Magazine article The Spectator

Why Mr Murdoch's Price War Is a War on Quality

Magazine article The Spectator

Why Mr Murdoch's Price War Is a War on Quality

Article excerpt

I have been asking myself again why Rupert Murdoch's price war is wrong. The question arises because three peers have put down amendments to the government's Competition Bill which if passed, and subsequently adopted, would render Mr Murdoch's `predatory pricing' illegal.

Let me for a moment put the case for Mr Murdoch. He bought the Times in 1981. He found himself 12 years later, and on his fifth editor, having lost many millions of pounds for pretty insignificant circulation gains. He then hit on the idea - or was it the brainwave of the Times's editor, Peter Stothard? - of cutting the paper's cover price from 45 pence to 30 pence. The rest is history. The sales of the Times have risen from about 370,000 to nearly 800,000. Whatever else, it was a brilliant manoeuvre, which confounded almost everyone's predictions, including my own.

On the face of it, Mr Murdoch's decision to initiate a price war seems justifiable. What else was he to do, having tried everything else? He had an unprofitable paper consuming millions of pounds and he had other profitable businesses making even greater sums. As he saw it, he was merely re-investing funds from one part of News Corp to another. The alternative was the continuing atrophying of the Times, and possibly even its eventual closure.

This is the case for Mr Murdoch, and many reasonable people hold to it. They also say - indeed, Mr Stothard says - that most of the Times's new sales have not come at the expense of other titles. This is true. The Daily Telegraph and the Guardian have actually put on a few sales. Only the Independent has suffered in this respect, losing about 80,000 buyers. But that - so the argument goes - merely shows that the paper was inherently weak. All in all, the quality newspaper market has considerably expanded.

It is a seductive argument, but a dishonest one. The effect, and no doubt the purpose, of Mr Murdoch's predatory pricing has been to drive other businesses towards unprofitability. It is not an even playing field. The Independent, which can't draw on the vast profits of BskyB to subsidise it, barely survives, and has been by far worse hit. But even the profits of the Daily Telegraph have been slashed because the paper has been forced to indulge in expensive subscription deals in order to maintain its sales. The general effect of the price war may have been to encourage more readers towards so-called quality newspapers. But those newspapers are forced to make editorial economies, and so readers have less good journalism.

A further effect has been to drive the quality papers further downmarket more quickly than would have otherwise been the case. The Times is making the running in that direction, and the others, in differing ways, feel that they have to follow. If the effect of Mr Murdoch's predatory pricing was to elevate our newspapers and enrich our culture one might cheerfully tolerate his distortion of the ,market. But he is not peddling the Frankfurter Allgemeiner or the New York Times. What appeals to the new readers of the Times is not, on the whole, its leaders and letters and admirable centre page columns, but its increasingly tabloid news and features.

Mr Murdoch's price war would not be allowed in America or many other countries. Predatory pricing is almost bound in the end to restrict choice and diversity. It is in Mr Murdoch's, but not the public, interest. Four years ago the Office of Fair Trading found there was nothing objectionable under British law in Mr Murdoch's conduct. …

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