Murdoch's British Titles: Who Would Buy?
After the News of the World closed unceremoniously on Sunday amid allegations of phone hacking of murdered teenagers and dead soldiers' families, speculation has been building about who might want to buy the other newspapers owned by Rupert Murdoch's News Corp in the UK.
Under the News International arm of New Corp , Murdoch owns The Sun, The Times and the Sunday Times.
On Wednesday, MPs from all parties are set to back a Labour motion urging Murdoch to withdraw his bid for BSkyB .
Wednesday's edition of The Sun vigorously denied that they had used any illegal methods to get hold of a story about former Prime Minister Gordon Brown's son Fraser suffering from cystic fibrosis. Brown has also accused the Sunday Times of obtaining information about his purchase of a flat using criminal methods.
Murdoch voluntarily put News Corp's bid for the 60.1 percent of BSkyB it does not already own up before the British Competition Commission, which will delay the bid for a few months, allowing News Corp time to get its house in order and fuelling rumours that part of its newspaper empire may be sold.
As he was called to appear before a British parliamentary committee next Tuesday with his son James and high-ranking employee Rebekah Brooks to face questions about allegations of phone-hacking at his newspapers, Murdoch's British newspapers could start to be more trouble than they are worth, especially if NewsCorp's bid to take over BSkyB looks under threat of failure.
There is also the risk that Britain's media regulator, Ofcom, may find that he is not a "fit and proper" person, although he has been since the regulator came into being.
The only business which has failed Ofcom's "fit and proper" test to date was Bang Media, which broadcast adult chat and was found to have breached rules protecting "children from inappropriate material and viewers from harmful and offensive material".
Murdoch has not given any indication or statement on whether he would sell the newspapers. He started his career at The News in Adelaide, which he inherited from his father almost six decades ago, and is known to be particularly attached to The Sun.
Michael Wolff, the author of "Inside the Secret World of Rupert Murdoch", told the BBC Monday that some within News Corp are asking "why do we own newspapers anyway?"
He added that, for News International, the British newspaper arm of the company, "there's no way for the company to come out of this in a way that doesn't leave it hopelessly diminished."
"They might just give them away," Alex DeGroote, media analyst at Panmure Gordon, told CNBC.com.
He pointed out that the loss-making UK newspaper The Independent was bought for just £1 last year by Russian billionaire Alexander Lebedev.
Lebedev, who also owns the London-based Evening Standard, has also been cited as a possible buyer for other newspapers which come on the market. A representative did not respond to CNBC's requests for comment Tuesday.
"It's awful, but the buyer will carry the liability," DeGroote said.
"If you are DMGT or Richard Desmond or Trinity Mirror or any of the other trade players, you don't know how far this is going to play out."
It would be "almost impossible" to put together sales documents for the various titles at the moment, as there is so little visibility on their profit and loss forecasts for the next few years, DeGroote believes.
Analysts at Needham & Co in New York predict that News International will account for about 10 percent of the $956 million of earnings before interest and tax the newspaper division is expected to generate in the current financial year. Given that the News of the World, one of its more profitable titles, has been removed, this could shrink even further.
DMGT , which is backed by the Rothermere family, could be a predator for the News International titles, as its flagship publications, the Daily Mail and the Mail on Sunday, are tabloids but fall between the loftier Times and the more downmarket Sun, DeGroote said.
"There's a massive market share opportunity for an existing player," he added.
Trinity Mirror , which published the Sun's great rival the Daily Mirror, would probably be unable to buy the Sun on competition grounds, Steve Clayton, an analyst with Mirabaud Securities, told CNBC.com.
He added that the Barclay brothers, the secretive billionaires who own the Daily Telegraph, would face similar difficulties if they wanted to buy the Times or Sunday Times.
"There are a limited number of combinations that might be possible," Clayton said.
"Print titles are becoming increasingly digital and nobody's quite sure how profitable they will be."
Several British media sources told CNBC.com that Richard Desmond, who made his fortune with publications such as the British edition of Penthouse, Asian Babes and Reader's Wives, might have the "resources and the inclination" to bid.
Desmond, who publishes OK! Magazine, as well as tabloids the Daily Express and Daily Star, has already said that he'd like to own The Sun.
"We would run it in a different manner, which would be more efficient in today's marketplace," he told the BBC last year.
Desmond, who recently added UK terrestrial television channel Channel 5 to his stable, could not be reached for comment Tuesday.
For Britain's other media barons, there is always the niggling possibility that the News International newspapers may not have been the only place where the law was allegedly broken.
"The important risk factor is that there could be more broadening out of the allegations," said DeGroote.