After more than 50 years of deal-making to build one of the world’s biggest media companies, Rupert Murdoch looks to be on the retreat. Cornered by the Fangs – as the tech giants Facebook, Apple, Netflix and Google are known – the ageing executive appears to have decided that its time to cash in and give up on a long-held ambition to hand his huge empire on to his children.
Until recently, Murdoch-watchers had assumed the patriarch planned to pass control of 21st Century Fox, his studio and TV business, over to one of his sons, Lachlan or James. Now the jewels in his crown look likely to be sold, with one-time rival Walt Disney in pole position to take them over.
Disney wants the Hollywood studio Twentieth Century Fox, Fox 21 Television Studios, US cable networks including FX and National Geographic, international assets including the fast-growing Star India business, Fox’s Latin American assets and its 39% stake in UK satellite broadcaster Sky.
The Murdochs would keep control of Fox News, Fox Sports and the Fox broadcast network, in a deal that could reportedly be announced as soon as this week. Even if the Disney talks founder, the cable giant Comcast seems keen to make a play.
The $60bn sale would leave the family, whose fortune is already valued by Forbes at $14bn, wealthy for the ages. But the sale also looks like an admission of defeat. A new generation is taking control of the media and the Murdochs are yesterday’s men.
Or is there another game afoot? Brian Wieser, senior research analyst at Pivotal Research Group, was as surprised as anyone by the Murdochs decision. “There are economies of scale in media,” he said, and the deal is easy to justify on that basis. But the Murdochs had always seemed more interested in legacy and influence than straight financial rationales for deals. “The rationale is less interesting than the catalyst,” he said.
What triggered the Murdochs to make this decision? After spending years chasing scale, they may have concluded that scale is a fool’s game when you are competing with behemoths like Apple. The sale has been reported to be worth $40bn-$60bn. Apple has $268bn in its overseas bank accounts.
One former senior Murdoch lieutenant, speaking anonymously, said: “It makes sense on so many levels. With the exception of movies, all of these businesses are monetizing content through advertising, and that business model no longer works. The Murdochs have realized that the subscription businesses are going to kill them.”
The businesses the Murdochs are keeping are also reliant on advertising, of course – including News Corp, the separately listed company that publishes the Wall Street Journal and New York Post in the US; the Times, Sunday Times and Sun in the UK; and a stable of Australian newspapers.
However, the deal would allow Rupert Murdoch to return to his first love: news. With Fox News and News Corp, Murdoch will continue to have the ear of the political elites in the US, UK and Australia, but with less of the hassle of competing in fields that are increasingly dominated by the tech companies he fears and dislikes.
Also last month, the Federal Communications Commission, the top US media regulator, moved to relax media ownership rules in local markets – a move that could allow Murdoch to go on a buying spree with his tinseltown money.
Then there’s the succession battle. On Friday, the Financial Times reported that James Murdoch, who as 21st Century Fox chief executive will have the business he runs broken up if the mooted deal comes off, is expected to part company with his father, either by joining Disney or launching his own venture. This would leave Rupert and Lachlan Murdoch to run the remaining TV assets, including Fox News, and News Corp.
James has been tipped for a senior role at Disney if a deal is struck – possibly taking over from the highly rated chief executive Bob Iger when he steps down. Iger has said he will leave in 2019, but that may be delayed if a deal is done so he can help integrate the Fox businesses.
Such a move will not sit well with the Murdochs’ many critics. Father Seamus Flynn, chair of the Interfaith Center on Corporate Responsibility, which represents nearly 300 organizations that manage over $100bn in assets, including Disney and Fox shares, has been a longtime critic of Murdoch management. No matter what the companies say if and when a deal is struck, he feels it is unlikely that the Murdochs will have any long-term influence over Disney.
“Disney is a much better-run company and I am not sure that James is the right man for the job,” he said.
There are many roadblocks ahead for James Murdoch. For one, during the phone hacking scandal that rocked Murdoch’s UK newspaper businesses, he “repeatedly fell short of the conduct to be expected of him as a chief executive officer and chairman”, according to the UK media regulator, Ofcom. That issue, and others, has threatened plans to take full control of Sky.
Secondly, with Hollywood reeling from a series of sexual harassment scandals, a senior hire from Fox, which has seen more than its fair share of harassment cases, might not be popular with Disney staff or shareholders. And third, while Disney has struggled to find a successor to Iger, there are many strong internal, and external, candidates.
But for Rupert Murdoch, the chance to roll the dice one more time, bank billions, build his news business, end a family squabble and potentially position his son to run the world’s biggest media combine may be too good to miss. Better still, if he’s right and Hollywood is burning, he can watch from the sidelines bathed in cash and schadenfreude.
