A Story Worth Writing

When the The Wall Street Journal went to the tabloid format a few years ago, who would've thought the next step would be being taken over by the king of tabloid sensationalism, Rupert Murdoch?

His News Corp. (NYSE: NWS  ) finally won over the controlling Bancroft family in a $5.6 billion deal and the venerable Dow Jones (NYSE: DJ  ) business paper will join the pages of Fox News, New York Post, London's Times, and a bevy of other media properties.

But before launching into full sputter at the thought of changes at the Journal, take a look at the economic realities shaping the future.

Keeping tabs on the tab
There's been a lot of hand-wringing over the deal, particularly because of Murdoch's reputation as a meddler in editorial content. To help alleviate those concerns, Murdoch agreed to the creation of a special five-person oversight committee for independence and integrity. While there can be a lot of smirking going on about the transaction -- liberal activist group MoveOn.org, for example, put out a spoof edition of the paper -- there's little reason for concern that we'll see stories of aliens meeting the president gracing the Journal's pages.

One of Murdoch's goals with The Wall Street Journal is to expand its reach -- and therefore his reach -- in Europe. While in the past the Journal has cut back its presence there as a way to save money, we can expect Murdoch to renew an international push. This will put the Journal up against the likes of Pearson's Financial Times, a brand popular in Europe. To have a chance of gaining international market share, The Wall Street Journal will need to maintain its renowned integrity, as the paper's reputation is one of its strongest assets.

While Murdoch says that the paper's business angle is currently sacrosanct, he also thinks the paper could use more "general news" coverage. That's something of a shot across the bow of New York Times' (NYSE: NYT  ) namesake publication which, although having a business section, is seen as far more of a general content paper.

Dow Jones, however, is more than just the Journal. It also includes Barron's weekly newspaper and the MarketWatch service. Certainly those will also assist Murdoch's efforts to expand the brand further overseas even as the financial news and information market has become more competitive.

Making the deal "ad" up
But even with all these new assets, why did Murdoch agree to a 67% premium? Among other things, the acquisition will help his launch of Fox Business Network. But it may also lead to a look at other things under the hood.

For one thing, ad revenues will need to be increased for the deal to work for Murdoch. According to the Newspaper Association of America, total print and online ad revenue was down nearly 5% to $10.6 billion in the first quarter of the year. Factor in an additional 0.3% decline for the full year of 2006 and the picture looks bleak. April and May didn't let up as publishers like Tribune (NYSE: TRB  ) and Gannett (NYSE: GCI  ) continued with their advertising woes. From New York Times to Gannet to McClatchy, advertising drops have become an ongoing problem for the industry. This past quarter, Dow Jones wasn't immune either. Will Murdoch be able to attract advertising dollars while being constrained from making dramatic changes in the Wall Street Journal's style or content?

Down to the wires
There are other areas where Murdoch could make changes. For example, he may want to invest more heavily in Dow Jones Newswires to compete effectively against Thomson (NYSE: TOC  ) , which is in the process of acquiring Reuters (Nasdaq: RTRSY  ) . Although the newswire service uses the latter to distribute its news, a combined company might not be as willing to do so.

While it's fun to imagine The Wall Street Journal running huge banner headlines, or wonder how the "What's News" section would look with a pinup model, the fact is the economics of Murdoch's acquisition won't allow for such extravagances, and there is little to fear in a News Corp.-Dow Jones acquisition. At least from a reader's perspective, it seems to be a deal of which Charles Dow and Edward Jones would approve.

For a stroll down Murdoch saga lane:

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Fool contributor Rich Duprey subscribes to The Wall Street Journal, but does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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