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Murdoch May Be Down, but He's Far From Out

The death of News of the World is Rupert Murdoch's current big trouble -- but just the latest in decades of big trouble that haven't noticeably harmed him. While his current scrape may look bad at first glance, chances are good he'll escape unscathed yet again.

We are, after all, talking about the man who started the week selling MySpace, which he'd bought for $580 million, for $35 million -- and yet is still hailed as a business visionary. Doesn't half a billion dollars mean anything anymore? Teflon doesn't come any slicker than that.

In fact, the most noteworthy thing about the whole phone hacking scandal may be how Murdoch, who built his empire on some of the shakiest financial dealings imaginable, actually ended up in hot water for a lack of journalistic ethics. Not that it's likely to matter much in the end.

Good riddance to bad rubbish, NOTW!
News Corp. (NWS), actually, is probably in better financial shape for shutting down its leading tabloid. Its total U.K. newspaper operations barely break even. London-based Enders Analysts have put the annual pre-tax profit contribution of News of the World and its sister paper The Sun at just $137 million. News Corp. reports about $3 billion in annual earnings.

The only way this scandal could become a real problem is if has a significant impact on News' efforts to become the full owner of U.K. TV network BSkyB. Regulators may delay the purchase for a few months and the price may go up a few million dollars, but getting more money has never been a problem for Murdoch. Tossing NOTW under the bus is actually a great move in business terms.

After all, the canny Aussie got to where he is today by extensive borrowing shored up by some very creative international accounting procedures. One year's losses have an amazing habit of shrinking in the following year's annual report. Murdoch has also shown a positive mania for restructuring subsidiaries so that a higher proportion of group profits could be made in tax havens.

News Corp.: A maze of twisty holding companies
The resulting labyrinth of holding companies in so many different jurisdictions has made it very difficult to pin down exactly what the financial state of the company is. Whatever it is, is questionable. Even the always suspect bond rating agencies -- Fitch, in this case -- can't bring themselves to give the company better than a BBB+ rating.

A year ago, News announced a $6.4 billion loss because of a massive write-down in the value of its assets. For the last fiscal year, revenues were down by 6 percent. Fortunately, Murdoch's decision to close U.K.'s largest newspaper has struck the investment world as a good thing, and as of today the company's share price was up, if slightly.
Despite all this, Murdoch has managed to buy and burnish a reputation as a good businessman. He gets to hobnob with Bill Gates, Warren Buffett and the like as if he weren't constantly juggling companies and finances to save his life. He is viewed as an elder statesman, when in reality he's the same con man he's always been.

News as a pathway to influence
Murdoch has never pretended the news business was anything but a way to get influence. He has bought his way to political power in every nation he can. This has made regulators in the U.S., the U.K. and elsewhere more than happy to blink when it comes to regulations concerning media ownership. He must be aghast that all the money he's spent on the British government can't shield him from public outrage over spying on a murdered girl's telephone.

Rupert's companies have long been happy to make up the truth as they went along. His media companies were no exception. A quick review of a few episodes of The Daily Show is all it takes to see how liberal Fox News is when it comes to what might be thought of as facts.

So there is justice in seeing Murdoch get whacked over his companies' failings in journalism. It is long overdue and well-earned. It's like Al Capone getting caught for extortion instead of tax fraud.

Except with none of the consequences.

Unless Murdoch dies tomorrow, this whole thing will get about a sentence in his obituary. It will be crowded out by the dozens of other times he was almost taken down, yet escaped to wheel and deal again.


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