Going digital isn't enough. It won't work.
That's the real reason behind the Bancroft capitulation that I have been saying since Day 1 had to happen.
It's the economics of the Web. But first, let's accept that
( DJ) two-tiered structure created a tremendous disincentive by management to develop businesses away from the
. As someone who worked for Dow Jones from 1991 to 1995 I can tell you that the reservations to do anything remotely smart or clever away from the paper were so great that I knew right at the start to shut up.
(Never forget that the publication you are reading was initially SmartMoney.com, my blueprint that I showed Dow Jones in 1995 so they could own the Web space. They wanted it for free and would not even give me a percent equity in it.)
Dow Jones hated new ideas,
them. And hated anything that would make their product more trader-friendly -- read Bloomberg-like. They also hated to hear any criticism about their TV show offerings -- remember that. Oh yeah, and they hated me for speaking up about it.
Why not? Who cared? As long as the family's trustee gave the execs cover, they were free to go to win as many Pulitzers as they wanted and free to run the place like a real good college.
But somewhere along the line, perhaps in the last five years, Dow Jones got dot-com religion. It developed a fabulous product that is the paid gold standard online. It's terrific.
And therein lay the real undoing of the company. You see every day that customers are switching from the staid off-line product to the cool online product. But customers simply can't be monetized. Every day DowJones loses income from the switch. The ads aren't there, the infrastructure's too unwieldy, the headcount way too big.
But that was OK, it had the Dow Jones Wires to make them money. But with the additional competition of Reuters and Thompson on the low end and Bloomberg on the high end, there was no room for the Wires either.
The one-two punch of the immediate and incredibly stupid kneejerk rejection of the savior bid
the potential annihilation of the wires resulted in a situation where the stock would fall to the 20s, the dividend would soon be in question, and the layoffs (the real compromise of journalistic integrity, not the aggressive muckrake of China that might go away), was actually at stake.
What we know about the Web and newspapers is that their integrity is
every day because every paper in this country is overstaffed vs. what can be made up in ads.
I believe the younger Bancrofts knew this and
(lonely but right) the lawsuit against the trustees was just too juicy.
The trustees knew they could never get the stock to $60 with these trends, and the big opponents of the bid -- like the two-faced James Ottaway, whose family created one of the journalistically worst chains of papers in the country -- had to accept that the Journal would soon be as bad as the Ottaway papers if the bid wasn't taken.
The bottom line here is that it was always in the bag for Murdoch: Cheaper than it was when he wanted to buy it in 1996 because of the rank incompetence of the management, which didn't know cash flow from Scapa Flow, and more needed because of the business channel. It's just that the trustee, who barely even bothered to show it to the Bancrofts, as usual, didn't know it. (Lawyers, more guys who can't read an income statement.)
The good news? I bet the paper, now well-funded, will be better than ever. The bad news? What a great saga, fun to watch and report on.
At the time of publication, Cramer had no positions in stocks mentioned.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
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