Getting Real About the News Corp. Scandal

| About: News Corporation (NWS)

Before I begin analyzing the ongoing train wreck at News Corp. (NASDAQ:NWS), for the sake of full disclosure, I must say that I am not in the pay of any organization with ties to News Corporation, nor am I a fan of either News Corporation or any of the Murdoch family. My writings should give ample support to that contention. As such, what is written below is meant as neither defense nor condemnation of either the company or its controlling family.

To the Grave Dancers of Fleet Street

Yesterday, the editors of The Wall Street Journal, in a sanctimonious, blame-shifting editorial defense of News Corporation that ill-serves the paper and its outstanding journalists, managed to make one point that strikes home. The media establishment is doing neither itself nor the public a service when it allows schadenfreude to seep into coverage of News Corp.’s troubles.

One need only read headlines to imagine the gleeful editors and publishers who composed them: “The tables are turned on Murdoch” crows Joe Nocera at The New York Times; “Just deserts for Murdoch” shouts Richard Cohen from the pages of The Washington Post. The blog and online coverage is downhill from there. As for the Times, once the standard-bearer of American journalism, Nocera goes so far as to try to make a virtue of a vice, explaining:

Well, yes, the schadenfreude is pretty darn thick. Who would deny it? The whole thing reminds me a little of the ending of Ian McEwan’s wonderful novel Solar, in which the many awful things the central character has done in his long life suddenly come together to bury him in an avalanche of comeuppance. I’m okay with that.

Joe is okay with that. And that is a worrisome problem.

Rupert Murdoch has made his share of enemies in the process of building News Corporation, many of them in the media industry -- some among the ranks of those with the power of the printing press. There is no shortage of people who have waited for a very long time for Rupert and his empire to get their requital. Further, I’m all in favor of companies sowing truth-based fear, uncertainty and doubt about competitors.

These are, however, extraordinary circumstances. If this scandal is as serious as it appears, the media have an especial duty not only to get the story right, but to maintain both the reality and appearance of balance in its coverage given that the target is a successful rival. The appearance of balance is eroded when you are reporting the story on page 1 while sticking it to Rupert on the opinion page. Once that happens, it starts to smell like someone is settling scores, and the credibility of an important media outlet is undermined. That’s not serving the public or the media.

There will be plenty of time for schadenfreude when this is all over, and once more when the better reporters on this story line up to collect their Pulitzers. For right now, stick to the facts and take a little less public joy in the trials of a rival; otherwise, you start to look exactly like the thing you hate the most: A pack of bloggers.

Rupert Is Not Going Anywhere

While there have been early reports that News Corp. is considering replacing Rupert Murdoch as CEO, I would not give them much credence. Corporate watchdog Nell Minnow doubts the ability of the News Corporation board to do anything without the express, prior approval of Mr. Murdoch, so there are probably only two ways that Rupert will surrender leadership of the company: Either by his own choice, or if they carry him out feet first under a sheet.

In a fawning editorial that compares Murdoch to Alexander the Great, Forbes publisher Steve Forbes promises us that Murdoch will survive and fight another day. In a rather less complimentary column in The New York Times, David Carr concedes that the News Corp. CEO still has his teflon armor:

Even as the flames of the scandal begin to edge closer to Mr. Murdoch’s door, anybody betting against his business survival will most likely come away disappointed. He has been in deep trouble before and not only survived, but prospered. The News Corporation’s reputation may be under water, but the company itself is very liquid, with $11.8 billion in cash on hand and more than $2.5 billion of annual free cash flow.

For better or worse, Rupert Murdoch is News Corporation. As long as there is a company, he will be calling the shots.

Aid and Comfort

What is most disturbing about this scandal is the impression it leaves in the minds of the people and government of China. In the west, we are fond of portraying a free and independent media as watchdog against lawlessness, corruption, and the abuse of power. As a whole, the media serves that function brilliantly around the world.

But if the allegations about News of the World are proven true, and worse, if the illegal and anti-democratic behavior extended beyond that single paper to elsewhere in the News Corporation empire, then the people and leaders of China can make the point that an overly independent media can actually become a vector of lawlessness, corruption, and the abuse of power. Under such circumstances, could China’s leaders not make a rational case that rather than have a media industry so powerful that government is in its thrall that it would be better for government to control the media?

You can bet China’s leaders will make that point, if they have not already. That can only be counted as a blow against progress in the world’s largest nation, a blow that must count against whatever good News Corporation did for media in China.