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Murdoch's Soft Spot a Sore Spot for News Corp.


Media mogul's love of newspapers is hurting company's bottom line.

Rupert Murdoch started building his multimedia empire with newspapers, and there's no doubt he still loves the dinosaurs.

The New York Times says Murdoch's fondness for black ink on a white page is dragging down News Corp.'s (NWS) revenues. The company's balance sheet suggests that the Times is onto something in the short-term, but the story misses a basic point: Murdoch publishes specialized newspapers that may have a solid future, unlike the general circulation, one-size-fits-all poopsheets now facing oblivion. If newspapers have a future, Murdoch has made a good bet.

Right now, it's hard to find an upside for what old newshounds once called "the daily miracle." The newspaper industry is staggering as advertisers move to the Internet and auto dealers and real-estate agents slash remaining print buys in the recession.

Philadelphia's 2 major daily newspapers filed for Chapter 11 bankruptcy protection Sunday in an effort to restructure debt. The filing comes a day after the Journal Register (JRCO) sought protection joining the Chicago-based Tribune Co. and the Star Tribune of Minneapolis.

Murdoch's papers are likely to escape the great newspaper die-off, because he delivers class and mass through different titles, a feat unmatched by newspapers published by McClatchy (MNI) or Gannett (GCI).

The Wall Street Journal delivers to the kind of well-educated, upscale audience that advertisers want to reach. If you follow the market, the Journal is a must-read; its competitors aren't. Magazines such as Business Week, Forbes and maybe Fortune are valuable supplemental reads, but life goes on if you skip them.

News Corp. also publishes the New York Post, a screechy tabloid that has artfully positioned itself as a must-read for its blue-collar base. The tabloid now carries ads for upscale department stores - a long way from the days when it couldn't sell ads to Macy's (M), because the store's advertising director told the Post "Your readers are our shoplifters." Still, the Post has yet to be a consistent money-maker.
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