5 billion was not the problem. The problem was that paying more than $5 billion would have made it difficult to make the transaction profitable for a buyer. He said it may even prove tough for News Corp. to make money off the deal and added that profits may not have been the prime motivation behind the purchase anyway. Read the rest of this entry »

You’d be hard-pressed to find an industry in a bigger slump than the newspaper sector. Newsstand sales are down. Circulation is down. Advertising revenues are down. It’s no secret that the Web is taking a big bite out of the business, as more and more readers flock to the Internet to get their news fixes and also to sites like Craigslist, Yelp and Monster.com, to name a few, for classified ads, information about local companies and job listings.

As such, shares of most newspaper stocks have been pummeled and several are trading at nearly 10-year lows. The New York Times Co. (NYT) is down 20 percent so far this year. Gannett (GCI) has plunged nearly 30 percent. And Lee Enterprises (LEE) and McClatchy (MNI) have each plummeted more than 50 percent.

Not even the pending takeovers of Dow Jones (DJ) by News Corp. (NWS) and the private equity-led buyout of Tribune (TRB) have been enough to rejuvenate investor interest in this moribund group.

So with all this doom and gloom, it’s interesting to note that some of the more well-respected institutional investment firms in the U.S. are loading up on shares of these beleaguered companies. Perhaps they sense that the sector may finally be nearing a nadir and that the stocks could head higher as newspaper publishers do more to transition to the Web?

According to figures compiled by data provider FactSet Research, Ariel Capital Management has boosted its stake in Lee and McClatchy in the past few months, for example. T. Rowe Price and Fidelity Management and Research each increased their stakes in Gannett, McClatchy and E.W. Scripps (SSI), which also owns cable networks in addition to newspapers. And Wellington Management, the company that subadvises for some of the Vanguard family of funds, has increased its positions in The New York Times, Gannett and Journal Register Co. (JRC).

So should investors follow the “smart money”? Not so fast. Read the rest of this entry »

News Corp. (NWS) president and COO Peter Chernin gave an upbeat outlook regarding his company’s prospects at an investor conference Monday afternoon, touching on topics ranging from the company’s rapidly growing MySpace social networking unit to its pending acquisition of Dow Jones (DJ).

Chernin, speaking at Merrill Lynch’s Media and Entertainment conference in Marina Del Ray, Calif. said that he expected News Corp.’s purchase of Dow Jones to close without any “impediments” but was tight-lipped about the company’s plans for Dow Jones and its Wall Street Journal newspaper once the acquisition was completed.

Chernin also discussed the company’s upcoming launch of the Fox Business Channel, which I wrote about earlier today. Despite some concerns about an expensive launch for what may turn out to be a niche channel, Chernin said he thought the channel would succeed since it will have more of a consumer focus and “livelier presentation” than its top rival CNBC.

Turning to the company’s broadcast television efforts, Chernin also said he was optimistic that Fox would be the number one network with 18-49 year olds for the fourth season in a row and that the margin of victory over CBS (CBS), Disney’s (DIS) ABC and GE (GE)-owned NBC would be bigger than this past season. In addition to airing the Super Bowl in February, Fox also has a little show called “American Idol” that will return in January.

But the most interesting part of Chernin’s presentation was his contention that MySpace was not seeing much pressure yet from Facebook, the social networking site that has attracted a lot of buzz — and users — since launching its open platform for applications earlier this year.

Chernin said that while Facebook has become a “more significant” competitor to MySpace in recent months, MySpace has “yet to see evidence of Facebook stealing growth.” He added that he expected MySpace to continue to have a leg up on Facebook thanks to its international focus and online video efforts.

In addition, he said that he believed MySpace was focusing more on “monetizing” the MySpace property. As such, MySpace has an ad sharing agreement with Google (GOOG) and News Corp. has maintained that it expects its Fox Interactive Media unit, which includes MySpace, to generate revenue of about $1 billion in this fiscal year, which ends in June 2008.

Still, News Corp. should not overlook Facebook. To be sure, Facebook is still a distant second to MySpace, with 19.2 million unique visitors in August compared to MySpace’s 60.3 million uniques, according to the most recent figures from Web tracking firm Nielsen//NetRatings. But Facebook’s traffic in August was up 117 percent from a year ago compared to 23 percent growth for MySpace.

Chernin’s comments come a day before Fox Interactive Media’s unit head Peter Levinsohn gives his own presentation at the Merrill Lynch conference. So it will be interesting to see if he shares some more specific information about how MySpace plans to hold off the charge from Facebook.

Then again, considering that Levinsohn is speaking at 2:15 EST, the same time the Fed is expected to announce that it has cut interest rates, something tells me that his remarks might not be noticed. Call me crazy but I suspect that many people, even those attending the Merrill conference, might be just a tad more interested in finding out whether Bernanke & Co. cut rates by a quarter of a point or a half a point than hearing about widgets and other cool social networking minutiae.

News Corp. (NWS) reported its fiscal fourth-quarter results after the closing bell Wednesday. And interestingly, the company did not mention the highly publicized Dow Jones (DJ) deal until page six of the eighteen page release.

Media hounds may find this amusing since News Corp. owns the New York Post, home to the famous gossip page called Page Six. And some industry watchers are concerned that News Corp. chairman and CEO Rupert Murdoch will look to broaden the coverage (i.e. make it more tabloid-esque) of the esteemed Wall Street Journal.

But to be fair, there was no real need for Murdoch to mention Dow Jones any higher in the earnings release. For one, as I pointed out yesterday, the Dow Jones transaction is not a make or break purchase for the company. It’s not going to have a major impact on revenue and profits in the near-term.

What’s more, even though News Corp. announced the bid in May, it wasn’t accepted by the Bancroft family that controls Dow Jones until last week, which means that the deal was technically agreed to in the company’s fiscal first quarter of 2008.

More importantly for News Corp. shareholders, the company reported better-than-expected sales and earnings growth in the quarter thanks mainly to strength in its cable television networks business and global satellite TV unit. The company, like fellow media conglomerates Walt Disney (DIS), Viacom (VIAB) and to a lesser extent, my parent company Time Warner (TWX), appears to be benefiting from improved ratings at its cable networks and a healthy demand for cable TV advertising.

In addition, News Corp. investors will also probably be pleased to learn that the company’s Fox Interactive Media unit, which owns popular social networking site MySpace, reported an operating profit for the full year thanks to strength in online advertising. MySpace has an ad-sharing partnership with search industry leader Google (GOOG).

During the company’s conference call with analysts, News Corp. chief financial officer David DeVoe added that during the fourth quarter, revenues from FIM more than doubled to $183 million and that the unit reported an operating profit of $30 million. Murdoch added that he expected FIM to report revenue in fiscal 2008 of more than $1 billion, with MySpace accounting for about $800 million in sales, and that operating profits would be well above 20 percent.

Still, Wall Street eagerly awaited what his Rupertness had to say about his new toy, Dow Jones. During the call, Murdoch joked that as the merger soap opera dragged on, he endured criticism during the past three months that was more befitting of a “genocidal tyrant.” Awww. He does have feelings! Read the rest of this entry »

News Corp. (NWS) will report its fiscal fourth-quarter results after the closing bell on Wednesday. The company is expected to report a profit of 27 cents per share, up from 23 cents a year ago according to consensus estimates from Thomson First Call. And sales are forecast to come in at $7.27 billion, an increase of 7.2 percent from the same period last year.

Yet many investors probably won’t pay that much attention to the earnings. Instead, they may be more keen to hear what News Corp. chairman and CEO Rupert Murdoch has to say about what the company plans to do with Dow Jones (DJ) once it completes its acquisition of the company.

After the lamest bidding war ever ended last week with enough members of the Bancroft family that control Dow Jones finally agreeing to News Corp.’s $60 per share offer for the company, there was no conference call to discuss the sale. So Wednesday’s earnings announcement is being viewed as Murdoch’s victory lap, a time when he will give investors more details about what’s next for The Wall Street Journal and other Dow Jones publications.

But it would be a mistake for Wall Street to just focus on Murdoch’s plans for Dow Jones. After all, Dow Jones is only expected to generate $2.1 billion in total sales this year and $2.15 billion next year, according to Thomson First Call. To put that in perspective, analysts are predicting that News Corp. will report on Wednesday that its annual revenue for fiscal 2007, which ended in June, came in at $28.5 billion and that sales in fiscal 2008 will top $30 billion.

“Rupert’s not betting the whole company on this acquisition,”said James McGlynn, manager of the Summit Everest fund, which owns about 44,000 shares of News Corp. He added that he does not expect the Dow Jones transaction to have a material impact, positive or negative, on earnings any time soon.

News Corp.’s slow-growth newspaper business — operating income was flat in the third quarter — is not what drives the company’s profits. It is the company’s cable networks, broadcast TV business and movie and studios that really make News Corp. click. In the third quarter, these three units accounted for nearly 80 percent of News Corp.’s operating profit.

“There has been too much attention paid to Dow Jones. I’m sick of reading about it. It’s such a small deal,” said David Joyce, an analyst with Miller Tabak & Co. Read the rest of this entry »

News Corp. (NWS) and Dow Jones (DJ) have FINALLY done it. The two companies agreed late Tuesday night to News Corp.’s $60-a-share takeover bid. Will News Corp. CEO Rupert Murdoch destroy the credibility of The Wall Street Journal? Is this the end of business journalism as we know it?

While I do think that the demonization of Murdoch is a bit excessive in the mainstream press, it will be interesting to see if Murdoch changes the culture of Dow Jones’ most important asset. And since News Corp. is paying a not insubstantial amount for Dow Jones, it will be extremely important for Murdoch to make sure that News Corp. shareholders get their money’s worth.

If he embarks on a radical editorial overhaul of the Journal, that could bolster the readership of publications like The New York Times (NYT), Pearson’s (PSO) Financial Times and dare I say it, Time Warner’s (TWX) CNNMoney.com, the owner of this blog.

Advertisers may not care that much about “editorial integrity” but they do care about eyeballs. If News Corp. alienates the core readers of the Journal, whom I suspect care more about stocks and bonds and less about politics and celebrity gossip, then Murdoch will have lots of angry News Corp. shareholders to deal with.

There are already some investors who aren’t thrilled with the fact that News Corp. is buying Dow Jones, since it increases the company’s exposure to the slow-growth publishing business. Buying Dow Jones may enhance the prestige factor of News Corp.’s newspaper unit but it won’t make News Corp. a sexier, more exciting media company.

As far as I’m concerned, the most important thing to keep an eye on in the months and years ahead is whether Dow Jones can boost News Corp.’s profits or if it will be a drag on earnings.

Anyway, I’ve discussed this merger saga endlessly for the past three months, dubbing it the lamest bidding war ever. And now that it’s finally over, I’m not the slightest bit sad. This was a story that, despite all the Bancroft bickering, lacked the drama of other takeovers, namely because there were no legitimate counteroffers to drive the price higher.

But as a treat (or trick depending on your tolerance for my rants) for my readers, I figured I’d end my coverage of this soap opera with a humorous little musical interlude. Apologies to the great Etta James…and to my wife for taking our wedding song and turning it into a Weird Al Yankovic-esque parody. (Sorry Beth!) But please, just imagine Rupert singing this in the shower this morning. Or not. That is a bit of a disturbing image.

At last, my love has come along

Now I own Dow Jones

For which I payed a song

Ooh At last

the Journal, can it be true

well my Fox News Channel praised me

the night that I bought you

I found a respected paper

that I could speak to

an editorial page I could call my own

Reporters to leak my right-wing thoughts to

a thrill that I have always known

well

You bluffed

I smiled

oh and then the spell was cast

Three months and $5 billion later

And you are mine at last

Rupert Murdoch must have been one of the many who saw his company’s “The Simpsons Movie” this weekend. The CEO of News Corp. (NWS) is doing his best C. Montgomery Burns impersonation, showing no mercy to the Bancroft family that controls Dow Jones (DJ).

With just hours left before the Bancrofts’ deadline to vote on whether to accept News Corp.’s $5 billion/$60 per share offer for Dow Jones, a News Corp. spokesman told The Wall Street Journal (subscription needed) that Murdoch is “highly unlikely” to stick with the bid if the offer does not get more support from the Bancrofts than it has currently. This report was later confirmed by CNN.

According to the WSJ report, family members controlling about 28 percent of the company’s voting power have said they are in favor of the bid and it is estimated that News Corp. would need at least 30 percent of the Bancrofts’ voting power in order to succeed in its efforts to buy the company.

Dow Jones’ board has already agreed to a deal and most other shareholders would likely approve it considering that the offer represents a more than 65 percent premium to the stock’s closing price the day before the bid was announced on May 1.

The WSJ report caused shares of Dow Jones to tumble nearly 4 percent to about $52.50 Monday. The fact that the stock is now well below the $60 offering price is an indication that Wall Street is growing skeptical about the deal’s chances of being consummated.

Still, two institutional shareholders who said they grew tired of waiting for the Bancrofts to make up their mind and sold Dow Jones stock in the high 50s told me Monday they still believe the deal will go through. Read the rest of this entry »

Maybe it’s altitude sickness. How else can one explain why the Denver branch of the far-flung Bancroft family that controls Dow Jones (DJ) is reported to be asking that Rupert Murdoch’s News Corp. (NWS) pay a 10 percent to 20 percent premium to the already rich $5 billion/$60 per share bid for Dow Jones?

The Bancrofts, by the way, are also supposedly asking for this premium to be attached just to their super-voting class of shares, not the common shares owned by average investors.

The Bancroft family has a deadline of 5 p.m. Monday to vote on whether or not to accept the News Corp. bid. Murdoch’s offer for Dow Jones, announced on May 1, represented a more than 65 percent premium for the publisher of The Wall Street Journal.

Until now, it seems that most members of the Bancroft family have been more worried about what Murdoch will do to the asset they consider their family legacy if they agree to sell it to him, not whether he is offering a fair price for Dow Jones.

Call it greediness or maybe just insanity. But why do the Denver Bancrofts think News Corp. should raise its bid for Dow Jones when nobody else so far has been willing or able to step up and save Dow Jones from Murdoch? There is no legitimate competitive counteroffer here — which is why I’ve been repeatedly calling this takeover saga the lamest bidding war ever.

Plus, Dow Jones reported second-quarter revenues two weeks ago that missed Wall Street’s expectations, thanks to a decline in advertising sales. Bargaining 101: If you want someone to pay a higher price for something you own, it helps to have it in good shape first. If your house is on the market and then a tree crashes through your living room window, you’d be hard-pressed to find someone to pay more than the asking price…even if you tout the limitless renovation possibilities.

Dow Jones is a company in transition, one that, like other newspaper publishers, is attempting to embrace the digital world. To its credit, the company is doing a better job than most in the online news business; Dow Jones did report an overall sales increase of 16 percent in the second quarter. But analysts expect Dow Jones to report annual profit growth of only about 12 percent a year for the next few years.

That’s not bad, of course. But considering that the $60 bid values Dow Jones at nearly 34 times 2008 earnings estimates, the current offer is more than generous.

Still, let’s just play a fun little game. Say Murdoch, for some bizarre reason, acquiesced and raised News Corp.’s bid. I know it’s not going to happen, but work with me here. For argument’s sake, assume he meets the Denver Bancrofis in the middle and boosts his offer by 15 percent, to $69 a share.

At that price, Dow Jones would be valued at a whopping 39 times 2008 earnings estimates. To put that in perspective, a $69 price for Dow Jones values the company at a higher multiple, using 2008 earnings estimates, than Apple (AAPL) and Google (GOOG). And both of those companies are expected to report annual profit increases that are much higher than 12 percent a year.

I don’t care how much synergy Murdoch can wring from owning the WSJ and his new Fox Business Network or how much costs he can cut. There is no way to justify a higher price for Dow Jones than the one he’s already offered, especially because some News Corp. investors are already not too thrilled by how much Murdoch is planning to spend for a relatively slow-growth business.

If the Bancrofts want to vote against the deal because of concerns about editorial integrity and independence, so be it. They’ll face the wrath of shareholders but at least they’d be taking a principled stance. But if they vote against the deal because they don’t think Murdoch is offering enough for the company, that just smacks of incompetence.

Say what you want about Rupert Murdoch and his News Corp. (NWS) empire. You may not be a fan of his politics. You may worry about what he could do to The Wall Street Journal if News Corp.’s $5 billion takeover bid for Dow Jones (DJ) is finally accepted, which seems inevitable now that both Dow Jones’ CEO and board have approved it.

The only remaining hurdle is getting the Bancroft family, which own a controlling stake in Dow Jones, to sign off on the deal.

But some of the reasons that people are giving for why he should not be allowed to buy Dow Jones strike me as at best, a tad alarmist, and at worst, anti-capitalist.

Free Press, a national nonpartisan group whose aim is to reform the media, put out a press release Tuesday urging the Bancrofts to block the deal.

“Rupert Murdoch’s takeover of the Wall Street Journal may not be illegal, but it’s certainly wrong. The cost of giving one company — and one man — this much media power is simply too high,” said Free Press president Robert W. McChesney in the statement.

“Less than a dozen outlets — the major TV networks, a few cable news channels and couple of newspapers — set the national news agenda. They decide what most citizens will — or will not — learn. If this deal goes through, Murdoch would control three of them: the Fox Network, Fox News Channel and the Journal. And that is just the tip of the iceberg for his media empire. When is it enough?” he continued.

Read the rest of this entry »

Can I get a Hallelujah? How about that? After two-and-a-half months, the lamest bidding war ever is finally over. Sort of.

News Corp. (NWS) has apparently reached a tentative deal to buy Dow Jones (DJ), the publisher of The Wall Street Journal. That’s according to a story in Tuesday’s WSJ. Rupert Murdoch’s News Corp. first proposed a $5 billion takeover for Dow Jones on May 1.

Since then, Dow Jones has hemmed and hawed about accepting a deal, even though Murdoch’s $60 per share bid valued the company at a more than 65 percent premium to the stock’s closing price on April 30. In fact, the last time shares of Dow Jones traded at $60 a share before the News Corp. offer was in April 2002.

But Murdoch hasn’t won the crown jewel of financial journalism just yet. Although Dow Jones’ CEO apparently reached a tentative deal to sell the company on Monday, the Dow Jones board must still approve the takeover. And after that, the Bancroft family, which own a controlling stake in the company, must also approve the merger.

Some of the Bancrofts have chafed at the idea of selling Dow Jones to Murdoch, who has a reputation for having his news outlets reflect his conservative views and also has been accused by some media watchers of tailoring coverage to suit his business needs.

But Murdoch and Dow Jones’ board have apparently agreed to some sort of deal that would guarantee some level of editorial independence in the newsroom of the Journal and other Dow Jones publications, which include weekly magazine Barron’s and web site Marketwatch.com.

Dow Jones has engaged in a futile search for white knight bidders. General Electric (GE), Microsoft (MSFT) and Pearson (PSO) decided to take a pass on making an offer for Dow Jones and it appears that an effort to get billionaire supermarket mogul Ron Burkle and MySpace founder Brad Greenspan to team up and buy Dow Jones is not coming to fruition either.

The end of this saga is inevitable. Murdoch is the only option for Dow Jones unless the board wants to explain to irate shareholders after the stock plunges back to the mid $30’s — where it was before the merger announcement — why remaining independent is a better course of action. Read the rest of this entry »