Rather than the foundation of a bold new venture, in his call with analysts yesterday Rupert Murdoch talked about “New Fox” as if it would be a nice annuity for shareholders. He and his sons could surprise me by marshalling their great wealth and launching a new offensive on the media status quo, but I’m not betting on it.
Disney Deal May Be Murdoch’s Last Hurrah
For four decades, the biggest job in television was to run a broadcast TV network with a string of major market TV stations and a bunch of sometimes unruly affiliates.
Even though FCC rules essentially barred them from owning Hollywood studios, ABC, CBS and NBC dominated the medium. A network boss like Bill Paley was something to be — a true media mogul.
But starting in the late 1980s, cable began siphoning away viewers and revenue from broadcasting and its networks. Then, over the last several years, the internet has emerged as another powerful challenger, further marginalizing the networks.
Today, the Big Four networks are mere divisions of giant vertically integrated media conglomerates — Disney, Comcast, 21st Century Fox and CBS. And the conglomerates are under increasing pressure from media newcomers from Silicon Valley — Facebook, Amazon, Nexflix and Google.
What I’m saying is that the broadcast network is not the center of the TV universe anymore, hasn’t been for 30 years. And running one doesn’t quite fit with my image of Rupert Murdoch, always looking to the horizon and determined to get there first.
But that is exactly the job he has carved out for himself with his deal to sell the Hollywood studios and most of the cable programming assets of 21st Century Fox to Disney.
What’s left is a broadcast network circa 1985 — that is, a network without a programming arm — Fox News Channel and a few other national cable networks that are mostly potential.
It’s early, I know. But Murdoch and his sons James and Lachlan failed in their public comments this week to articulate any strategic vision for what they are calling New Fox during the regulatory review.
The senior Murdoch told analysts yesterday that he is interested in buying more TV stations, but that’s what all owners of TV stations say when they get on those calls.
Fox may opportunistically buy a few more stations as it has over the past several years, but I have heard nothing to suggest it will try to substantially increase its footprint. (Under the newly liberalized FCC rules, it could stretch that footprint from 37% of U.S. households to as much as 66% if it wanted to.)
Over the last week or so, as it became clear that the Disney deal was coming together, there was talk that Murdoch might merge New Fox with his newspaper publishing company, News Corp.
That was intriguing. If the FCC prohibition against common ownership of newspapers and TV stations in the same market finally goes away, perhaps Murdoch could create something new and exciting by combining the resources of local papers and TV stations.
But on the analysts call, Murdoch knocked down such speculation. “We haven’t thought about combining with News Corp.,” he said. “If we do it, it’s way, way in the future.”
Rather than the foundation of a bold new venture, Murdoch talked about New Fox as if it would be a nice annuity for shareholders.
New Fox will have revenue of $10 billion and free cash flow of at least $2 billion, he said. “We will start modestly on the dividend side and then we will see [about acquisitions] from there.”
I have to agree with Bob Wright, who told the Los Angeles Times, “It is a clear retreat. …It clearly is the end of an era of expansion for Rupert.”
Murdoch disputed this notion on the analyst call, saying that he is “absolutely not” retreating. “We are pivoting at a pivotal moment.”
But he undercut the assertion by offering no hint of what he was pivoting to.
The kindest analysis may be to say Murdoch is making a strategic retreat. TV is a land of giants, and if you can’t be one, it’s best to get out of the way. Recall that he tried to buy Time Warner, but was rebuffed by management.
Murdoch’s redoubt in this retreat is broadcasting, but it is not as safe as his dividend comment would have you believe.
As he made clear in an interview with Fox Business Network this week, Murdoch understands that linear TV’s days as a medium for recorded entertainment are numbered. “The old broadcast ‘Must-See’ TV brand is dead, no matter who tries to revive it.”
What is not dying and what is broadcasting’s best hope is live entertainment, sports and news. So, I would expect New Fox broadcasting to focus sharply on those.
On the analysts call, Murdoch blew off a question from analyst Michael Nathanson on the future of NFL and MLB rights.
But it was absolutely the right question. If Fox is unable to renew its rights for Sunday NFL and the World Series in the next few years, it will be in deep trouble the next time it sits around the retrans negotiating table. I don’t need to remind you that it is primarily retrans that is driving growth for the networks and their affiliates these days.
Looking at the Murdoch’s remaining assets, I see New Fox has at least one strategic opportunity. By drawing on the cable news channels and the local newsrooms, it could inject national news into the network. It’s not much, but it’s something.
Recorded linear TV may be dying, but it isn’t dead yet. So, Murdoch’s other challenge will be to find winning primetime shows. That hasn’t been easy for Fox lately and it’s unlikely to get easier after it spins off its Hollywood assets to Disney.
On the analysts call, Murdoch downplayed the problem, saying there are plenty of places to go for programming, including Sony and Warner Bros. that don’t have rival networks in their corporate families.
It’s ironic that Fox will find itself without a companion studio. He and Barry Diller built Fox on the back of 20th Century Fox.
And to grow the network, they had to break down FCC rules that barred common ownership of studios and networks — a move that not only allowed Fox to flourish as a part of a vertically integrated media company, but also, eventually, its rivals — ABC (Disney), NBC (Universal) and CBS (Paramount/CBS Studios).
Look, the Murdochs could surprise me and many others by marshalling their great wealth and launching a new offensive on the media status quo. The Fox network would be a good base of operation for the assault.
But I’m not betting on it. Rupert is 86, and neither James nor Lachlan has demonstrated that he has inherited his father’s entrepreneurial heart.