UK readers will miss Rupert Murdoch (honestly)

As predicted here and variously across the planet, Rupert Murdoch is in the fight of his life with politicians, regulators and courts in the US and UK.  Leaving the mounting horrors aside, it is timely to examine the context for Mr Murdoch and News Corporation, viz:

  • Newspapers represent under 20% (and falling) of News Corp’s total £20bn revenues. The UK papers account for just 5%.
  • News International, the UK newspaper subsidiary, made a £900k loss last year and only The Sun of its remaining 3 newspapers is still profitable
  • News Corp is primarily a film and TV business with most of its earning derived from the US. Any inability to acquire 100% of BSkyB (or, perhaps,even to retain the existing 39%) would make the UK a pariah colony for News Corp.
  • The company’s stock market valuation is depressed by its newspaper businesses – and, further still, by the UK-based scandals
The cold fact is that newspapers are the business with which Rupert Murdoch began his long rise to international influence and infamy. They are also the business (as we are now being reminded) that has helped him wield business-building influence with regulators, content owners, advertisers, and readers/ viewers.

Newspapers still ‘big’ in the UK

Nowhere has this been more obvious than in the UK, a country almost defined by its unrivalled collection of long-established national dailies. For all the explosion of always-on news, newspapers still have a sizeable impact on life in the UK, not least because there are so many of them, washing over the entire population. Even people who never read newspapers see the front pages staring out at them from every corner shop, supermarket and news stand. People across the UK have been accustomed to contrasting the profusion of  daily newspapers with the dearth of choice in the US, Australia and almost everywhere else. And, for Brits, election after election has been characterised by the endorsement of Murdoch’s biggest-selling daily The Sun.

Brits have, therefore, been wont to assume that there is something special about their nation’s ability to sustain this range of daily newspaper choice. Well, there is but it’s got little to do with economics or even with flattering national levels of literacy.  The biggest single reason today for the UK’s range of national newspapers is: Rupert Murdoch. Examine the evidence. Only 6 out of 10 national dailies and 3 out of 9 Sundays are profitable, so 50% are loss making. Most circulations are falling sharply (up to 14% in the range of figures released in May) even though the numbers are being bolstered/ padded  by TV advertising, free DVDs – and liberal distribution of free copies on trains, planes and in hotels. UK daily newspapers are “big” partly because Mr Murdoch has been happy  - at least until now – to be the leading publisher accounting for 40% of the market – and losses. Even his largest circulation News of the World has been declining steeply.

It now seems clear that the paper’s “shock” closure was part of a (failed) strategy to enable News Corp to acquire BSkyB, and to create a firewall for the rest of the group’s UK newspapers. Even for the punchy Murdoch, it must have been gut wrenching to ditch the newspaper that kick-started his whole worldwide group almost 35 years ago. It was, though, made easier by the paper’s (and the industry’s) downward spiral: in May,  NoW circulation was 2.6m – some 7% down year-on-year, a far cry from the peak of 8m+ in the 1960s, when there were a whole bunch of newspapers also selling 5m+. News of the World profits have been sliced in recent years and any lasting damage from the threatened reader and advertiser boycotts would surely have consigned the paper to the losses of so many of its peers. So, closure became a no brainer for the ace gambler with something big to fall back on (ie BSkyB).

Murdoch loves newspapers

Those sliding newspaper circulations are well-documented. But Rupert Murdoch has been one proprietor who, consistently across the last 35 years, has supported daily newspapers – and right across the spectrum. And, for all the ruthlessness of his game-changing switch of printing to non-union Wapping in the 1980s (which certainly injected new profits into the whole market), his newspapers have above-average numbers of journalists. Difficult as it might be to admit it right now, Murdoch has, on one level, been the newspaper industry’s most steadfast patron and its biggest investor. He has his motives, but he loves newspapers.

That is why this might just be the tipping point for all UK daily newspapers. The papers that gave the Aussie-born media trailblazer his motive power are now threatening, quite simply, to bring News Corp to its knees. The shareholders (and his key New York based executive Chase Carey, who will surely become the next News Corp boss instead of the exposed son James) who were urging Murdoch to dump the News of the World (and over the months before it, the whole of News International) will now find it rather easier to persuade Murdoch that newspapers are not what they were. Murdoch may anyway find it easier, over the next few months, to follow advice he has traditionally ignored. He may not survive if he doesn’t. So, either way, who could bet against News Corp’s three daily newspapers (and the News of the World brand too) being put up for sale? It’s just a matter of when.

When that day comes (and perhaps sooner than we might guess), there will be a good number of cost-conscious buyers for the best selling tabloid Sun and also for the prestigious (high-cost) Sunday Times and The Times. But that will change the whole market simply because there may never again be anyone so willing to invest in (and treasure) the old fashioned business of daily newspapers. After Murdoch has drained the last bit of printing ink from his veins, UK daily newspapers will look very different and their decline will become ever more visible. British newspaper readers will (believe it or not) come to miss Rupert Murdoch. Honestly.

What do you think?