Maybe—but he might also take News Corporation privateby Richard Northedge / July 20, 2011 / Leave a comment
Rupert Murdoch was willing to close a market-leading newspaper to save his British business, but it did not work. Might he now need to sacrifice his whole British operation to rescue his global media empire?
The News of the World had become more trouble than it was worth. Once major companies such as Asda, Boots and Sainsbury’s cancelled their advertising, a publication that had previously made £5m-£10m a year looked like becoming a loss-maker.
The fear was that opposition to Murdoch’s business would spread to his other operations. While the hacking allegations escalated and politicians denounced News International, judges started inquiries, and police stepped up their investigations, it would have been impossible to continue publishing the News of the World. What is more, it may have caused an advertising boycott to spread to his other papers—and to BSkyB. Since 2009 advertisers have been deserting Fox News, Murdoch’s US cable TV network, in protest at the Glenn Beck show. Beck recently left Fox.
Murdoch hoped that amputating the tabloid would once again halt the infection. But eventually, when he realised that his bid for the 61 per cent of BSkyB he didn’t own was politically impossible, he withdrew it.
This leaves his empire in a parlous state. The Times may have international prestige, but it and the Sunday Times lost around £42m last year, subsidised by an estimated £70m profit from the Sun. One option might be to combine the newsrooms of The Times and the Sunday Times, which would reduce losses, while launching a Sun on Sunday could recover some lost revenues. With the News of the World axed, the newspapers’ net contribution to the Murdoch empire will now be negligible, even before millions in compensation is paid to hacking victims.
It is television that now forms the bulk of Murdoch’s profits. BSkyB’s 10m subscribers generate an estimated £1.4bn profit. News Corporation does not share directly in profits, but receives 39 per cent of the dividends, totalling £139m. When Murdoch started Sky in 1989, it was regarded as something of a gamble—he was, after all, planning to sell television to a nation that already watched it for free. The move nearly bankrupted News Corporation. He had to give away half the company to buy and eliminate the competition. He then lost control when BSkyB was floated in 1994 to raise cash to repay debt, selling some of his shares during…