Murdochs appear willing to sell key Fox assets
Rupert Murdoch is one of the most driven media owners, defying the odds for more than half a century to build a global media empire from a small newspaper in Australia.
Accordingly, many people were startled to learn the Murdoch and his sons appear willing to sell some of their prized 21st Century Fox media assets.
Walt Disney Co. approached the Murdoch family in recent months to inquire about buying key properties, including the Los Angeles movie and television studios, cable TV channels FX and National Geographic, and Fox’s international TV operations.
Such a deal would have been unfathomable a few years ago, but rapid shifts in consumer behavior have forced the Murdochs to rethink their strategy, company insiders and industry analysts say. Although talks with Disney have broken down over price, analysts believe other bidders such as Apple, Amazon or Google may emerge.
“All of this has a whiff of desperation,” said Doug Creutz, a managing director of Cowen & Co. “For Fox, it doesn’t make sense. They would be cutting the heart out of their content creation business.”
James Murdoch is the company’s chief executive. Lachlan Murdoch shares the title of executive chairman with his father and is more in sync with the views of his famously conservative father, according to several current and former Fox executives. Rupert Murdoch coaxed Lachlan back into the corporate fold in 2014 after nearly a decade’s absence from day-to-day management.
James Murdoch “definitely is the more ambitious of the two,” said Jeffrey Sonnenfeld, a professor at the Yale School of Management, “and Lachlan is the peacemaker and the bridge builder.”
James and Lachlan Murdoch joined forces in July 2016 when former Fox News host Gretchen Carlson sued Roger Ailes, then the network’s powerful chairman, alleging that she lost her job because she spurned Ailes’ sexual advances. The sons, according to several knowledgeable people, pressed their father to get rid of his longtime ally, Ailes, who died in May.
But Fox News continues to vex James Murdoch. A string of sexual harassment allegations ensnared other network hosts, including Bill O’Reilly, who was forced out in April. Last summer, James Murdoch bristled during the racial unrest in Charlottesville, Va., after President Donald Trump said both sides were to blame for the deadly protests. He also donated $1 million to the Anti-Defamation League, which he noted in a letter to friends.
“What we watched this last week in Charlottesville and the reaction to it by the president of the United States concern all of us as Americans and free people,” James Murdoch wrote.
Meanwhile, Rupert Murdoch has been an informal adviser to Trump.
Fox faces growing uncertainty about its long-sought ambition to acquire the European pay-tv service Sky.
Fox currently owns 39% of Sky, but British regulators have thrown up roadblocks that have delayed, and could scuttle, Fox’s ambition to buy the remaining 61% of Sky for more than $15 billion.
Sky provides TV service in Britain, Ireland, Germany, Austria and Italy. James Murdoch has been focused on purchasing Sky to help diversify Fox’s assets and has said the deal should close by July. He has long been involved in Sky and is its chairman.
But several British lawmakers have opposed the Murdochs’ bid for more power. Britain’s secretary of state for culture, Karen Bradley, sidestepped approving Fox’s deal for Sky this summer. Instead, she referred the matter to a regulatory body for further scrutiny after complaints that Fox had long tolerated sexual harassment at Fox News.
Rupert Murdoch helped launch Sky in 1989. In 2011, the company abandoned an earlier bid to buy Sky over another scandal: reporters at the Murdochs’ now defunct News of the World tabloid hacked into messages left on cellphones of celebrities, crime victims and royal family members. It was revealed last month that News of the World reporters hacked into the computer of a former British intelligence officer.
Without its major European asset, Fox might lack the scale it needs to compete in an increasingly consolidated media landscape. AT&T is trying to buy Time Warner, which owns CNN, HBO and the Warner Bros. studio. Comcast owns NBCUniversal.
“The Murdochs understand that the game is all about gaining clout – and Disney is the world’s most valuable business partner,” British media analyst Alice Enders said. “James and Lachlan grew up in media and entertainment – it is the family business. They see the problems. Now, the business is all about scale and distribution.”
Disney, according to two knowledgeable people who were not authorized to discuss the matter, was particularly interested in Fox’s international business, including the Fox holdings in India and its stake in Sky.
A Fox spokeswoman declined to discuss the company’s internal dynamics or its talks with Disney.
Rupert Murdoch long has cared little about Fox’s movie studio. He skips the Hollywood circuit. Fox executives and other media figures attend the parties at his Moraga Estate vineyards in Bel-Air, not movie stars.
Movie studios struggle to make money, particularly now that the DVD market has withered. TV production also produces more misses than hits.
Some analysts believe the Murdochs will focus their business more around news, sports and possibly streaming.
“Keeping news and sports plays to their strengths,” said media analyst Michael Nathanson.
Andrew Neil, a prominent broadcast journalist and a former top editor in Murdoch’s empire, also mentioned Rupert Murdoch’s love of news when he testified last month in London during hearings for the Sky deal.
“There is ink in his veins,” Neil said. “He is never happier than when he is spending time with journalists. That is not true of James or Lachlan, who are fundamentally ... in the entertainment business.”
Fox’s market capitalization is $52 billion. Analysts say the Murdochs could use proceeds from an asset sale to take private a slimmeddown news and sports broadcasting company, or double down on a streaming service such as Hulu (Fox owns 30%). They probably would then reunite the remaining Fox assets with their second company, News Corp., which owns the Wall Street Journal, the Times of London, Australian newspapers and HarperCollins publishing house.
The Murdoch family controls Fox and News Corp. with 39% of the voting shares of each firm. News Corp. and Fox were part of the same company until 2013. Rupert Murdoch was persuaded to divide his empire into two pieces because Wall Street was wary of newspapers and print media.