Murdoch’s track record in recent years running the corporate parent of 20thCentury Fox, FX and the New York Post, among others, has been terrible. Shares of the New York-based company have slumped more than 18% over the past five years, underperforming rivals such as Walt Disney (NYSE:DIS), which soared 25%, and Viacom (NASDAQ:VIA.B), which gained about 12% during that period. The reason for News Corp.’s underperformance is simple: Murdoch has made oodles of really bad decisions.
Let’s take the newspaper business. Murdoch, who began his career running tabloids in his native Australia, loves papers with a passion reminiscent of the press barons such as William Randolph Hearst. In 2007, he acquired Dow Jones & Co. for $5 billion, agreeing to pay an insanely high premium of 65% for the parent company of The Wall Street Journal at a time when there were no other bidders.
The impact on News Corp.’s bottom line doesn’t appear to have been great. In the fiscal year ended June 30, 2007, News Corp. earned more than $1 billion in operating income from its magazines and inserts, newspapers and book publishing businesses. During the same period ending in 2011, those businesses returned $497 million, excluding one–time charges. News Corp doesn’t break out the results of any individual papers.
For many shareholders, the fact that Murdoch owns three national papers in the U.K. (which account for 30% or so of the country’s readership), almost 150 news brands in Australia, the New York Post and book publisher Harper Collins is a liability that grows exponentially the longer the phone-hacking scandal continues to fester. The turmoil could imperil News Corp.’s holdings in satellite broadcaster BSkyB, which has held exclusive rights to the U.K.’s top soccer games since 1992. Last year, News Corp. was forced to abandon its $12 billion bid to assume control of BSkyB.
Referring to the U.K. parlimentary panel ruling that Murdoch is “not a fit person” to run News Corp., The New York Times said:
“The tough language of the report increases pressure on Ofcom, Britain’s broadcast regulator, which since last summer has been assessing News Corporation to determine whether it is ‘fit and proper’ to hold the BSkyB television license. In the nine or so years of its existence, Ofcom has only once removed a television license on the basis that its owner had not met the “fit and proper” test — in the case of the broadcaster of a pornography channel. A decision to remove the license from a company as large and established News Corporation would be unprecedented.”
It would also increase pressure on Murdoch to shed some, if not all, of his U.K. papers because profits from BSkyB subsidize them and probably some of his U.S. assets as well. Even Murdoch has his limits. Earlier this year, the struggling Fox Business Network, which the billionaire founded as a more business-friendly alternative to CNBC, canceled its Prime Time lineup.
Before the phone-hacking scandal, perhaps no failure stung Murdoch as badly as the debacle over the MySpace. News Corp. acquired the pioneering social network’s parent Intermix Media in 2005 for $580 million in cash. At the time, Murdoch declared: “We see a great opportunity to combine the popularity of Intermix’s sites, particularly MySpace, with our existing online assets to provide a richer experience for today’s Internet users.”
Murdoch couldn’t have been more wrong. Even he later admitted: “We screwed up in every way possible.” As anyone with two brain cells knows, the skyrocketing popularity of Facebook crushed MySpace. News Corp. sold the social network road kill last year for a fire-sale price of $35 million.
On his Twitter account, Murdoch spoke of learning “lots of valuable expensive lessons” from MySpace, though it doesn’t seem that the lessons stuck.
Jonathan Berr does not own shares of the companies listed here. Follow him on Twitter @jdberr.