Why Media Companies Shouldn’t Go Public

What up, web.

Last night the Bancroft family, controlling owners of Dow Jones and its flagship paper The Wall Street Journal, seems to have thrown in the towel and potentially opened up to the takeover bid from News Corp., owned by NY Post-Loc Rupert Murdoch. They haven’t sold yet, and a sale isn’t guaranteed, but DJ did issue several statements saying their current structure is untenable and the company would better accomplish its mission “in combination or collaboration with another organization that may include News Corporation.”

That sounds like B to the S to me. The Bancrofts hadn’t been shopping the company around pre-bid; they then very publicly turned down Murdoch’s unsolicited offer earlier in May, hardly the move of a company that needs to sell. The real reason the family is willing to consider a sale is because the shareholders are hardcore leaning on them to do so. The share price of Dow Jones jumped from $36 clear up to $58.47 on May 2, when Murdoch’s bid became public. Shareholders in Dow Jones, like T. Rowe Price, stand to make a lot of windfall if the sale goes through.

This is the worst aspect of publicly traded media companies. The current ownership doesn’t even want to sell to News Corp., chiefly because they legitimately fear that Murdoch will turn their distinguished paper into another vehicle for his own politics-of-the-moment. (That can mean either appeasing the communist government in China or stoking war fever here in the U.S.) Yet the dictates of the public market are forcing their hand. DJ’s investors, seeing the cash to be made from the sale, are more than willing to throw the product itself under the bus, and one of America’s best newspapers—arguably the best—might start to undergo a subtle and disheartening shift. You can read better arguments against News Corp. buying the Journal here and here.

I think the market usually does decide what’s best, and while solvency is a necessity in any economy, an unregulated market will occasionally run roughshod over the very things that society most wants to protect. (Re-read The Jungle sometime.) I’m going to climb back up the j-school ivory tower and state that an independent—note that I didn’t say “objective”, even though that’s important to strive for—press is one of those things. A media that’s solely under private ownership will be more inclined to take risks with reporting, political angles, styles of coverage, technology and business models than a large, public company that’s beholden to shareholders. It’s not the drive for solvency that creates problems with media companies, it’s the drive for constantly increasing returns in a field that has always been more about viewpoints and information than it has about profitability. In theory the extra capital that comes with public ownership could be used to create a better news well, but anyone who follows the press will notice that newsrooms are laying off employees as fast as they can these days and relying more and more on centralized news sources.

Crazy rich guys have always gotten into the media business for the vanity that comes with loudly voicing one’s perspective, not because they see it as a highly profitable investment. They make their money elsewhere, then get into the media. That emphasis on viewpoints is a good thing, because unlike a capital market, the media is nothing if not the marketplace of ideas. I would hate to see the Wall Street Journal be forced into a partnership they don’t even want.