Dow Jones Down

The WSJ editorial page launches baseless attacks on its competitors' motives—it will fit right in at News Corp.

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.

But I really object to the Journal’s editorialists calling into question—by name—the motives behind The New York Times and The Financial Times for their coverage of the News Corp. story.

Some of these voices, however, are commercial or ideological competitors who have their own interest in undermining the Journal’s credibility. Both the New York Times and the Financial Times have been especially aggressive in assailing the potential News Corp. purchase of the Journal. These also happen to be the two publications that Mr. Murdoch has explicitly said he might invest more to compete against. Readers can judge if the tears these papers and their writers claim to shed for the Journal’s future are real, or of the crocodile variety.

The nastiest attacks have come from our friends on the political left. They can’t decide whose views they hate most — ours, or Mr. Murdoch’s.

First, this slander has nothing to do with the FT, which did little that was particularly critical of anybody. What is it supposed to do, ignore the story?

No, this was all about the Times. It did a superb job, in fact. But whatever the Journal’s editorial page thought of the coverage, does it really think Joseph Kahn, the Times’s superb Asia hand, exposed News Corp.’s timely payments to the relatives of Chinese political officials, and reporters Jo Becker, Richard Siklos, Jane Perlez, and Raymond Bonner revealed its timely book contracts for U.S. congressmen, because they and their bosses were concerned about competition from a Murdoch-owned Journal?

The only other party to take the debate to that level was—who else?—News Corp., which declined to comment for the Times series by saying this:

News Corp. has consistently cooperated with The New York Times in its coverage of the company. However, the agenda for this unprecedented series is so blatantly designed to further the Times’s commercial self interests — by undermining a direct competitor poised to become an even more formidable competitor — that it would be reckless of us to participate in their malicious assault. Ironically, The Times, by using its news pages to advance its own corporate business agenda, is doing the precise thing they accuse us of doing without any evidence.

That’s not argument. I’m not sure I have a name for it.

But okay. You want ulterior motives? Here’s one:

Paul Gigot, editor of the Journal’s editorial page, gets a guaranteed job as a result of the News Corp. deal. Gigot now has more job security than the Lubovitcher Rebbe or a mid-level clerk at the DMV.

Come to think of it, Gigot has a lot more job security than I do. But then we believe in accountability up here at Columbia—free markets, free people. That’s us.

The editorial page is supposed to reflect the thinking of Gordon Crovitz, the paper’s publisher, who is $5 million richer as a result of the News Corp. deal.

Point is, lay off the motives nonsense. There’s no basis for it, and it’s not right. Senior Journal editors have a lot of nerve.

The editorial staff and publisher, while not calculating the value of their DJ options now enhanced by the News Corp. offer, might consider that some of us critics might be critical not for commercial motives or ideological ones (I’m not sure how the logic works in any case; liberals want an independent Dow Jones because they hate what, exactly?).

No, they might consider that some of us were critical for the same reason that Tunku Varadarajan,—their own deputy editorial features editor—was critical a few years ago.

What does one make of the Murdoch position on China? In my view, it is a form of corporate prostitution…But China is run by sophisticated tyrants. They see the use of people like Messrs. Murdoch—père et fils—and will use them. They are not taken in by the flattery, the unctuousness, the bowing of the corporate knee. They are not unduly impressed by the Murdoch attempts to be more Catholic than the pope when it comes to China. They know that he wants to make more money in China and that he is willing to pay any price to do so.

We think the News Corp.-owned Journal will be bad for journalism. That’s the thing we’re all supposed to be in favor of, right?

If we’re supposed to be reassured that the WSJ will remain uncorrupted by News Corp. values, we’re off to a bad start.

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Dean Starkman Dean Starkman runs The Audit, CJR's business section, and is the author of The Watchdog That Didn't Bark: The Financial Crisis and the Disappearance of Investigative Journalism (Columbia University Press, January 2014). Follow Dean on Twitter: @deanstarkman.