While Rupert Murdoch and his board of lackeys and cronies
face legal action from shareholders over the anti-John Malone poison pill, there
was an interesting little footnote last night to remind everyone how Murdoch
managed to get himself into this predicament.

It should also serve as a reminder for Murdoch’s loyal hacks
before they do their master’s bidding attacking other media companies that
their boss remains the king of the dud deals – part of the reason why News Corp
has shown no return for shareholders over the past seven years.

Malone’s Liberty Media acquired most of its News Corp stake
in September 2000 when Malone played
Murdoch for a sucker over his stake in Gemstar-TV Guide. Forget Alan Bond being
Kerry Packer’s billion-dollar patsy – Rupert was Malone’s US$6 billion mug.

Malone talked Rupert into buying his 21% interest in
Gemstar-TV Guide for 486 million News Corp prefs and a bunch of Class A
in News Corp’s Sky Global Networks. The deal lifted Malone’s stake to
18% of News Corp non-voting shares and it’s now a matter of Murdoch
that Malone last year was able to swap non-voters into 17% of News
Corp’s voting stock.

News Corp had already paid heavily for 22% of
Gemstar-TV Guide, so the Malone parcel lifted Rupert’s interest to 43%
and gave him a seat on the board when Gemstar shares were trading at more than
US$70 each.

Last night was the official re-launch date of the failing TV
magazine – and its shares fell another 6 cents to US$2.75. They’ve
halved in price since March, let alone what they’ve done since Rupert bought

Gemstar-TV Guide lost US$5 million in the June quarter on
revenue of US$177 million – revenue that
is steadily shrinking. TV Guide has cut the circulation guarantee it offers
advertisers from 9 million to 3.2 million, cut its cover price from $2.49 to
$1.99 and changed format from 75% program listings/25%
editorial to 75% editorial/25% listings. It hopes to be making
a profit in three years’ time.

News Corp has had to write off US$6 billion on its
investment. The upside for the deal was supposed to be Gemstar’s electronic
guide technology – but that’s proven to be run of the mill as well. It’s the sort of technology that is destroying
the magazine, but isn’t replacing it with significant revenue.

The TV Guide woes are being used as a prime example of how
old print mastheads fail to adapt to a changing world. Marketwatch
columnist Jon Friedman has a nice wrap here.

As Rupert waxes increasingly enthusiastic about the internet
and continues to pay top dollar for whatever he buys, there might be a hint of
the TV Guide lesson showing up.

It could be argued that the Murdoch family selling out of
Queensland Newspapers last year effectively was a swap out of an investment
concentrated in old-technology print into the broader News Corp portfolio. The
other print bits and pieces that have been sold off – the New
Zealand newspapers, the
Times Educational Supplement – might be an indication that the future for
newspapers in Murdoch’s world is about power rather than profit.