Murdoch Claims New WSJ Section Already Profitable. Is It Really?

Everyone knows you can't have your cake and eat it too -- unless, apparently, your name is Rupert Murdoch.

On a call with analysts to discuss News Corp.'s (NWS) third-quarter earnings, the 79-year-old mogul claimed it cost the company next to nothing to add a New York City metro section to The Wall Street Journal. In fact, he said, the section is already -- improbably -- profitable.

"We invested nothing," Murdoch said in response to a reporter's question about what Greater New York, the section introduced last week, had required in terms of start-up costs. "Maybe we spent a million preparing for it, but our advertising currently and certainly up until the end of June is more than covering the total cost. Any idea about our spending $30 million in a war is B.S."

Significant Costs

That $30 million is one figure that has been thrown around, although other reports have pegged the budget for the New York section at $15 million, attributing the other $15 million to other projects, including a makeover of the Weekend section. If Murdoch is to be believed, they're both way, way off.

But is Murdoch to be believed? Sure, the company says the Journal's ad revenue was up 25% in the quarter. But balance that against the cost of hiring 35 new staffers, upgrading the printing plant in the South Bronx to handle the extra requirements, and printing the extra 16-page section. One knowledgeable Journal source disputes Murdoch's claim, saying the ad campaign promoting Greater New York and the lavish launch party at Gotham Hall by themselves cost more than $1 million.

Then again, the Journal has already shown it can turn an $87 million loss into a profit virtually overnight -- even if it has never quite explained how.