Tuesday, May 1, 2007

NewsCorp Bid for Dow Jones: Empire Building or a Balanced Play? UPDATED

CNBC Reports along with others on the USD 5 billion cash offer from NewsCorp to acquire control of Dow Jones & Company from the Bancroft family and other majority shareholders. Dow Jones has long been in the eyesights of Rupert Murdoch who prizes the Wall Street Journal editorial page's outlook as much as its healthy subscription revenues and improving online profile, but certainly the recent reoganization at Dow Jones under CEO Richard Zannino doesn't hurt the prospects of Dow Jones getting a good asking price for a traditional news and business information service in a problematic market. The broader problem is what happens if the Bancrofts et al. come back and express interest. Certainly Bloomberg and other business information companies may be willing to put in an offer as a prophylactic move to ensure that another well-funded global competitor is not breathing down their necks, but few outside of NewsCorp would have a globally positioned product that would complement Dow Jones' existing media and business information capabilities effectively.

In the CNBC article Mort Zuckerman notes that NewsCorp's efforts to launch a cable business news channel to compete with offerings from CNBC, CNN and Bloomberg can make this a good fit, and it's a key point. Dow Jones' footprint in video has been very limited so a broadcast-savvy ownership provided by NewsCorp's Fox division would certainly position their editorial assets more effectively - especially in exploding online video markets. The same factor argues somewhat against a Bloomberg acquisition, as it already has a reasonably successful broadcast presence in both television and radio. But the ringer in all of this is business information. The Dow Jones Enterprise Media group under Clare Hart provides NewsCorp with an enterprise footprint that it lacks - and that it needs to give it a more interesting balance sheet compared to Reuters, which maintains growing media interests and solid enterprise interests.

All in all this may be the offer that the Bancrofts can at last not refuse. Expect considerations from Bloomberg and others to enter the picture in reaction to the bid but my sense is that this may be the time for Dow Jones to move into the hands of new ownership - and for Zannino and crew to benefit from a broader array of outlets through which to market their editorial products.

UPDATE: ABC News reports that Dow Jones rejected the NewsCorp bid within hours of its posting. The article mentions, though, that there is no statement from DJ indicating that it would not consider other bids from NewsCorp or other companies. This is not entirely surprising - Dow Jones is likely to want to remain in U.S. ownership, given its history - but my comments stand. This may have been the last best chance for Dow Jones to bail out under reasonably good conditions. Their online operations are doing well enough and they are finding more innovative ways to market non-financial content but the long-term trend for print revenues is not promising. To stay healthy more video production is a must.
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