News Corp

Last edited by Ian Elwood on July 11, 2008 - 3:51pm

Company Snapshot:

Rupert Murdoch's News Corporation media conglomerate includes cable networks such as Fox, Fox Business Channel, National Geographic and FX; 35 television stations; 175 newspapers -- including the recently-acquired Wall Street Journal, the New York Post, and Barron's; other publications including TVGuide and SmartMoney; book publishers HarperCollins; film production companies 20th Century Fox, Fox Searchlight Pictures and Blue Sky Studios; numerous Web sites including MarketWatch.com, and non-media holdings including the National Rugby League.

Ownership status:

Publicly traded

Chief executive officer:

Rupert Murdoch

2008 Global Fortune 500 rank:

280

Website:

http://www.newscorp.com/

Corporate accountability

Accountability overview:

Charges of Media Bias

The groups FoxAttack and Fairness and Accuracy in Reporting (FAIR) track examples of inaccuracy and bias at Fox News.

Shareholder Disputes

On April 7, 2006 The New York Times reported that The News Corporation had settled a shareholder lawsuit two weeks before the opening of a trial in a lawsuit that accused the company of defrauding investors by denying them a vote on whether to extend an antitakeover resolution adopted in 2004.

A longstanding gadfly favorite, the resolutions generally ask that any current or future poison pill be put to a shareholder vote. Because poison pills are the single takeover defense that boards can enact unilaterally, shareholders have often sought pledges from companies to seek shareholder approval of a pill within a reasonable time after adoption to prevent potential abuses. But as witnessed at News Corporation in 2005, such a policy may have no legal standing if the board chooses to ignore it.

Stephen Mayne: ‘Why News Corp has to change’

Tax issues:

In 1999, BBC summarized a report by the Economist that found that in the four years up to June 30, 1998, News Corporation and its subsidiaries paid just 6% of the consolidated pre-tax profits in taxes. Although the opaque nature of the business makes it difficult to know how it achieved such low rates, analysts suggested Murdoch's team employed three strategies:

    * Tax relief claimed on debt interest repayments.
    * A reliance on off-shore tax havens.
    * Exploiting global differences in accounting standards.

(According to the Economist, "finding out the specifics of News Corporation’s tax affairs is difficult because of the company’s complex structure. In its latest accounts, the group lists roughly 800 subsidiaries, including some 60 incorporated in such tax havens as the Cayman Islands, Bermuda, the Netherlands Antilles and the British Virgin Islands. ... This structure, dictated by Murdoch’s elaborate tax planning, has some bizarre consequences. The most profitable of News Corporation’s British operations in the 1990s was not the Sunday Times, or its successful satellite television business, BSkyB. It was News Publishers, a company incorporated in Bermuda.")

When a congressional panel asked Murdoch if he was hiding money in tax havens, including communist Cuba, he responded that "we might have in the past, I'm not denying that." The Washington Post reported in 1997 that "through the deft use of international accounting loopholes and offshore tax havens, Murdoch has paid corporate income taxes at one-fifth the rate of his chief U.S. rivals throughout the 1990s, according to corporate documents and company officials." His company "reduces its annual tax bill by channeling profits through dozens of subsidiaries in low-tax or no-tax places such as the Cayman Islands and Bermuda. The overseas profits from movies made by 20th Century Fox, for instance, flow into a News Corp.-controlled company in the Caymans, where they are not taxed."

IRS officials say that "U.S.-based companies face U.S. taxes on their offshore subsidiaries in the Caymans and elsewhere if more than 50 percent of the subsidiary is controlled by American shareholders. But that doesn't apply to News Corp., an Australian company."

According to the New York Times, one of its lobbying firms focuses almost exclusively on parts of the tax code that affect the News Corporation. "By taking advantage of a provision in the law that allows expanding companies like Mr. Murdoch’s to defer taxes to future years, the News Corporation paid no federal taxes in two of the last four years (i.e. between 2003-2006), and in the other two it paid only a fraction of what it otherwise would have owed. During that time, Securities and Exchange Commission records show, the News Corporation’s domestic pretax profits topped $9.4 billion."

Labor:

Murdoch told biographer William Shawcross that much of the criticism of him in the UK is attributable to his success in breaking the print unions and his success in establishing satellite broadcasting. "I'm a catalyst for change … You can't be an outsider and be successful over 30 years without leaving a certain amount of scar tissue around the place."

Environment and product safety:

On August 18, 2000, a Florida state court jury unanimously determined that Fox "acted intentionally and deliberately to falsify or distort (Jane Akre and Steve Wilson's) news reporting on BGH." In that decision, the jury also found that Jane's threat to blow the whistle on Fox's misconduct to the FCC was the sole reason for her termination... and the jury awarded $425,000 in damages which makes her eligible to apply for reimbursement for all court costs, expenses and legal fees. The two verteran reporters had been working on an investigation of synthetic growth hormone, or BGH (a Monsanto product -- Monsanto was a Fox News advertiser). The story they had been working on was about how America’s milk supply has quietly become adulterated with BGH. Pressure from Monsanto led Fox TV to fire the two award-winning reporters and sweep under the rug much of what they discovered but were never allowed to broadcast. For more on the story, go here.

Human rights:

Murdoch has been criticized for doing business with Chinese Communist Party leaders and their children. According to the New York Times Fox News helped China’s leading state broadcaster develop a news Web site, while Murdoch worked with the Communist Youth League on a risky television venture. Mr. Murdoch’s third wife, Wendi, is a mainland Chinese who once worked for his Hong Kong-based satellite broadcaster, Star TV. But Murdoch says he hit a “brick wall” after bidding for prime-time broadcasting rights and failing. Murdoch cooperates closely with China’s censors and state broadcasters, several people who worked for him in China told the Times.

A group of China-based reporters for The Wall St. Journal accused him in a letter to Dow Jones shareholders of “sacrificing journalistic integrity to satisfy personal and political aims,” a charge News Corporation denied.

Human rights activists have reportedly vented their spleens against Murdoch for supposedly calling the Dalai Lama "a very political old monk shuffling around in Gucci shoes". Ian Johnson, a Journal reporter who worked in China from 1994 to 2001, wrote that during the same period, "Murdoch went from being a critic of Beijing—once famously saying that satellite television would be "an unambiguous threat to totalitarian regimes everywhere"—to an archetypical pro-Beijing businessman. He pulled the BBC from Star TV, for example, and sold the Hong Kong-based South China Morning Post, which until then had often criticized the mainland's human rights record. And of course he killed the memoirs of former Hong Kong governor Chris Patten, who had long been a thorn in Beijing's side."

Political influence:

The New York Times reported that Murdoch uses "a gamut of tools — not just campaign contributions, but also jobs for former government officials and media exposure that promotes allies while attacking adversaries, sometimes viciously — all of which he has used to further his financial interests and establish his legitimacy in the United States, interviews and government records show."

For example, after supporting a congressional move to limit media ownership, Senator Trent Lott, Republican of Mississippi, agreed to a compromise that allowed companies to own stations reaching to 39 percent of American homes. Months before, HarperCollins, Mr. Murdoch’s publishing house, signed a $250,000 book deal to publish Mr. Lott’s memoir, “Herding Cats.” (Mr. Lott, an outspoken critic of media consolidation, agreed to the increase because it was still lower than what Mr. Powell had proposed, his spokesman, Nick Simpson, later told the NY Times.)

The deal reminded critics of the time HarperCollins gave Republican Newt Gingrich $4.5 million for a book contract just as Congress was preparing to redraw media ownership rules.

Other prominent politicians have also received significant deals from HarperCollins: Senator Arlen Specter (R-PA) received $24,506 from HarperCollins for “Passion for Truth,” according to a NYTimes review of Specter's financial disclosure forms. Senator Kay Bailey Hutchison, Republican of Texas, received $141,666 for her book “American Heroines.” All sit on either the Commerce or Judiciary Committees that most closely oversee the media business. In addition, HarperCollins has given book deals to Senator Chuck Hagel (R-NE), as well as a $1 million advance to Justice Clarence Thomas of the Supreme Court.

In 2007, Murdoch's acquisition of the Wall St. Journal elicited criticism from others in the media establishment familiar with his tactics:

“It is hard to imagine Rupert Murdoch publishing The New York Post in Midtown Manhattan, with all of his personal and political biases and business interests reflected every day, while publishing The Wall Street Journal in Downtown Manhattan with no interference whatsoever,” James Ottaway Jr., a 5 percent shareholder and former director of Dow Jones, said.

Murdoch's Washington Lobby Corps, paid $11 million between 1998 and 2007, includes:

Anthony Podesta, former counsel to Senator Ted Kennedy (a frequent target of Murdoch's Boston Herald);
Ed Gillespie, former Republican Party chairman;
Former New York Senator Alfonse M. D’Amato
The firm headed by former Mayor Rudolph W. Giuliani of New York.
Jack Quinn, former White House counsel under Clinton.

A Times analysis of campaign finance records "shows that (between 1997 and 2007), Republicans have received only a slight majority — 56 percent — of the $4.76 million in campaign donations from the Murdoch family and the News Corporation’s political action committees and employees. Since Democrats won control of Congress in the 2006 elections, the company and its employees have given more than twice as much to Democrats as to Republicans, the records show."

Gary Ginsberg and Peter Chernin, president and chief operating officer of the News Corporation, were hosts of back-to-back fund-raisers for Hillary Clinton’s presidential campaign, one in New York and one in Los Angeles.

Murdoch donated $500,000 to former president Clinton’s Global Initiative.

News Corporation turned to Republican allies to put pressure on the Nielsen Corporation to drop plans to switch to a more sophisticated technology to calculate ratings that television stations use to set advertising rates for local programming. Senator Conrad Burns, a Montana Republican who was chairman of the Commerce Committee’s communications subcommittee, and Representative Vito J. Fossella, a New York Republican, introduced legislation that threatened Nielsen with government oversight. According to the Times, during the year the legislation was introduced (2005), the bill’s 29 sponsors and co-sponsors together received at least $144,650 in donations from the News Corporation’s political action committees and lobbyists.

Dale Snape, who lobbied for Nielsen, told the Times: “It was a classic example of him using all his resources to try to politically influence an outcome — he bought a Hill debate. It was scorched earth, and it was all about money. They created a public interest furor where there was none.”

Atlantic Monthly editor James Fallows wrote in the September 2003 issue: "Murdoch seems to be most interested in the political connections that will help his business … In short, some aspects of News Corp's programming, positions, and alliances serve conservative political ends, and others do not. But all are consistent with the use of political influence for corporate advantage. In the books I read and interviews I conducted, I found only one illustration of Murdoch's using his money and power for blatantly political ends: his funding of The Weekly Standard. The rest of the time he makes his political points when convenient as an adjunct to making money."

In 2004, News Corporation shareholders voted to approve the company's proposal to reincorporate to the United States.

History

After taking over a family newspaper operation and establishing News Corporation in his native Australia, Rupert Murdoch entered the British market in the 1960s and by the 1980s had become a dominant force in the U.S. market. News Corporation went heavily into debt to subsidize its purchase of Twentieth Century Fox and the formation of the Fox television network in the 1980s; by the mid-1990s News Corporation had eliminated much of that debt.

News Corporation operates in nine different media on six continents. News Corporation has been masterful in utilizing its various properties for cross-promotional purposes, and at using its media power to curry influence with public officials worldwide. "Murdoch seems to have Washington in his back pocket," observed one industry analyst after News Corporation received another favorable ruling (New York Times, 7/26/96).

News Corp. drew on its experience in establishing the most profitable satellite television system in the world, the booming British Sky Broadcasting (BSkyB), as well as its U.S. Fox television network to provide programming for its nascent satellite ventures in Asia and Latin America.

Financial information

Stock ticker symbol:

NWS and NWS.A

Total revenue:

$ US 28,655 million

Fiscal year:

2007

Net Income:

$ US 3,426

Fiscal year:

2007

Major lines of business/segments:

Filmed Entertainment (20th Century Fox; Fox Studios, etc.);

Television (Fox);

Cable (Fox News, Fox Business, Fox Movie, FX, Fox Sports, National Geographic);

Direct Broadcast TV (BSkyB, DirecTV, Sky Italia);

Magazines and Inserts (Big League, Inside Out, ALPHA News America Marketing, Smart Source, The Weekly Standard, Gemstar - TV Guide International Inc.);

Newspapers & Information Services (22 papers in Australia; UK: The Sun, TLS, Sunday Times, etc.; US: Wall St. Journal, New York Post);

Books (HarperCollins)

Additional descriptive data

Link to full list of subsidiaries:

http://www.newscorp.com/operations

Investor website:

http://www.maynereport.com/articles/2007/09/07-1205-863.html