No FT sale? No comment

A curious article appeared in The Wall Street Journal last week. The piece was ostensibly a report of the full-year results announcement by Pearson, parent company of the Financial Times. The headline was hardly hold-the-front-page stuff: "Pearson grows in education but maintains its hold on FT." The strap, "Paper, now a smaller part of business, is still crucial to strategy", endorsed the headline. Readers in the City of London happy to see from both headline and strap that their daily pinkun was safe in Pearson's hands may not even have bothered to read on. But if they did, they would have got a shock.

The intro to the story seemed to fly in the face of the headline and strap above it. It did not make any assertion. That is not the way of The Wall Street Journal. It merely asked a question. And the question it asked was this: "Would Pearson CEO Marjorie Scardino, a newly named Dame Commander of the British Empire, contemplate unloading the company's flagship Financial Times newspaper?"

The question of selling the FT was put to Scardino at a Pearson news conference last week. "Over my dead body," she replied. When a newly named Dame Commander of the British Empire leaves no room for misunderstanding, etiquette should demand that that is the end of the matter. But The Wall Street Journal in its article, employing three writers, had other questions it wanted to raise.

It pointed out that operating profit at the paper fell 62 per cent to £31m from £81m. Advertising volume was down 29 per cent and ad revenue down 20 per cent. The fall in advertising was blamed for Pearson's 12 per cent fall in pre-tax profit for 2001 to £294m from £333m a year earlier.

But even if its profits are down, and it is to start charging for more content from its FT.com website, including items from the Lex analysis column, the FT does remain in profit; the latest circulation figure of 487, 651 (see table) shows a rise month on month and year on year. But about 70 per cent of that global circulation lies outside Britain, and has been dependent on investment from the parent company.

So, is there a logic to the merger rumours, or the "unloading" as the WSJ puts it in more direct New York-speak? Scardino has invested heavily in educational publications, has bought Dorling Kindersley in Britain and Simon and Schuster's education business in the USA, and has indeed made Pearson the world's largest educational publisher. She has already sold some FT business trade mags. The chief executive of the Financial Times Group, Stephen Hill, is "stepping aside" for a period while he puts together a bid for a management buy-out of the FT's remaining business publications, which include Investors Chronicle and The Banker. If that bid is unsuccessful, he intends to return to his post as MD. It's hard to think of another national newspaper where such a scenario could be enacted.

But such curiosities are a long way from presaging a sale of the Financial Times. Even the remote possibility of a merger has intrigued though puzzled media analysts. Roger Haywood, chief executive of Issues Analysis Limited, said yesterday: "Both The Wall Street Journal and the FT have strengths and weaknesses. This would suggest some logic in a merger where both play to their strengths. But the reality, from my experience, is that they might end up emphasising their weaknesses – the old-fashioned journalism of the WSJ with its US-centricity, the whimsicality of the FT and the dull writing on too many topics.

"Also the readerships of both are very different and FT readers tend not to like the WSJ and vice versa. The overlap is tiny, which might again suggest synergy. The truth would be that one would be dominant. The key factor would be the name. Who would wish to abandon either brand? But to reach a new market it would have to be something like "International Financial Journal". Really, we need them both and we need the competition."

As Mr Haywood implies, both brands are worth millions; the FT's pink colour has in itself become a branding for some other papers, the London Evening Standard, for example. The FT is still the dominant business daily in Europe and The Wall Street Journal in the United States. Basically, they have both tried to attack each other on their own respective turfs, to little effect if the aim was to usurp the indigenous brand.

There seems little doubt that The Wall Street Journal had its own agenda for running a lengthy article questioning whether the FT might be for sale, when every other report ignored it after the Scardino denial.

Karen House, president, international affairs, of Dow Jones, the parent company of The Wall Street Journal, told me yesterday: "Our chairman has said that if the price were right we would love to own the FT. Marjorie Scardino says 'over my dead body' and we have to take her at her word. But this is a very tough time for the publishing industry as a whole and for the FT in particular. They blew a lot of money in the US, in Germany and on the internet. They lost more money in 1999 and 2000 on FT.Com than we have lost since the birth of WSJ.Com in 1995.

"They are happy to tell people that they have a circulation figure of 144,000 in the US and yet no one at the FT will say what is subscription and newsstand and what is bulk. Most of that 144,000 is bulk. They probably sell 50,000 in the USA and that has cost them £100m. The WSJ sells 1.8m copies in the US."

Ms House is also sceptical of Scardino's claim in the Mail on Sunday at the weekend that she is still interested in an Asia edition of the Financial Times. "We will look at an Asia edition," Mrs Scardino said. "We have watched The Wall Street Journal try for 25 years to do something out there."

Ms House retorted: "I think our British friends are not aware of that market. They play a small role in it. The Asia Journal sells more than 80,000 copies and has the number one share of business advertising in Asia." John Fallon, the head of communications at the FT, unsurprisingly does not wish to fan any flames that might exist. He said yesterday: "The Wall Street Journal is a fine newspaper, but Marjorie couldn't have dealt with this point more categorically than she did."

It's no great surprise that The Wall Street Journal is watching the FT's situation with predatory intentions. But the FT now knows that the WSJ will use its own columns to stir the pot. This could develop into an upmarket version of the amusing Mirror/ Sun fights of old. But with the effect on share prices and city confidence that adverse comment in The Wall Street Journal can cause, the FT might find it a lot less funny.