Murdoch's 'Editorial Suicide' Bodes Poorly For Dow Jones Merger

When the Newscorp's (NWS) buyout offer for Dow Jones (DJ) broke, I was in the camp thinking the Murdoch deal would succeed given the hefty premium he was offering - in his words, "generous". But with seemingly solid opposition from both the Bancroft family and especially the Ottaway family, I've been having growing doubts as it is quite clear those families aren't so easily seduced by more money.

And now, in light of the scandal that's been disclosed over journalistic improprieties surrounding the New York Post's Page Six gossip column, I think Murdoch will have an ever tougher time convincing the controlling families that he will maintain the journalistic integrity of the Wall Street Journal. On Friday, Muchoch's NY Post disclosed allegations that its top editor was comped at strip club in return for favorable coverage and that the Page Six columns chief writer, Richard Johnson, once took a $1000 cash gift. Cross town rival, The New York Daily News, summed it up best with this lead: "The New York Post's scandal-scarred gossip column committed editorial suicide yesterday when it admitted that Page Six honcho Richard Johnson took cash from a favored celebrity restaurant." It may go well beyond suicide for the Page Six; at the very least this dirty laundry will make merging the Dow Jones papers into the Murdoch family fold a far tougher sell.

The chart below is a 5 min day chart of Dow Jones. Briefly the stock spiked on a rumor that the company would take itself private. But as the day wore on and more people read about the dirty deeds at the NY Post, there was a, "What the??" kind of reaction and DJ shares sank well off the highs.

It will be interesting to see if Murdoch, as his position weakens, will try to make things better by upping his already rich offer. Stay tuned.

Comments

[Malkiel:]

Murdoch can be rightly criticized till the cows come home about letting Ailes turn Fox News into a propaganda agency, but the New York Post is the original American tabloid and nobody should even feign surprise at this development or think that it reveals anything new about Murdoch. The only respect in which Murdoch's character comes into question is in his decision to even own the Post; beyond that, the Post is what it is. And half the traders on the floor patronize the clubs in question and read the Post as though it were news, so it's surprising the story made the price go down--scandal should be an uptake, not a downtick for a tabloid...

2007 May 21 12:52 PM

[Sr. Pessimist:]

I'll never forget OJ Simpson getting a load of money and that smear campaign Murdoch orchestrated to make a scape goat out of somebody other than him for enriching a murderer.

2007 May 21 11:36 PM