Facebook (FB) as the new News Corp?

My first full-time portfolio management job was investing $100 million for TIAA in Australia in the mid-1980s. Doesn’t sound like much in today’s terms but back then that made me the largest foreign investor in Australia after the Kuwaiti Investment Office.

That’s where I heard for the first time about Keith Murdock, who had created a nationwide newspaper chain in Australia. In its simplest form, the Murdock strategy was to provide favorable coverage to right-of-center politicians in return for help in getting regulatory approval for his company’s expansion. It worked very well.

At that time, Keith’s son, Rupert, was in the early stages of applying the same formula abroad–first in the UK and then in the US. Here, Murdock maintained his right-wing focus, but supported politicians of all stripes in his regional newspapers so they would assist his drive to build Fox, a third national television network with a film studio.

The original News Corp no longer exists. The Fox studio was sold to Disney and the newspapers separated from the tv network, presumably as part of Murdoch’s succession planning.

All in all, News Corp seemed to me to be an unsavory nineteenth-century approach to the news that, surprisingly, worked very well in the last half of the twentieth. As a stock, though, after some initial success on listing in the US, News Corp was never anything to write home about. Part of the weak performance was due to the deeply partisan political nature of the Murdoch business, part to the large amount of financial leverage News would at times employ, part to missteps like its involvement in book publishing.

The other day I was thinking about FB, a stock I don’t own, and wondering if Mark Zuckerberg is quietly following the Rupert Murdoch playbook. FB’s curious tolerance (until just recently) of harmful conspiracy theories, from QAnon to anti-vaxxers, suggests this is so.

In Murdoch’s case, he was ultimately able to find enough like-minded journalists to run his enterprise. They were content to do work of dubious merit, and that the relatively low price earnings multiple Wall Street assigned to News Corp would make their stock options–if reporters and editors had any–much less valuable.

If Zuckerberg is in fact mirroring Murdoch and has tied FB to Trump’s star, it would be reasonable to figure that this would be a negative for the stock. In Murdoch’s case, he could not find enough American reporters to carry out his strategy. He had to import writers from his businesses in the UK. Could FB do likewise? Another question might be that with stock options less valuable could he attract any skilled tech workers?

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