NXG

Comment: The family media merry-go-round continues

4 August, 2010

What is it about family business owners and newspapers? After years of toiling away establishing efficient companies, often with little or no borrowings, why do some businessmen buy loss-making media outlets?

The latest seemingly idiotic move was Sidney Harman's purchase of the loss-making weekly news magazine Newsweek. Harman looks like a sensible business type – he founded and built up a multi-million dollar audio equipment maker called Harman International Industries. It makes money, not like the business he's buying.

Shouldn't he know better, especially since he's 91 years old?

Harman, of course, is not the first to be infected by this seemingly irrational business desire. In the UK, Russian billionaire Alexander Lebedev bought the daily newspapers the Evening Standard and the Independent, despite both publications haemorrhaging tons of money for years.

Then there is Rupert Murdoch, who paid $5 billion – what most analysts felt was too much – for the loss-making Dow Jones media business back in 2007.

Of course, the obvious answer to why these seemingly sane business owners buy loss making news organisations is found in the egos of the purchasers. Few businesses massage the ego of their owners more than newspapers.

They give them influence and invites to the best parties in town, as well help to publicise issues dear to their heart. And, in the case of Murdoch's purchases, they are often part of a bigger media strategy involving cross marketing and content opportunities.

That said, the squeeze in profitability of big, traditional news organisations looks to be forcing some business owners to think beyond the ego rationale of owning news outlets.

The Graham family, owners of the Washington Post, sold Newsweek. The Evening Standard and the Independent were controlled by family-owned businesses before being bought by Lebedev. And Business Week, sold to Bloomberg last December, was controlled by McGraw Hill, another family-controlled publisher.

Speculation is also rife that the Murdoch children will sell the newspaper business of New Corporation when the patriarch of the family eventually bows out. Most insiders say the next generation of Murdoch's don't share their father's blind faith of print media.

Then, of course, the potential buyers of any Murdoch newspapers put up for sale will probably be successful family business owners, thus ensuring the media family ownership merry-go-round continues.