This has been a big, bumpy month for the Rupert Murdoch-controlled News Corporation, marked by:
- UK Government approval to acquire the 61% of pay tv operator BskyB he does not already own
- Sale of the once mighty (but now loss-making) My Space social network site for $35m just six years after it was bought for $580m
- Another former News of the World employee arrested in the still-growing phone hacking scandal
- Cashflow. For most of the last 25 years, Murdoch’s newspapers in the UK, US and Australia have contributed some 50% of group profits. Even today, the film/TV-dominated group derives 20% of its revenues from newspapers.
- Promotion for his pioneering pay TV especially in the UK where BskyB has become a $12bn business
- Political influence to facilitate his expansion across sectors and countries, and to lobby against ‘unfair’ competition eg the BBC
1. Media visionary
2. Fearless risk-taker and gambler
Murdoch’s maternal grandfather was an inveterate gambler and this might have contributed something to News Corp’s white knuckle ride. It has frequently taken life-threatening risks. Murdoch’s acquisition of the then loss-making Times Newspapers in the UK (a risk in itself) was followed by the ultimate 1980s risk in building a union-busting, cost-slashing newtech printing plant in London’s docklands. In the US, his $3bn acquisition of the legendary TV Guide (later sold, humiliatingly, for a fraction of what Murdoch paid for it) and the launch of his then unlicensed Sky TV in the UK almost broke the whole business. The launch of Fox TV and the roll-out of Star TV across Asia represented similarly huge risks but were being taken then by a corporation (and an individual) with the strength, confidence and track record of (mostly) winning the big bets. Winning big with James Cameron’s over-costed movie “Titanic” was a watery picnic by comparison.
There is a pattern. Murdoch’s decision so transparently to over-pay for TV Guide was based on his urgent conviction of its vital role in the planned buildup of the Fox TV network in the US, and his desperation to pre-empt an auction. (However, he misjudged the pacy decline of the hard copy TV listings market in an era of multiplying channels and electronic programme guides) . The Sky-BSB merger in 1990 had Murdoch on song, playing poker with Granada and Reed International: the sleepy UK blue-chips were desperate to stop their own losses but blissfully unaware that News Corp was itself teetering on the brink of bankruptcy. The lift-off of the merged Murdoch-led BskyB even came courtesy of Granada/ Reed’s own cash, without which Murdoch would have folded first. It was flawless poker but a “game” which Murdoch said had aged him 20 years. But that was 20 years ago. Arguably, paying $5bn for the Wall Street Journal in 2007 (25 years after failing to acquire the Financial Times) is another of those corporate risks. However, unlike TV Guide and Sky, nothing Murdoch invests in today (not even My Space) risks the survival of the $32bn-revenue News Corp.
One thing that characterises Murdoch from other corporate gamblers is his self-awareness, almost humility (well,sometimes anyway). Once his mistake with TV Guide was clear (and even before he decided to write it off) Murdoch was quoted as saying “perhaps I was a bad buyer, too keen”. That is the stuff, of course, of someone who learns from his mistakes and is not too proud to admit them. That is, you suspect, why Murdoch has never tried to suppress any of the unflattering and sometimes quite damaging biographies about him, when (in the UK, in particular) he certainly has had those legal opportunities.
3. Relentless ‘driver’
4. Political manipulator
The rewards for this political flip-flopping may, perhaps, be seen in the decision by Mrs Thatcher to wave through the Sky merger with BSB even though Murdoch already controlled four national newspapers and had a ‘share of voice’ that would have been constrained but for a loophole because the competition laws of the time had pre-dated any notion of broadcasting from outside the UK (ie by satellite). Forward to June 2011 and the decision to allow News Corp to acquire full ownership of BskyB has been approved after reviews not of the concentration of media ownership but solely with reference to “preserving” the independence of Sky News.
Many observers (led by Murdoch’s nemesis The Guardian) had expected the UK ministerial review at least to involve the News of the World phone hacking scandal and to consider whether it compromised News Corp’s suitability to manage such a large proportion of the nation’s media. But no. Some politicians conducting the Parliamentary hearings into the scandal dramatically claimed they were apprehensive about questioning News Corp bosses too stridently for fear that they would be investigated by the company’s newspapers. However, the widening phone hacking scandal (still predominantly involving only the News of the World) does make this a potential smoking gun for Murdoch and many of his key people, including his son James. This is one story that may already have moved beyond Rupert Murdoch’s control and the influence of his political supporters.
Murdoch is a driven man but one who is strikingly less confident about his own commercial powers than are his competitors. His competitive paranoia – and often open respect for rivals – feeds an impatience and moodiness when his executives make mistakes or miss opportunities. Murdoch is motivated by the moving target of success; and one of his lifelong business strengths has been his lack of personal vanity. He cares little about what other people (even investors) say about him and his business decisions. He is not looking in the mirror. There’s always something to do, some risk to be faced – or a scrap to take on. You’re never too big to lose. Echoing a familiar theme of his father’s, James Murdoch recently asserted that News Corp was by no means a dominant media player when rated against companies like Apple, Microsoft et al in a modern view of the worldwide industry. More than most, Rupert Murdoch understands the shortening life cycle of media and communications businesses, and the need to respond quickly to the changing environment. Nobody ever said he was complacent.
It is too early to write any kind of obituary for Rupert Murdoch but News Corp’s stuttering online performance (underscored by the My Space fiasco) are naturally being linked with the 80-year-old’s personal limitations on digital media he does not understand. His continued affection for newspapers may today be starting to look more like a weakness than the corporate strength it has demonstrably been for half a century. The BskyB acquisition is now expected to happen, albeit with fund managers pushing for a price that may be a mighty $3-4bn more than Murdoch expected to pay when he set out on the politician campaign to win UK Government support for the bid.
It is a deal now that almost “must” happen. And for the man with a celebrated history of paying high for strategic deals (and, mostly, also over-delivering hugely) is there really a price that will be unacceptable? But times are changing for Rupert Murdoch, as investors ponder the company’s longterm term future after him. It would be cruelly ironic if News Corp’s acquisition of that most successful of Murdoch-led enterprises – the world’s best pay TV network – proved to be something other than a triumph of a last big deal for the media visionary. Paying too much for BskyB may just be as dangerous to Murdoch’s control of News Corp as the launch of Sky was to its survival 20 years ago. However, more worrying for the Murdoch legacy is the UK phone hacking scandal which has the capacity to undo all the political influence so carefully weaved over the years – and to damage News Corp financially and legally (the US regulator, FCC, is watching). Such developments could yet prompt anxious big-hitting shareholders to force his exit. That might become the scrap he cannot not win.