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Media Experts Weigh Effects of Wall Street Journal Buyout

August 1, 2007 at 6:35 PM EDT

RAY SUAREZ: Global media magnate Rupert Murdoch now has a signed merger agreement between his News Corporation and the financial news organization Dow Jones, parent company of the Wall Street Journal. The approved $5 billion takeover offer is assured passage when it goes to a final Dow Jones shareholder vote later this year.

The deal will pay stockholders $60 in cash per share, and News Corp. has agreed to appoint a member of the Bancroft family or another person to their board of directors. Murdoch has also agreed not to interfere with news decisions. He will establish a special committee with the power to approve the hiring or firing of top editorial officials. The agreement still faces regulatory review.

With me to discuss the details of the deal and its effect on American journalism is Geneva Overholser, professor of journalism for the University of Missouri. She’s a former editor of the Des Moines Register, ombudsman at the Washington Post, and once served as a member of the editorial board at the New York Times.

And Norman Pearlstine, who worked at the Wall Street Journal for 23 years, including nine as its top news executive, before becoming editor-in-chief of Time, Inc. He’s now a senior adviser to the Carlyle Group.

And, Norman Pearlstine, let me start with you. Now that the acquisition is all but done, is this good for the Journal, a major pillar in American journalism, and is it good for journalism?

NORMAN PEARLSTINE, former editor, Wall Street Journal: Well, I think it has high potential to be very good for the Journal, especially when considering the alternatives. The entire news industry, as well as the business press, have really been under extraordinary financial pressure. And were there not a deal with Murdoch, I think there would be continued layoffs at the Journal, continued cost-cutting, and a continued struggle to try to get the business right.

Murdoch has a passion for the Journal, wants to invest in more news resources and expansion of the overseas editions and the Web sites. What I think remains to be seen — and is obviously the concern of many journalists — is that you can point to some of Murdoch’s publications and to some of the business of News Corp. and ask whether it is possible for the Journal to remain editorially independent and compatible with those institutions.

My own experience at Time-Warner, where there were many divisions that, if you will, were not practicing journalism, while CNN and Time, Inc., were, would suggest that it is possible to cohabit. And the question is how committed Murdoch will be to guaranteeing that editorial independence. My own bet is that he didn’t spent $5 billion to destroy that product.

RAY SUAREZ: Geneva Overholser, same question.

GENEVA OVERHOLSER, University of Missouri: You know, I think there really are causes for worry. I agree with many of Norman’s points. It’s good that Rupert Murdoch wants to spent a lot of money on the Wall Street Journal. But this purchase plays out against enormous unsettlement in the news-gathering world — as you well know, Ray — and the public has a good reason to wonder what is going to happen to journalism in the public interest.

We’ll watch this sale. It will be interesting to see. Will he pull punches on coverage in China? Will he do a major series — will the Wall Street Journal be doing a series on the effect of international corporate ownership on big media? I mean, you know, it’s an important question.

But I think that even if the attempts to kind of keep it as independent and nonpartisan as it can be succeed, one question for all of us now is, so many of our media are operating under this same kind of ownership structure, where there is family control — important media, the New York Times, the Washington Post, McClatchy newspapers — can any family resist what happened in this case? I think it’s an important question.

Murdoch's promises to the Bancrofts

Norman Pearlstine
Former Editor, Wall Street Journal
And if anything, I think some of my former colleagues on the editorial page worry that Murdoch is not conservative enough.

RAY SUAREZ: We'll get to that a little later, but I want to return to something we mentioned earlier, which is that, in return for getting the acquiescence to this sale of major members of the Bancroft group, Rupert Murdoch made some promises. Once he owns the paper, are those agreements for real? Do they have some longitudinal heft out into the future?

GENEVA OVERHOLSER: Well, it seems that the people at the Times of London are inclined to question whether or not the agreements will hold. My own view is that the man is going to own the place. And when family ownership or corporate ownership keeps its hands off a newspaper, I'm not sure that's always the way to go. I assume in the future, however long that deal holds, this will be Rupert Murdoch's newspaper, and we'll see what he does with it. I agree with Norman, he doesn't want to tarnish the jewel, but is his goal really journalism in the public interest? That's my question.

RAY SUAREZ: Well, Norman Pearlstine, is it?

NORMAN PEARLSTINE: Well, I think he has a goal of journalism in the public interest. I think he also will want to be an active owner. And I think he will want to establish a publication that challenges the New York Times for setting a national agenda on many issues and that will challenge the Financial Times on many business issues.

But I think where you're going to see a lot of that is really on the editorial page. And if anything, I think some of my former colleagues on the editorial page worry that Murdoch is not conservative enough.

Past acquisitions by News Corp.

Geneva Overholser
University of Missouri
What I think we ought to recognize with this is that we are now in an era where the ownership of newspapers, which has been sustained by advertising, the model isn't working anymore.

RAY SUAREZ: Well, what does the record say, Norman Pearlstine, about acquisitions of this kind by News Corp. in the past? For people looking for signs, what can they look to in this fast-growing company that will give them some comfort?

NORMAN PEARLSTINE: Well, I think the biggest question is certainly the acquisition of the Times of London in the early '80s. And if you read the book by Harold Evans, who was then the editor, "Good Times, Bad Times," it is full of examples of Murdoch allegedly reneging on his promises.

I was living in Belgium at the time, and I guess you were in England at the time Murdoch took over the paper. And my own sense was that, while he and Evans clashed on a number of issues, it wasn't about the serious investigative pieces that Harry was best known for. He clearly moved the editorial page to the right, but when Charles Douglas-Home replaced Evans as editor, I saw no significant change in the editorial project during the three years he was editor, from '82 to '85.

I would also look to the Australian, where Murdoch went 20 years without turning a profit, creating a national paper that I think is clearly the best paper in the Australia. It's not even close.

RAY SUAREZ: So there are prestige properties, Professor, in the Murdoch stable that the company has not monkeyed with a great deal. Does that give you cause for hope?

GENEVA OVERHOLSER: Even Norman will agree that there is dispute over whether the company has monkeyed with them. I mean, other people -- Harold Evans' own book, obviously, seemed to indicate that he felt strongly that there was real monkeying.

NORMAN PEARLSTINE: And he was there.

GENEVA OVERHOLSER: I think we just don't really know what he will do with it. I think there are good aspects. He's going to put money into it. And Norman is right that we would have seen layoffs. We're seeing layoffs everywhere.

What I think we ought to recognize with this is that we are now in an era where the ownership of newspapers, which has been sustained by advertising, the model isn't working anymore. Is the new model that we're going to have major, international corporations owning our media in this country? Even if they don't keep their hands off, I think it's an important question for us to think about what it will mean.

Independence from ownership

Norman Pearlstine
Former Editor, Wall Street Journal
I think one very good test of that is going to be how aggressively he encourages the Journal to cover News Corp. and himself.

RAY SUAREZ: Well, earlier, Norman Pearlstine mentioned the Financial Times and mentioned the New York Times. And people have been talking about Murdoch broadening the Wall Street Journal to become a major news platform, not just a business news platform, and the Financial Times, an international financial paper. If people at those two institutions are worried about this acquisition, doesn't that mean a good, competitive fight? And isn't that good for journalism?

GENEVA OVERHOLSER: Well, it may be, but the Wall Street Journal is already a serious broad newspaper. It's not just a financial newspaper. The Wall Street Journal is really one of our most substantial handful of news-gathering organizations, reporting on the nation, reporting on international news.

Is that what Murdoch is really interested in? I assume he wants to build a major international newsgathering operation, yes, but putting it together with all the rest of what he's doing. Now, if he intends to invest in the Journal in the way that Norman thinks, then we may be very well off. I have my doubts about whether or not we will see the kind of complete independence from ownership pressure that I think is essential to free newspapers.

NORMAN PEARLSTINE: I think one very good test of that is going to be how aggressively he encourages the Journal to cover News Corp. and himself. That is very difficult for an owner to do, and there aren't many CEOs who are committed to that level of editorial independence.

But it should be clear that everybody is going to be watching every move at the Wall Street Journal. And one of the toughest things, in fact, will be for an editor to write a story about something positive that News Corp. is doing.

GENEVA OVERHOLSER: That's probably true. I think he's so smart, we'll see very vigorous coverage. You're exactly right. It's hard to do vigorous coverage of your own business. I think he is a real smart guy, and we will see vigorous coverage. The question is, three years down the road, what will the coverage of China look like? Will we still be watching well enough?

RAY SUAREZ: Professor, Norman Pearlstine, thank you both.