Skirting the serious issues at Dow Jones

Roger Lowenstein, a former Wall Street Journal reporter, reviews the Warren Phillips‘ book “Newspaperman: Inside the News Business at The Wall Street Journal,” and wonders whether Phillips could have done a better job of running its parent company.

Lowenstein writes, “He skirts, however, the serious issues raised when Dow Jones, in 1986, created a super-voting stock—a tactic that shielded both the controlling Bancroft family and management from dissatisfied investors. Many media companies, as if too lofty to concern themselves with mere shareholder democracy, took this step. The industry’s current troubles suggest that it was a mistake.

“Did insulation from market pressures slow the Journal’s efforts to go electronic? We will never know, but Dow Jones actually got off to an early lead. The Journal’s pioneering efforts to send copy to far-flung printing plants by satellite were mirrored by aggressive expansion in electronic publishing. By 1989, a year before Mr. Phillips’s retirement, 39% of Dow Jones’s income derived from Telerate, a subsidiary providing real-time markets data.

“Then, it all came apart. Telerate failed, miserably, in competition with Reuters and Bloomberg. Mr. Phillips, who elsewhere has a tendency toward self-congratulation, accepts some blame for underestimating ‘the difficulties of managing a very complicated and new business.’ In fairness, Telerate’s weakness didn’t show until some years after Mr. Phillips retired—and the sale to News Corp. came 16 years later.

“Mr. Phillips has gentlemanly praise for the Journal under News Corp.—a company with much deeper media expertise than the old Dow Jones. Yet he insists that journalists (he tapped a former newsman as his successor) can still be worthy CEOs. It is true that, under Mr. Phillips, net annual profits quadrupled to $107 million. The number now seems almost quaint. Even though Dow Jones owned a world-class newspaper, it remained a modest enterprise, ill-equipped to deal with the Internet’s gathering revolution. Mr. Phillips admits as much. With painful frankness, he writes that digital publishing was ‘alien to our experience and beyond our ability at the time to understand fully.’ The era of journalist-moguls is well and gone.”

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