Dressing Up For Fun And Profit

Michael Hedges March 1, 2012 Follow on Twitter

For the news media’s most piercing voices scandal is stock in trade, titillation is currency. The public has, it seems, an insatiable interest for stories that bring the rich, powerful or simply well-known back to earth. Feeding that human instinct is an unbeatable business model.

The grand old man of tabloid media – Rupert Murdoch – rushed to London for the unveiling of the Sunday edition of the Sun tabloid. Media watchers in the UK and elsewhere rushed to conclude that this proves The Elder truly loves newspapers, his UK newspapers particularly, the Sun most of all. It’s probably true, to a point. It was so sad to shutter that other Sunday tabloid News Of The World last July and dismiss scores of employees, not counting those arrested.

So the Sunday edition of the Sun arrived (February 26), not to be referred to as the Sun on Sunday, with the expected fanfare, publicity and, reportedly, a GBP 10 million ad campaign. Media buyers were excited. Even competitors were excited, barely concealing joy at a bit of juice flowing into the UK newspaper business. By the end of the day The Elder tweeted – of course – that more than 3 million copies had been sold. “Thanks all readers and advertisers. Sorry if sold out – more next time.”

Monday, though, follows Sunday as surely as the sun rises and sets. The Leveson Inquiry into media ethics that came about when the phone hacking scandal involving News International, owner of News Of The World and owned by News Corporation, could no longer be ignored by the UK government would enter a new phase. First up was Deputy Assistant Commissioner of the Metropolitan Police Sue Akers who told the Leveson Inquiry (February 27) of “a network of corrupted officials” taking money from employees of the Sun in a “culture of illegal payments.” It was a mood spoiler.

The company line reiterated by The Elder after Ms Akers intervention maintained that “we have vowed to do everything we can to get to the bottom of prior wrongdoings in order to set us on the right path for the future. That process is well underway. The practices Sue Akers described at the Leveson Inquiry are ones of the past, and no longer exist at the Sun. We have already emerged a stronger company.” But then, James Murdoch - The Younger - "stepped down" as News International chairman.

Early in February News Corporation reported fiscal second quarter financial results to the tune of US$8.98 billion revenue and US$1.06 billion net income. “We thought the numbers were terrific across all the divisions except publishing,” said media research analyst Thomas Eagan of US-based financial analyst Collins Stewart, quoted by Reuters (February 8). Revenues from the television and movie businesses soared. Publishing, in the UK and elsewhere, dipped.

Legal fees and payouts related to the UK phone hacking problem cost the company US$104 million in the first two quarters of the fiscal year. That would be about 1% of company net income. Publishing worldwide makes up a bit less than 3% of total News Corporation revenues.  “Due to the fluid nature of the investigations, inquiries hearings and judicial proceedings we are unable to reliably forecast these costs for the full year,” said CFO David Devoe on the results conference call. Some stock market analysts suggested jettisoning the UK newspapers might bump up the share price by as much as 20%. 

After The Elder sealed the deal for the Wall Street Journal – and before the current unpleasantness hit the front pages in the UK – conventional wisdom held that the company would continue to throttle forward in television and film, primarily in the US but also in Western Europe, and scale back risky ventures; the mark of a mature company fat with cash and a looming succession question. The phone hacking scandal – bribery allegations notwithstanding – turned that world on its head with concerns that convictions in the various cases could invoke the much feared US Foreign Corrupt Practices Act (FCPA), putting US television licenses in jeopardy.

The more recent company line is that all the bad stuff is in the past and it is cooperating completely with UK authorities to root out the rot. That would be the first line of defense if the US Justice Department expands its quite quiet investigation – defeat of the current government in November notwithstanding. Dressing up the UK newspaper business for quick sale would be another.

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