News Corp.'s $5.6 billion buyout of Wall Street Journal publisher Dow Jones & Co. will have a big impact on the entire media industry—and business publications in particular, industry observers say.
News Corp. Chairman-CEO Rupert Murdoch is "going to aggressively price ad rates to take dollars away from other publications," said Nancy McConnell, newspaper director at media buying agency Carat USA. "Competition is a good thing and helps people who are buying things."
The deal was hammered out late last month following a three-month saga that deeply divided the Bancroft family, which has controlled Dow Jones for 105 years. The transaction is expected to close later this year.
Among other media outlets, News Corp. owns Fox Broadcasting Co., 20th Century Fox, satellite TV service BSkyB, MySpace, the New York Post, The Weekly Standard and dozens of newspapers in Australia and the U.K.
In addition to the flagship Journal, Dow Jones' properties include Barron's, Dow Jones Newswires, Dow Jones Indexes, Factiva, MarketWatch and WSJ.com.
Content for new network
Dow Jones' resources are expected to play a key role in supplying content for the Fox Business Network, which is slated to debut Oct. 15 and will have an initial reach of about 31.5 million homes. Dow Jones has an existing deal with CNBC through 2012.
In a conference call last week to discuss News Corp.'s latest earnings, Murdoch said he expected to keep most of Dow Jones' assets in place. (For its full fiscal year ended June 30, News Corp. earned $3.40 billion, up from $2.31 billion in the previous fiscal year.)
Murdoch said News Corp. is debating whether to eliminate WSJ.com's paid subscription model. "I think it would be an expensive thing to do in the short term," he said. "In the long term it may be a wonderful thing to do. We're looking at it closely."
The New York Times reportedly has decided to scrap TimesSelect, an experiment with charging for certain online content. The move, which could force Murdoch's hand, is significant because it would leave WSJ.com as one of the last vestiges of paid content on the Web.
L. Gordon Crovitz, publisher of the Journal, exec VP at Dow Jones & Co. and president of the company's Consumer Media Group, said that by allowing readers access to selected articles outside the WSJ.com firewall, "We think we're getting the best of both worlds."
Ken Doctor, a media analyst at Outsell Inc., said: "The wall is important for bundling subscriptions with the print product."
Murdoch has vowed to pump up Dow Jones' online presence, which has been growing. Profits for the Consumer Media Group were up more than 30% to $25.6 million in the second quarter, driven by growth at WSJ.com, whose circulation was up 24% from a year earlier to 983,000.
"This is an Internet-TV play," said Mark Edmiston, a managing director at media investment bank AdMedia Partners, referring to the deal. "Of course, Dow Jones produces a newspaper, but Murdoch is going to work the electronic side. He wants [the Journal] distributed on new platforms, which is something the current Journal hasn't been very successful at."
Edmiston said he doesn't expect any advertising fallout from the takeover. "News Corp. is not going to scare away any advertisers."
Several major b2b advertisers declined to comment on how the deal might affect their media spending.
Asked about the possibility that Murdoch would reduce ad rates at the Journal, Gary Slack, chairman- senior partner at b2b ad agency Slack Barshinger, said: "In the short term it would be a good thing because a lot of b2b marketers would relish the opportunity to buy the Journal at a discounted rate, but in the long term it may diminish the quality of a media property that has long been able to justify high ad rates."
Rivals were taking a wait-and-see approach as to how the deal may affect the delivery of business information.
"I'm not convinced it's a game-changer," said Jim Spanfeller, president-CEO of Forbes.com. He said that while News Corp.'s takeover of Dow Jones will usher in a new level of competition, he doesn't think it will result in taking market share away from Forbes.com.