Disney sale trims Murdoch empire back to what he knows best
Murdochs will still be left with a substantial media empire centred around the businesses they are most comfortable with: newspapers and traditional TV.
Rupert Murdoch enjoys nothing more than a good gossip and, if he is in town, likes to pop into his editors’ offices at the end of a working day to hear the latest — and to pass on his own view of the world. I have a memory of him coming into the Sunday Times one Saturday night after the paper had “gone to bed” and holding forth on his latest enthusiasm — The Simpsons, a new animated American TV series coming out of his Twentieth Century Fox studios in Hollywood.
None of us had even heard of it and we all looked bemused as he went on about Bart and Homer Simpson, who, he said as he departed, we were “going to hear a lot more of". He would lay on a screening for us, at which few of us saw what he did. Today The Simpsons is one of the biggest assets in global TV, generating billions in revenue for 21st Century Fox, the heart of the Murdoch empire. It is also one of the prize assets which Walt Disney Co is now acquiring from him in a deal worth $66 billion (Dh242bn), including debt.
For months Disney has been trying to persuade Mr Murdoch to sell the Simpsons along with a large chunk of Fox’s media assets, including the Fox movie and TV studios, its highly profitable cable channels and its regional sports networks. After months of on-off talks, during which the giant cable network Comcast (it owns NBC-Universal) and Viacom approached him, a deal has finally been agreed under which Disney, besides the US domestic businesses, picks up key international assets including a 39 per cent stake in the UK-based Sky pay-TV company, as well as Star TV, which is growing rapidly in India, and Fox’s stake in the Hulu digital streaming service. According to YipitData, which monitors these things, a combined Disney and Fox would own almost 20 per cent of the TV shows aired on Netflix, making it the second-largest provider of content to the streaming service after CBS. Neither company, increasingly concerned by the rise of Netflix and Amazon, could have done that on their own. And Murdoch knew it.
In Murdoch’s heyday it would have been the other way around – he would be buying Disney. He did try – twice – to take over Time Warner which would have given him the scale needed to stay in the ferociously competitive market which the US media industry has become as the tech giants have moved in. And he has held talks with Disney over a number of years but always had the door slammed in his face. Baffled by the internet, in which — like so many newspaper proprietors — he has lost hundreds of millions, he bought the Wall Street Journal and for the past four years has been battling with UK regulators to get full control of Sky.
Age has not dulled his ambition, but it has taken its toll on his energies and his ability to keep up with fast-moving trends which could engulf him. The internet came out of nowhere to wipe broad swathes of value out of his newspaper business which he confessed he lost control of, forcing him to spin it off into a separate company and close his beloved News of the World. He bought into social media through MySpace and failed miserably, losing another couple of billion. He has also been facing up to the reality that Google and Facebook are killing his advertising revenues. And now there is streaming media, which he did not see coming and which could undermine his whole empire.
So when Disney offered him $60bn (in shares) for a large chunk of assets from his 21st Century Fox corporation, he was interested enough to enter into discussions, which broke down after they leaked in his own Wall Street Journal. Now comes the announcement that agreement has been reached on a deal that effectively puts a value on Fox stock of $40, against $27 only three weeks ago.
In many ways, the deal suits the old man just fine. The Murdoch family owns 17 per cent of Fox (worth $10bn at the offer price), but has kept a tight control of it through special voting shares. That will translate into a 5 per cent stake in Disney, which, given the benefits which both sides think will accrue from the deal, is an attractive investment. It is still unclear if Rupert’s son James, Fox’s chief executive, will join Disney following the deal or strike off on his own, but what is clear is that the Murdochs will still be left with a substantial media empire centred around the businesses they are most comfortable with: newspapers and traditional TV.
The remaining Fox assets will be spun off into a separate company which will keep the Fox News cable channel that Murdoch founded from scratch and which he is inordinately proud of, the Fox broadcast network and the Fox Sports 1 channel, all dear to his heart. It will also retain some valuable properties, including a studio lot in Los Angeles.
The big question now is: will he re-merge the media empire he broke up a few years ago in the hope of persuading the UK regulators to let him buy Sky? The Murdoch family controls 39 per cent of the separately quoted News Corporation, owners of the Sunday Times, Times, Sun, the New York Post and of course the Wall Street Journal for which he paid $5bn. It has a market value of $9.5bn, about the same size as the rump of Fox. That gives him what he enjoys most: political influence, both in the US and the UK.
It should be enough to keep him busy in his twilight years.
Updated: December 14, 2017 11:00 PM