How Rupert Murdoch May Save the News Biz

Newspapers need more competition, and there's a big untapped audience out there, Simon Constable says.
By Simon Constable ,

It's time to stop complaining about Rupert Murdoch and his vast News Corp. (NWS) - Get Report empire and start embracing what he really stands for: Vigorous competition.

Murdoch is enlivening a business in much need of a shakeup.

Whatever you say about him -- and there's plenty to say -- the truth is that he's exactly what the American newspaper needs right now.

The newspaper business is suffering now from a lack of

internal

competition. It shouldn't be a surprise that the quality of product has declined, and that as a consequence, readers have fled.

No industry has ever benefited for long where competition has been lacking. Just look at what happened to RCA, which at one time had great color-television technology but let it all slip after achieving monopoly status, says Michael Carew, professor of economics at Baruch College in New York.

You Killed a Bleeping Tree for That?

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It's a similar story where newspapers are concerned.

"The lack of vigorous competition slowed the pace of innovation and allowed publishers and editors to make decisions... without listening carefully to the readers themselves," wrote Steven Pearlstein, a Pulitzer prize-winning columnist for the

Washington Post

-- owned by

Washington Post Co.

(WPO)

-- in a recent column.

Although that first comment makes sense, he then says the answer for the business is

fewer newspapers

: "Industry consolidation is not only necessary, but desirable."

Those statements just don't mesh: more competition, achieved with fewer papers? It makes no sense.

The truth is that more papers are needed. Many more.

There are only two real national dailies in the U.S.:

The Wall Street Journal

and

USA Today

. (

The New York Times

, owned by the

New York Times

(NYT) - Get Report

, likes to think of itself as a national paper, but to my mind, it's only half-national because its distribution is not widespread outside the Northeast.)

The rest of the country is littered with one-paper towns.

Contrast that with the U.K., my native land -- and home to one of the most competitive newspaper markets in the world. It's the place where Murdoch really cut his teeth in the news business. He owns a highbrow paper (

The Times

, which he saved when he took it over in 1981), and a lowbrow but uber-high-circulation one (

The Sun

).

Each day, those two papers have a knock-down, drag-out fight with the other national dailies to attract readers:

The Financial Times

,

The Telegraph

,

The Guardian

,

The Daily Express

,

The Daily Mail

,

The Mirror

,

The Independent

and

The Daily Star

. That list doesn't include the large regional papers such as

The Yorkshire Post

,

The Journal

,

The Scotsman

, or the

The Evening Standard

, plus a list of local papers as long as your arm.

Without a doubt, the harsh competition has led to a healthy mosaic of news products that entice readers every day. It's been this way for a long time, and my friends and family routinely read

more than one

paper.

That shouldn't surprise anyone. It's a basic tenet of liberal capitalism that competition creates innovation, resulting in better products and services for the consumer and typically better returns to shareholders. But you'd think it was news to those in the news business.

There are those who say that the U.S. is different and that Americans just don't want to read. It's a variation on an old -- and silly -- story: let's blame the customers for our lack of performance.

Two very high-quality publications were brought to market here in the U.S. both from the U.K. Perhaps most notably,

The Economist

saw its worldwide distribution double to 1.3 million over the past 10 years. That included a 2.5-fold jump in circulation in North America, to around 720,000.

Then there was men's magazine

Maxim

, which launched in 1997 with a rate base of 175,000. But by 2001,

Maxim

had a circulation of 2.5 million, far exceeding expectations.

It wasn't that Americans didn't want to read. It's just that they didn't want to read what was on offer in America.

And there's where Murdoch might actually help with the news business. It seems clear he wants to make

The Wall Street Journal

, the flagship publication of Dow Jones & Co., which he acquired recently, a general readership newspaper. It would compete directly with

The New York Times

.

It could actually make the

Times

a better publication, and one which is more attuned to its readers.

"The

Times

is going to have to give up its agenda and start reporting some news," Carew says. Carew mentions that he has read

The New York Times

every day for 40 years, despite being disappointed in what he finds. "People want to know what's happening in the world and you don't get that in the

Times

."

He says the

WSJ

as a general news publication could really give the

Times

a run for its money, hopefully improving quality at each publication.

There are other ways Murdoch will also help. He is very focused on something many journalists seem to find dirty: Making money. But when it comes down to it, the only reason to spend billions of dollars buying a newspaper (Murdoch spent about $5 billion on Dow Jones) is to make money.

Anyone who disagrees with this is free to do so when they put up their own $5 billion for a paper, or alternatively should talk with the previous controllers of Dow Jones, the Bancroft family, who suffered for years while the purchasing value of their investment dwindled.

A profitable company is one which is doing something right. It's almost certainly serving its customers right and it might actually serve the shareholders also.

Maybe now, with Murdoch in the national newspaper business, there will be something extra worthy of newsprint: A newspaper returning healthy profits to its owners.

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