There can be no better sign of who is most powerful in this struggle than the fact that all the threats and overtures are coming from News and Microsoft. Google is the Gorilla, Microsoft is the Chimp, and News is the customer who wants the vendor to pay to provide their service.
I think social networks have more power in spreading news. Obviously news and magazines thrived before Google, and even the internet. They're still large and powerful, even if they are starting to wane.
If you are implying that Wall Street Journal readers would not subscribe and read Wall Street Journal without Google, then I disagree. I think the comment by @mynameishere is correct, for the Wall Street Journal, Google is probably sending a lot of riff-raff over. You don't want those users. Even if they click on the NetJet or Jaguar ad, I doubt they could afford it. And most of them probably do not know what American Express Black is.
If, however, you are saying that Murdoch and Google are playing a giant game of chicken, then I would agree.
Murdoch threatening to block Google is like Kim Jong Il proposing to bomb South Korea - absolutely suicidal, but given how "crazy" he is no one can count against him doing it.
Like most North Korean gambits, it's mostly posturing but the fact that it comes from a potentially threatening source means it has to be carefully considered.