Last Updated: May 8, 2008: 10:12 AM EDT
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Rupert Murdoch loves print...

But not as much as everybody would like to think - look what just happened to TV Guide.

By Devin Leonard, senior writer

News Corp CEO Rupert Murdoch supported a wholesale redesign of TV Guide. Then he sold it.

NEW YORK (Fortune) -- Everybody's been talking lately about how much News Corp. CEO Rupert Murdoch loves print. His company just paid $5 billion for Dow Jones, publisher of The Wall Street Journal. Yesterday, he sounded confident that News Corp. would shortly acquire Newsday for $580 million from Tribune Co. Who better to spruce up these papers than a man who is often said to "have ink in his veins," right?

Let's not be overly romantic about Murdoch. Sure, he loves print. But his affection has its limits. Last week, News Corp. severed its longstanding ties with TV Guide, which it controlled through its 41% stake in Gemstar-TV Guide International, the troubled company that Murdoch cobbled together with John Malone and Henry Yuen at the height of the dot-com boom. TV Guide is no longer the powerful brand that it was 20 years ago. However, the magazine is in the midst of a surprisingly successful makeover from a listings-driven magazine to a celebrity book. It's a tale that would make any print lover misty eyed - if only the ending were happier.

When Murdoch's company bought TV Guide in 1988 as part of its $3 billion purchase of Walter Annenberg's Triangle Publications, the magazine was at its zenith. It had a weekly circulation of 17.2 million and annual revenues of $331 million, the highest in the industry. It also broke its share of stories, like the expose about CBS News' 1982 documentary lambasting the Vietnam War conduct of General William Westmoreland, who later won a celebrated libel suit against the network.

The next decade wasn't kind to TV Guide. Newspapers started offering television listings. Cable networks introduced their own scrolling guides. TV Guide's circulation slowly eroded. In 1999, Murdoch tried to reinvigorate the magazine with one of the most dubious deals of the dot-com era. He helped create Gemstar-TV Guide International by merging the magazine with a television listings cable channel controlled by John Malone's Liberty Media, and Gemstar, owner of patented interactive programming guide technology. The new company's CEO, Henry Yuen, promised to create a TV-based portal that would surpass Yahoo in popularity.

Gemstar-TV Guide's stock soared. Then the technology bubble burst, and the company never recovered. It became embroiled in SEC lawsuits challenging its accounting practices. Murdoch forced Yuen out in 2003 and put his own people in charge. News Corp. also took a $6 billion write-down on its investment in its sister company.

Then Murdoch did something more prudent. The magazine's weekly circulation had fallen to 9 million. News Corp (NWS, Fortune 500). considering pulling the plug on TV Guide. But that would have been expensive. So with News Corp.'s enthusiastic support, Gemstar-TV Guide embarked on what was referred to internally as the "hail Mary" strategy. It changed TV Guide from a digest-sized book crammed with television listings to a larger celebrity-focused magazine that would compete with People (owned by Time Inc., Fortune's parent), Us Weekly and the Star.

The strategy was a winner. TV Guide's circulation fell by two-thirds, but then stabilized at 3 million copies. April Horace, an analyst at Junco Partners, says the magazine is now breaking even and should return to profitability after years of losing money. "I think the redesign was quite successful," she says. "If you look at year-over-year increases in ad pages, they are up almost 30%."

But just when TV Guide was turning around, News Corp. threw in the towel. Last July, Anthea Disney, chairman of Gemstar-TV Guide and a longtime News Corp. executive, announced that the former company was effectively putting itself up for sale. This, of course, was right when Murdoch was closing in on Dow Jones.

The sale of Gemstar-TV Guide wasn't pretty. There was talk that Microsoft (MSFT, Fortune 500), Google (GOOG, Fortune 500) and any number of private equity firms would be possible buyers. But after the credit markets collapsed, only one real suitor emerged: Macrovision (MVSND), a Santa Clara-based technology company specializing in copy protection and other digital distribution solutions. Macrovision CEO Fred Amoroso made it clear that his company intended to strip Gemstar-TV Guide for parts. He wanted to keep the interactive programming guide technology. He hoped to sell the magazine and the TV Guide cable television channel as soon as he could.

Last week, Macrovision swallowed Gemstar-TV Guide in a deal valued at $2.8 billion. (Wednesday, Murdoch told investors that News Corp. reaped "approximately $950 million in value" in the transaction.) Macrovision, as promised, immediately started preparing the magazine for a sale. The new owner ousted TV Guide editor-in-chief Ian Birch, the architects of the redesign, and several other top executives at the magazine. Amoroso says part of the reason for these personnel changes is that he wants the magazine to be more adversarial with the networks.

It won't be easy for Macrovision to unload the magazine. Amoroso wants to keep TV Guide's Web site - but who wants to buy a print title these days without its online component? Macrovision may end up running the magazine longer than it expects.

You can't fault Murdoch for losing his affection for TV Guide. Even after the redesign, the magazine's future was uncertain. Yes, it was on the way back to profitability. But the magazine still faced all the long term challenges that are confounding print publications in the digital age. But then so do the Wall Street Journal and Newsday.

That's something people at the Journal and possibly Newsday should ponder. Right now, Murdoch is enamored with their papers. But he's no sentimentalist. One of these days, they could all be working for a tech company CEO who doesn't love print at all. To top of page