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Murdoch's acquisition of Dow Jones is all but complete

Phil Rosenthal and Michael Oneal

CHICAGO - Rupert Murdoch's $5 billion conquest of Dow Jones & Co. is all but complete.

After an operatic, months-long battle of wills with the wealthy Bancroft family, which has controlled the business news empire for more than a century, Murdoch's hefty $60-per-share offer finally prevailed on Tuesday. Ultimately, an agreement to pay the family's advisory fees trumped fears that Murdoch might corrupt their birthright, one of the most respected and powerful news organizations in the world.

The victory of Murdoch's News Corp. marries the staid, establishment publisher of The Wall Street Journal with a global media maverick and his company best known as purveyor of newspapers such as The New York Post and television shows such as "The O'Reilly Factor" and "The Simpsons."

That coupling has sent chills through the world of establishment journalism and raised anew a question that has bedeviled the industry in recent years as audience and advertising revenue decline: Why can't even the best newspapers find a way to pay for themselves?

Murdoch appears to have come to the same conclusion about "old media" as Chicago billionaire Sam Zell, who agreed in April to help fund a transaction to take private Tribune Co., the owner of the Chicago Tribune, in an $8.2 billion deal involving an employee stock ownership trust.

Both tycoons are confident that with more aggressive management focused on transforming these companies for the digital future, they can wring out better performance and make their investment pay off.

At issue is whether they can do so and still produce high-quality journalism.

"An owner who loves the product and is willing to roll up his sleeves - I think that could be exciting," said Norman Pearlstine, former editor of The Wall Street Journal and Time Inc. and now a senior adviser to the Carlyle Group, a Washington D.C.-based private equity firm. "The question is: Does respect (for the product's credibility) go along with that?"

As much as Bancroft family members voiced their worries about Murdoch's aims since he made his offer earlier this year, his initial strategy of appealing to their profit motive ultimately won the day.

Although the family was deeply divided among those who considered Murdoch dangerous for the Journal's integrity and those who simply wanted him to pay more money, the latter side became the majority when Murdoch agreed to cover an estimated $30 million in fees from the family's lawyers and investment bankers.

Now, pending expected approval of the deal by shareholder vote, most observers agree Murdoch is likely to move boldly and decisively to transform Dow Jones.

Paul Tash, editor of Florida's St. Petersburg Times and board chairman of the nonprofit Poynter Institute, a journalism think tank, said he is wary of Murdoch's record of editorial intervention. But he also noted that Murdoch's history suggests "he will try to build Dow Jones and the Wall Street Journal rather than use it to harvest profits in a period of decline. That's not his style."

Starting with his father's small newspaper company in Australia, Murdoch built News Corp. into a media empire with $28 billion in revenues by spending heavily to gather assets he can piece together to create value others failed to spot.

His offer to pay a premium of 67 percent for Dow Jones' shares is comparable to his 1993 decision to commit $300 million per year - $100 million more than rival CBS bid - to land the rights to National Football League telecasts for his then-nascent Fox Broadcasting network. On its face, the NFL deal was a money loser. But it raised the profile and worth of the network, enabling Fox to become the force it is today.

Many believed Murdoch overpaid again when he outbid Viacom for the social networking site MySpace.com in 2005. Now, however, MySpace is one of the most successful brands on the Web and the $580 million price tag looks like a bargain. Murdoch is applying a similar long-term calculus to Dow Jones. The purchase not only burnishes News Corp. with a patina of establishment credibility, but it also may allow him to use The Wall Street Journal brand to gild his Fox Business Network, a new cable channel set to be available in more than 30 million homes beginning Oct. 15.

The move is classic Murdoch.

"He has a singular vision and he's able to make decisions and execute them without having to call a committee and asking them what to do," said Alex Ben Block, former editor of the Hollywood Reporter and TV Week and author of "Outfoxed," a book about the launch of Fox Broadcasting. CBS Corp. CEO Leslie Moonves, who was a 20th Century Fox executive when he first met Murdoch more than 20 years ago, said the man is a quick study.

"There are just some people who are visionaries, who see the world in a different scope, and he's one of them," Moonves said. "If you spend any time with him, (you quickly see) he really is brilliant. There's a master plan."

What makes the establishment media world so nervous are charges that Murdoch's master plan often includes interfering in editorial decisions to advance his political or business aims. His currying favor with Chinese officials is a widely cited example of his meddling.

But none of that would matter if his media offerings weren't effective in the marketplace, especially at a time when others are floundering. While he is best known for going down-market or stirring controversy to attract readers and viewers, media observers also admit he is able to stand out from the media clutter through the razor sharp focus of his products.

The hallmark of a Murdoch media property, they explain, is a distinct brand identity that is reinforced by a clear - and often controversial - voice, point of view or attitude that separates it from the pack. Like it or not, the New York Post stands for scrappy gossip mongering and cheeky coverage of the Big Apple's chattering classes. Fox News positions itself as a counterweight to other media outlets it brands as liberal.

The Wall Street Journal, as a brand well-established within the business world, has the kind of focus Murdoch favors, but that imprimatur is rooted in a delicate balance. The paper's conservative editorial page syncs up with Murdoch's political bent. But its news-gathering operation prides itself on its balance and credibility, as well as its independence from the op-ed page's politics.

For that reason, some believe Murdoch would be foolish to risk compromising that trust.

"It would be a mistake to make assumptions about the Journal based on what you see in the New York Post," Pearlstine said. "With a business audience, if they see that they will react against it. We'll have to see. But I don't see him screwing this up."

Murdoch, however, is unabashed in his love of sensationalist tabloids. His office walls are covered with front-page images from the Sun in Great Britain, each with a headline more lurid than the next. Fox News and Fox Broadcasting gained their foothold by being flashier, noisier and bolder than rivals.

That frightens critics who see him as a throwback to such old-time newspaper barons as William Randolph Hearst and Tribune patriarch Col. Robert McCormick, who used their media empires to advance agendas.

"When Col. McCormick ran the Tribune, he ran it on what we might call a Murdoch model," said Nicholas Lemann, dean of Columbia University's School of Journalism. "It was successful, openly ideological. It went on crusades and had its own system of spelling. It was entertaining and fun to read. But the price you pay is informational."

It is impossible to know yet which Murdoch will dominate at Dow Jones: the old-style ideologue or savvy 21st century businessman who recognizes the value of credibility.

The suspicion among many media executives, both outside and inside of News Corp., is that Murdoch needs the Journal's credibility more than its soapbox to further his larger aims.

"Just as much as he can turn The Wall Street Journal into a weapon for his political point of view, he can easily kill The Wall Street Journal," said MSNBC's Keith Olbermann, a former Fox Sports star who often finds himself in the crosshairs of Murdoch-owned outlets.

Phil Rosenthal and Michael Oneal

Chicago Tribune (MCT)

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