News Corp: Murdoch's Game-Theory Golden Touch
Jane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
For News Corp (NASDAQ: NWS), the hacking scandal from six months ago has turned the stock to gold. At 18.60, it's near the 52-week high of 18.90. Sure, we all know: crisis can generate positive change. It did just that with the U.S. auto industry. For 2011, sales were up 26 percent at Chrylser and 13 percent at Ford and GM. But when News Corp head Rupert Murdoch is the player, there usually appears the fingerprints of a Midas Touch.
Look at how things have shaken out. Shutting down NEWS OF THE WORLD is one less newspaper in a downsizing industry. Investors couldn't be happier in a business where a death watch is going on. Concern about nepotism in succession is relieved since the front-runner is Chase Carey, not family member James Murdoch. Nice how he's out of the loop. Couldn't have worked out better. Many lawsuits associated with hacking are being quietly settled with respectable money on the table. Trial attorneys worth their salt would prefer that to the uncertainity and publicity of jury decisions. Forget trying to prove a principle. Stock buy-backs now total $2.5 billion and News Corp watchers such as the folks at the FINANCIAL TIMES expect more than $5 billion this year. Buy-backs can send a negative signal. Or, they can revive confidence among investors. News Corp investors are confident.
The makings of Murdoch's Midas Touch could have begun not in business, but way before that when he was studying at Oxford. See, then game theory, a concept brought mainstream by John Nash, was the rage. According to game theory, you make your move on the basis of what others are expected to do or have done, not in isolation or following so-called best practices. What's risky and how much so is never an absolute. It's determined by each player. Take the example of job-hunting. Applicants using game theory dig for the identity of competitors or construct hypothetical profiles, analyze how those are presenting themselves, and then custom-make their approach, which may appear risky, versus standardized templates associated with job search. ["Game Theory: A Very Short Introduction" by Ken Binmore is a useful read.]
Those who claim they don't understand Murdoch's moves, are shocked by them, or even censure them likely are framing him according to the supposed best of 20th-century management theory and practice as well as the orthodoxies of public relations. He's beating media competition like Walt Disney (NYSE: DIS) and Time Warner (NYSE: TWX). With all the intersecting uncertainities in a global economy disrupted by technology, Murdoch has game.
I own no stock in any of these companies.