36 hours after News Corp AGM

Sunday, October 21, 2007, 1pm AEST

Dear Mayne Report subscribers and a few extras,

It's now Saturday night in New York City and I should be out on the town. Alas, there's too much to do before checking out in the morning, so here is another edition of the Mayne Report with some more thoughts on Rupert Murdoch.

I've summarised all of the press coverage from the AGM on our website, complete with links.

It was initially excellent in all the wire and website coverage but nothing of note made it into anything printed in New York City today. The complete absence of The Wall Street Journal and The New York Times was just amazing and disappointing. We are essentially running a dual campaign aimed at institutional shareholders and the media and they are the two most important players in this game.

I've just sent this email to two of The Journal's media reporters:

From: stephen mayne [mailto:smayne@crikey.com.au ]
Sent: Sunday, 21 October 2007 12:09 PM
To: sarah.ellison@wsj.com; rebecca.dana@wsj.com
Cc: smayne@crikey.com.au
Subject: News Corp AGM

Hi Sarah and Rebecca, was there any reason why The Journal didn't cover the News Corp AGM on Friday and carried no reports of the meeting online or in the paper edition on Saturday.

I'm the Australian shareholder activist who put up a resolution to unwind the dual class share structure and it got supported by 60% of the independent shareholders, totaling $4.5 billion worth of stock.

Whilst all the detail about CNBC advertising arrangements is interesting, surely a challenge to Rupert's voting control is a more important story given all that has happened with the Bancrofts and New York Times in recent times.

Regards, Stephen Mayne

HOW THE PRESS CONFERENCE UNFOLDED

There were about 20 reporters at the meeting and Rupert Murdoch always has a press conference after his AGM. Usually he deals with more questions from journalists than his own shareholders.

This year was no exception as he was highly restrictive on question time at the AGM, declaring I'd had my "quota" before really even getting a chance to begin.

In future years the strategy might have to include taking in another couple of supportive shareholders to share the questioning load around.

Anyway, here is a summary of how the press conference unfolded:

1. Hollywood Reporter: any more takeover plans? Rupert said the challenge was absorbing what News now has.
2. Bloomberg: integrating Fox Business News and the Wall Street Journal.
3. USA Today: Fox Business News being more main street than Wall Street.
4. ABC TV: Michael Rowland on Rupert's views about the Australian election. He didn't take the bait after Rowland tripped him up two years ago.
5. The Guardian: a backlash from Dow Jones journalists. Rupert said the paper is only 30% unionised and the reporters are happy after a recent wage settlement.
6. Nikko Newspaper: Asian investments. Rupert said China is too hard so the focus is on India.
7. The Independent: why are the British papers bagging the Brown government so much? Rupert agreed they've gone negative but attributed it to the editors.
8. Financial Times: Myspace age verification problems.
9. ABC TV: Michael Rowland on the dual class share structure.
10. Dow Jones wires: digital piracy. Peter Chernin said MyspaceTV did digital fingerprinting before youtube.
11. Reuters: reporter Kenneth Li asked what Rupert think of Fox Business News. "Very impressive" and some "outstanding programs" said Rupert.
12. Unknown journalist: do you want to buy Facebook? Not for $10 billion.
13. ABC TV: Michael Rowland on whether The Wall Street Journal will directly take on The AFR. No plans as The Australian is doing this quite well.
14. Associated Press: Seth Sutel on how Wall Street Journal will take on The New York Times. Rupert said more general news and culture sections.
15. Multi-General News: CNBC ads being pulled from Dow Jones' MarketWatch.com. Rupert said this was heavy handed and nothing to do with him.

WHAT WILL HAPPEN ONCE MALONE IS GONE

The Liberty Media peace deal with News Corporation is proving to have the longest gestation period of any deal I can recall. It took three years to hammer out and now it look like taking almost a year to go from announcement to closure.

This means that John Malone was still on the register and able to vote his stock at the News Corp AGM. He backed the board in retaining the gerrymander, but next year will be different because he will be gone.

Let's have a quick look at how the numbers currently sit in both classes of shares, before and after the Malone deal.

VOTING SHARES NOW

985 million on issue (31.56% of total shares)
Murdoch family: 307 million (31.1% of voting shares)
Liberty Media: 188 million (19.1% of voting shares)

NON-VOTING SHARES NOW

2.136 billion shares on issue (68.44% of total shares)
Murdoch family: 33.95 million (1.6% of non-voting shares)
Liberty Media: 324.6 million (15.2% of non-voting shares)

TOTAL ECONOMIC INTEREST

3.121 billion shares on issue
Murdoch family: 341 million (10.92%)
Liberty Media: 512.6 million (16.42%)

SITUATION AFTER LIBERTY MEDIA IS TAKEN OUT

VOTING SHARES

787 million on issue (30.3% of total shares)
Murdoch family: 307 million (39% of voting shares)

NON-VOTING SHARES

1.811 billion shares on issue (69.7% of total shares)
Murdoch family: 33.95 million (1.87% of non-voting shares)

TOTAL ECONOMIC INTEREST

2.598 billion shares on issue
Murdoch family: 341 million (13.12%)

Based on the Friday closing prices in Australia, the Murdoch family stake is currently worth $8.877 billion, comprising $8.04 billion of voting stock and $837 million of non-voting stock.

Liberty Media owns $8 billion worth of non-voting stock and $4.92 billion worth of voting stock for a total investment of $12.92 billion.

Giving all shareholders the vote after Malone had been taken out would reduce Rupert's stake to just 13.12% of a company capitalised at $65.26 billion – less than a third what Google is worth.

RUPERT THE BIGGEST – JUST FLEETINGLY

One of the more interesting comments made by Rupert Murdoch at the AGM was this: "It is with some pride that I tell you that last week our market value exceeded all of our traditional peers for the first time ever."

Kenneth Li from Reuters picked up on this in his report but clarified it as follows:

"News Corp's more than $70 billion market capitalization slipped past Time Warner to steal the title of the world's largest media company for a brief moment this month. Its market value has slipped back down below Time Warner's this week, but Murdoch's ambition has not."

According to New York Stock Exchanges figures, News Corp actually closed on Friday with a market capitalisation of $US67.8 billion, marginally ahead of Time Warner at $US67 billion. This was after News tumbled 3.8% on Friday in the 1987 20-year crash anniversary slide, whilst Time Warner only fell 2.23%.

However, all this will be academic when the John Malone peace deal goes through because News Corp will be canceling $13 billion worth of stock and will slip back to third, also well behind Disney which is currently capitalised at $US65.62 billion.

Liberty Media is a distant fourth at $US28.83 billion, followed by Viacom at $US27.7 and you shouldn't forget Yahoo which is worth $US39.11 billion.

The amazing thing about Google is that its market capitalisation has just passed through $US200 billion, so it is worth more than Time Warner, News Corp and Disney combined.

THE HYPOCRISY OF NEWS CORP AND PRESS FREEDOM

News Ltd chairman John Hartigan gave quite an entertaining and interesting address at the Andrew Olle memorial lecture on Friday night. However, there was a touch of hypocrisy in some of his comments when you consider what his boss Rupert Murdoch was doing in New York a couple of hours later.

Here was Harto on press freedom and information flows: "While journalism might be in good shape, information isn't. We live in times when press freedom - the freedom of speech - is more restricted than in living memory. And I don't say this lightly."

He then briefly touched on the big campaign he's been pushing this year to free up freedom of information laws, overturn suppression orders and further reform the defamation laws.

Yet just two hours later Rupert Murdoch was treating shareholders with disdain, curtailing free speech more aggressively than he's done before at any AGM I've seen.

The proponents of the two shareholder resolutions were told they had 2 minutes, he then gave me 3 minutes to discuss the entire slate of directors up for re-election and when it came to general questions at the end, he imposed a limit of two questions per shareholder that had to be asked in one minute.

Despite spending $5000 coming all the way from Australia for the exercise, Rupert declared my "quota" was full after answering just one question during the general business at the end of the meeting. In 1999 he tolerated 16 straight questions over about 40 minutes.

Whilst the general media were allowed into the meeting and to film the closing press conference, the video freelancer I'd hired, who works for MTV in New York, was specifically banned from any involvement.

And News Corporation journalists around the world would be rightly outraged if a leading politician couldn't answer the simply question: when were you last re-elected?

Despite formally putting the question on notice before the meeting and then repeatedly asking it at the AGM, there has still been no answer. And there is no way to lodge an FOI request on News Corporation.

It is also interesting to look at the way the Murdoch press covers the News Corp AGM. Jane Schulze is The Australian's Media editor. She was at the John Hartigan lecture by 7.30pm on Friday night but miraculously got this story up on The Australian's website for Saturday morning.

Now Jane clearly hasn't gone back and listened to the webcast of the AGM starting at midnight because the story is just a re-write of Rupert's prepared speech. What sort of corporate culture sees a company slip what is essentially a press release to one of its own respected journalists, so they can be first with the company spin, whilst failing to cover the real action of an AGM in the same story.

Even News Ltd's New York correspondent Stephanie Bolagh filed an initial piece on Friday which was very upbeat and didn't go near the gerrymander controversy when most other websites covering the meeting were leading with it.

A lifetime of bad habits won't change at News Corp unless Rupert makes a directive that his journalists and editors are to stop treating him with kid gloves.

That's all for now. I arrive back in the country at 8am on Tuesday morning so you should hear from me again before the end of the week.

Do ya best, Stephen Mayne