Another Shrimp On The Barbie: Murdoch Buys 'Newsday'

NewspaperRupert Murdoch's News Corp. is poised to acquire a majority stake in Newsday for $580 million, according to reports published by The Wall Street Journal and Newsday, owned by News Corp. and the Tribune Co., respectively.

 

The report, citing an unnamed source familiar with the deal, follows months of speculation that Murdoch wanted to pick up the troubled daily, both to increase the News Corp. footprint in New York City, and to achieve substantial cost savings by consolidating its printing and distribution operations with the New York Post. The papers are already cooperating in distribution.

The deal would technically be a joint venture, with Tribune retaining a less than 5% stake in Newsday, effectively giving News Corp. control of the paper. Last February, Tribune sold another New York City asset, the Spanish-language daily Hoy, to ImpreMedia LLC. Hoy was printed and distributed from the same facilities as Newsday.

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In some of his previous New York-area acquisitions, Murdoch faced the possibility of regulatory action by the federal government because he owns TV stations and newspapers in the same media market, long prohibited by a rule forbidding cross-media ownership. However, the press baron has always managed to obtain a waiver of this rule, which regulators can choose not to enforce if one of the businesses is "failing," like the New York Post was in the 1980s.

The recent decision by FCC chairman Kevin Martin to loosen restrictions on cross-ownership could also help Murdoch's case. However, Martin's decision has ignited controversy in Congress, and may be reversed.

Several years ago, Newsday was caught engaging in fraudulent practices to boost its circulation by up to 100,000 copies per week, allowing it to charge higher rates to advertisers. Allegations of fraud first surfaced in February 2004, when four advertisers filed a lawsuit against the newspaper detailing the scheme.

Newsday circulation managers responded with a bold attempt to cover up the crime, in cooperation with newspaper sellers. In April 2004, with ABC auditors watching, newsstands at four street corners in Long Island "sold" thousands of newspapers to fake "readers" (newspaper carriers employed by sales agents). In the aftermath, Tribune fired a number of employees including executives; in March 2006 seven pleaded guilty to fraud.

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