[A-List] Financial news media & share price manipulation

[Keaney Michael]

No FT sale? No comment
The Wall Street Journal asks if the Financial Times is for sale. No way,
says the FT's Marjorie Scardino. But, says David Lister, the pink one's
rival could be poised to pounce
The Independent, 12 March 2002

A curious article appeared in The Wall Street Journal last week. The
piece was ostensibly a report of the full-year results announcement by
Pearson, parent company of the Financial Times . The headline was hardly
hold-the-front-page stuff: "Pearson grows in education but maintains its
hold on FT." The strap, "Paper, now a smaller part of business, is still
crucial to strategy", endorsed the headline. Readers in the City of
London happy to see from both headline and strap that their daily pinkun
was safe in Pearson's hands may not even have bothered to read on. But
if they did, they would have got a shock.

The intro to the story seemed to fly in the face of the headline and
strap above it. It did not make any assertion. That is not the way of
The Wall Street Journal . It merely asked a question. And the question
it asked was this: "Would Pearson CEO Marjorie Scardino, a newly named
Dame Commander of the British Empire, contemplate unloading the
company's flagship Financial Times newspaper?"

The question of selling the FT was put to Scardino at a Pearson news
conference last week. "Over my dead body," she replied. When a newly
named Dame Commander of the British Empire leaves no room for
misunderstanding, etiquette should demand that that is the end of the
matter. But The Wall Street Journal in its article, employing three
writers, had other questions it wanted to raise.

It pointed out that operating profit at the paper fell 62 per cent to
£31m from £81m. Advertising volume was down 29 per cent and ad revenue
down 20 per cent. The fall in advertising was blamed for Pearson's 12
per cent fall in pre-tax profit for 2001 to £294m from £333m a year
earlier.

But even if its profits are down, and it is to start charging for more
content from its FT.com website, including items from the Lex analysis
column, the FT does remain in profit; the latest circulation figure of
487, 651 (see table) shows a rise month on month and year on year. But
about 70 per cent of that global circulation lies outside Britain, and
has been dependent on investment from the parent company.

So, is there a logic to the merger rumours, or the "unloading" as the
WSJ puts it in more direct New York-speak? Scardino has invested heavily
in educational publications, has bought Dorling Kindersley in Britain
and Simon and Schuster's education business in the USA, and has indeed
made Pearson the world's largest educational publisher. She has already
sold some FT business trade mags. The chief executive of the Financial
Times Group, Stephen Hill, is "stepping aside" for a period while he
puts together a bid for a management buy-out of the FT's remaining
business publications, which include Investors Chronicle and The Banker.
If that bid is unsuccessful, he intends to return to his post as MD.
It's hard to think of another national newspaper where such a scenario
could be enacted.

But such curiosities are a long way from presaging a sale of the
Financial Times . Even the remote possibility of a merger has intrigued
though puzzled media analysts. Roger Haywood, chief executive of Issues
Analysis Limited, said yesterday: "Both The Wall Street Journal and the
FT have strengths and weaknesses. This would suggest some logic in a
merger where both play to their strengths. But the reality, from my
experience, is that they might end up emphasising their weaknesses - the
old-fashioned journalism of the WSJ with its US-centricity, the
whimsicality of the FT and the dull writing on too many topics.

"Also the readerships of both are very different and FT readers tend not
to like the WSJ and vice versa. The overlap is tiny, which might again
suggest synergy. The truth would be that one would be dominant. The key
factor would be the name. Who would wish to abandon either brand? But to
reach a new market it would have to be something like "International
Financial Journal". Really, we need them both and we need the
competition."

As Mr Haywood implies, both brands are worth millions; the FT's pink
colour has in itself become a branding for some other papers, the London
Evening Standard, for example. The FT is still the dominant business
daily in Europe and The Wall Street Journal in the United States.
Basically, they have both tried to attack each other on their own
respective turfs, to little effect if the aim was to usurp the
indigenous brand.

There seems little doubt that The Wall Street Journal had its own agenda
for running a lengthy article questioning whether the FT might be for
sale, when every other report ignored it after the Scardino denial.

Karen House, president, international affairs, of Dow Jones, the parent
company of The Wall Street Journal, told me yesterday: "Our chairman has
said that if the price were right we would love to own the FT . Marjorie
Scardino says 'over my dead body' and we have to take her at her word.
But this is a very tough time for the publishing industry as a whole and
for the FT in particular. They blew a lot of money in the US, in Germany
and on the internet. They lost more money in 1999 and 2000 on FT.Com
than we have lost since the birth of WSJ.Com in 1995.

"They are happy to tell people that they have a circulation figure of
144,000 in the US and yet no one at the FT will say what is subscription
and newsstand and what is bulk. Most of that 144,000 is bulk. They
probably sell 50,000 in the USA and that has cost them £100m. The WSJ
sells 1.8m copies in the US."

Ms House is also sceptical of Scardino's claim in the Mail on Sunday at
the weekend that she is still interested in an Asia edition of the
Financial Times. "We will look at an Asia edition," Mrs Scardino said.
"We have watched The Wall Street Journal try for 25 years to do
something out there."

Ms House retorted: "I think our British friends are not aware of that
market. They play a small role in it. The Asia Journal sells more than
80,000 copies and has the number one share of business advertising in
Asia." John Fallon, the head of communications at the FT, unsurprisingly
does not wish to fan any flames that might exist. He said yesterday:
"The Wall Street Journal is a fine newspaper, but Marjorie couldn't have
dealt with this point more categorically than she did."

It's no great surprise that The Wall Street Journal is watching the FT's
situation with predatory intentions. But the FT now knows that the WSJ
will use its own columns to stir the pot. This could develop into an
upmarket version of the amusing Mirror/ Sun fights of old. But with the
effect on share prices and city confidence that adverse comment in The
Wall Street Journal can cause, the FT might find it a lot less funny.

Full article at:
http://news.independent.co.uk/uk/media/story.jsp?story=273481

Michael Keaney
Mercuria Business School
Martinlaaksontie 36
01620 Vantaa
Finland

michael.keaney at mbs.fi