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
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.
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.