The Jerusalem Post

A pivotal moment – Murdoch charting a new path


LOS ANGELES – Rupert Murdoch began his restless quest to build one of the world’s most influentia­l media empires 65 years ago, when his father died unexpected­ly, leaving him a tiny newspaper in southern Australia. In the decades since, Murdoch’s appetite seemed insatiable as he gobbled up more and more newspapers, a Hollywood movie studio, television stations, TV networks and satellite TV operations that circle the globe.

Thursday, however, the 86-yearold tycoon walked away from some of his most significan­t properties. He sold much of his 21st Century Fox media company to Walt Disney Co. for $52.4 billion in an all-stock deal that will slenderize Fox at a time when Disney and other media companies are bulking up.

“Are we retreating? Absolutely not!” Murdoch told Wall Street analysts on a conference call Thursday. “We are pivoting at a pivotal moment.”

One thing is clear. Murdoch is drasticall­y downsizing his empire and charting a far different path forward than what Disney Chief Executive Bob Iger is pursuing.

Murdoch has long been a contrarian, never a sentimenta­list.

Now, facing a more fraught media environmen­t – and challenges by deep-pocketed technology companies like Netflix, Google, Facebook and Amazon – he and his two sons will retrench and begin to reconstitu­te what they are calling “new Fox.”

The slimmed-down company will be made up of the mogul’s cherished Fox News Channel, Fox Business Network, the Fox broadcast network, dozens of television stations, including Los Angeles-based KTTV-TV Channel 11 and KCOPTV Channel 13, and a few cable sports channels. The company will hold onto its lucrative real estate, the Fox Studios lot in Century City on the west side of Los Angeles.

Murdoch, according to those familiar with his thinking, simply lacked confidence that Fox in the future could be as dominant as it has been in the past.

“Times have changed,” said Robert Wright, the former chief executive of NBCUnivers­al. “It is a clear retreat... It clearly is the end of an era of expansion for Rupert.”

Murdoch and his family could still have influence for years to come through their newspapers and Fox News Channel. Fox News’ ability to shape public opinion has intensifie­d with President Donald Trump in office. Trump regularly cites Fox News as his favorite informatio­n source, and Murdoch has become an informal adviser. The president even called Murdoch on Thursday to congratula­te him on the deal, White House spokeswoma­n Sarah Huckabee Sanders said.

And the Murdochs also will retain a second company, News Corp., which owns The Wall Street Journal, The New York Post, The Times of London, dozens of papers in Australia and the HarperColl­ins book publishing house.

The Disney-Fox deal is not expected to close until 2019 because Disney needs time to secure required regulatory approvals in the US and overseas. The Murdoch family then would become the second-largest shareholde­rs in Disney with about 4.4% of Disney’s stock.

But such a stake would not give the Murdochs the sway they are used to.

“They don’t own Disney,” Wright said. “Rupert was all about being a major player in the areas he wanted to be in, which was newspapers, then it was broadcast television, and then movies and sports.”

One longtime Murdoch ally, who did not want to be identified, described the sale to Disney as “an elegant solution” to the various problems vexing Murdoch. The entertainm­ent businesses have become more challenged in recent years with escalating programmin­g costs as companies such as Fox, CBS, Time Warner Inc. and NBCUnivers­al are forced to spend to keep up with Netflix, which has said it will spend $8 billion next year on content.

Television programmer­s used to spend about $3 million to $5 million to make one hourlong TV show episode. But with Netflix and waving big bucks, the cost has soared to about $15 million for an hourlong episode of a premium show like The Crown.

The Murdochs are jettisonin­g the glitzier and capital-intensive Hollywood part of their business – the 20th Century Fox film and television studio, regional sports networks, FX, National Geographic and its internatio­nal outposts, including its 39 percent stake in European pay-TV giant Sky and the fast-growing Star television service in India.

“Rupert Murdoch is taking a minority interest (and) letting someone else, Disney, manage the bulk of what he’s built, and a big chunk of his net worth,” said Laura Martin, a media analyst with Needham & Co.

With what’s leftover, Murdoch and his two sons, James and Lachlan, plan to build a scrappier company that is expected to take advantage of consumers’ increased appetite for news and live sports, including NFL games and Major League Baseball’s World Series. Such live programmin­g is particular­ly attractive to advertiser­s because viewers don’t skip the commercial­s.

“The new Fox is about returning to our roots as a lean, aggressive challenger brand,” his oldest son, Lachlan, told investors.

And in one way, the sale of assets to Disney could help clear the way for British regulators to approve Fox’s $15-billion purchase of the remainder of Sky, the European pay-TV service that Rupert Murdoch helped launch in the late 1980s. Fox owns 39 percent of the satellite TV service, but it has been striving for more than a year to buy the remaining 61 percent.

The Murdoch family’s unpopulari­ty in some British political circles, and the lingering stain of the British tabloid phone hacking scandal from six years ago, has become a drag on that deal. The more recent sexual harassment scandals engulfing Fox News – including allegation­s against Roger Ailes and Bill O’Reilly – have also slowed the process.

Murdoch said Thursday that if Fox fails to win British regulators’ blessing next year for its Sky deal, then it will be Disney’s problem – not his. (Disney will take over Fox’s stake in Sky as part of the deal.)

Murdoch may also have been “thinking about his family going forward,” Wright said.

He has long intended to leave his empire to his sons to manage. But for the last year and a half, the three Murdoch men have been managing Fox in a power-sharing arrangemen­t that has been awkward at times. By selling so much of the assets to Disney, the eventual management of the company should be less sticky.

The family may want to consolidat­e the slimmed-down Fox and News Corp. and “go back to where they were,” with one or more of the sons being in charge, Wright said.

The new setup could ease conflicts that could arise when Lachlan and James Murdoch are left alone to jointly manage the business. Murdoch has long wanted his sons to collaborat­e to run the company.

“But it’s always difficult for two people to share one job,” observed one Fox insider who was not authorized to comment.

Many analysts have speculated that James Murdoch, the ambitious younger son, who has served as Fox’s chief executive, might move over to Disney. Iger, for his part, didn’t rule that out.

“James and I have had a lot of conversati­ons about the future of these companies,” Iger said on a separate conference call. “He will be integral in helping us integrate these companies over the next months and, during that time, he and I will continue to discuss whether there is a role for him here or not.”

But even as Rupert Murdoch jettisoned a huge chunk of his company, the billionair­e still seemed to show his moxie during his conference call with Wall Street.

“Those of you who know me know I am a newsman with a competitiv­e spirit,” he said. He delighted in telling analysts that when satellite TV mogul Charlie Ergen briefly dropped Fox News Channel from Dish Network during a contract dispute a few years ago, “he lost 150,000 customers.”

“He didn’t sound like a man who was looking to play more golf,” said Michael Nathanson of MoffettNat­hanson.

Martin, the Needham & Co. analyst, agreed.

“Never put a billionair­e in a corner,” she said. “I’ll be very interested in seeing what he does with Fox News and the broadcast (network)... Do not count him out. I think he’s going to surprise us.”

 ?? (Dennis Van Tine/Abaca Press/TNS) ?? RUPERT MURDOCH attends the 2017 WSJ Innovator Awards at the Museum of Modern Art in New York City last month.
(Dennis Van Tine/Abaca Press/TNS) RUPERT MURDOCH attends the 2017 WSJ Innovator Awards at the Museum of Modern Art in New York City last month.

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