And so Dow Jones & Co., once the proud lion of financial news, goes down instead like a jackrabbit shot while sprinting across a field, tumbling just long enough to hold a discussion about tradition, responsibility, ethics, Schumpeter and other conservative-sounding things, before finally coming to rest, belly up.
After the deal was announced, the WSJ’s editorial page went on the offensive, or tried to, against anyone who might suggest that Dow Jones’s sale might not be as good a deal for business-press readers as it is for top DJ executives and senior Journal editors.
No sane businessman pays a premium of 67% over the market price for an asset he intends to ruin.
There are nonetheless critics, especially in the journalism world, who claim this is precisely what Mr. Murdoch will proceed to do. And they have certainly had a merry time bashing him and the Journal these past few months.
We “critics” have indeed had a merry old time. But nothing was more grimly fun—in a nauseating kind of way—than watching the Dow Jones carcass picked clean by Wall Street hyenas Merrill Lynch & Co., Wachtell, Lipton, Rosen & Katz, along with the fabled trust-and-estates-law-and-taxidermy firm, Hemenway & Barnes, which ran up such huge bills advising the Bancroft family to do the wrong thing that News Corp. was required to bail them out as a final condition of the deal.
Dow Jones’s board had rejected the request for a higher price for Class B shareholders. Instead, what emerged from the talks was a deal under which Dow Jones agreed to pay the family’s legal and banking bills. News Corp. will assume these liabilities when it buys Dow Jones. The family’s fees, to be paid to firms including Merrill Lynch, Morgan Stanley and the law firms Hemenway & Barnes and Wachtell, Lipton, Rosen & Katz, could total at least $30 million, according to people familiar with the situation. That figure doesn’t include fees incurred by the Dow Jones board, which had its own advisers.
These are deeply conflicted, untrustworthy advisers, who are paid much more in the event of a deal than no deal. That goes double for Merrill Lynch, the no-can-do investment bank, which swayed the Bancrofts by repeatedly delivering dark forecasts for an independent Dow Jones.
The spectacle was too much for Jim Ottaway Jr., the major DJ shareholder and former director and executive, who argued tirelessly against a sale and then issued a statement rightly calling the advisers’ fees “outrageous”:
It is ironic indeed for the Bancroft family to have to pay 30 shekels of silver to their investment bankers, and 30 shekels of gold to their corporate lawyers, for scaring some of them into betraying their 105-year family loyalty to Dow Jones independence.
Ottaway’s right, of course. And another question might be this: How could a company that owns the Journal and the Dow Jones Industrial Average not succeed in the digital future? Only Merrill Lynch knows.
So here’s some advice to the Sulzberger family: when the unsolicited takeover offer comes for the New York Times Company—and yes, it’s coming—find some other advisers. We already know this group can’t get it done.
Speaking of not getting it done, The Audit appreciates the WSJ editorial page quoting Schumpeter.
Change is inevitable in a capitalist marketplace, for the news business no less than for any other. That includes the possibility of changes in ownership, especially in an industry like ours roiled by the Internet. Ask the Tribune Company, or the reporters who once worked for something called Knight-Ridder. Our June 6 editorial, “An Independent Newspaper,” was portrayed by some as a request for a reprieve from such market forces. But that’s a canard. As we said in that editorial, “those of us who extol the virtues of Joseph Schumpeter’s ‘creative destruction’ for others can’t complain when it sweeps through our own industry.”
Well, la dee da. Thanks for the lecture on capitalism—emanating from a failed enterprise. That’s like a Dodo bird giving a lesson on aerodynamics.
Now, I’m not the Schumpeter scholar that those WSJ editorial philosophers surely are. I’m sure they can all quote Theorie der wirtschaftlichen Entwicklung in the original German, in unison. But I suspect that if the great Austrian thinker were here today, he would agree with me that a key word in that famous phase is creative destruction, not self destruction or Dow-Jones-shareholder-value destruction, which is precisely what DJ senior managers and the asleep-at-the-switch board have engaged in for years. The idea that DJ’s failure was at all inevitable or was the result of some kind of economic determinism is not only bogus but betrays some strange ideas about capitalism itself.