‘We are pivoting at a pivotal moment’: understanding the Fox-Disney deal

‘We are pivoting at a pivotal moment’: understanding the Fox-Disney deal

Nick Ferris explores the recent Fox-Disney deal, while exploring the life and thinking of its former owner and ‘The Man Who Owns the News’, Rupert Murdoch

Rupert Murdoch has made a move that few would ever have predicted in agreeing to sell the majority of assets held by 21st Century Fox. The $66bn (£50bn) deal includes the 20th Century Fox film studio, national US cable networks like FX and National Geographic, a 39% stake in British pay TV service Sky, and the Fox Networks Group – Fox’s international network of channels that broadcasts in 45 different languages, and reaches 1.725 billion households worldwide.

The Australian-born Murdoch’s media business began in 1952 when he inherited the family’s newspaper, The Adelaide News, at the age of 21 following the death of his father. His business mantra since then has been deemed by all accounts to be one of buy buy buy – firstly as a newspaper man in Australia and the UK, before setting his sights on the USA and ultimately branching out into film and television production.

Murdoch’s fundamental strategy has been to focus on growing his business, rather than to focus the quality of his media output. Sure, he might have acquired The Times and Wall Street Journal to cement his status and establishment credentials – but his main news-focus has always been to express the popular conservative agenda that has made his newspaper and television businesses so successful across the world. This can be seen in his purchase and subsequent renovation of The Sun in 1969, transforming it into a fiery red-top tabloid with sensational stories, a conservative undercurrent and page three girls. He equally transformed The NewYork Post, buying it in 1976 and turning it from a highly-respected liberal broadsheet to a conservative tabloid along the same lines as The Sun.

The sell-off last week therefore signalled to many a stark move away from Murdoch’s traditional entertainment-based high-growth strategies. The Financial Times wrote that ‘an era of empire-building that started with The Sun deal… abruptly ended this week’. Andrew Neil, a former editor of Murdoch’s Sunday Times described the move as ‘the end ofa lifetime’s ambition,’ while Vanity Fair quotes oneformer executive as calling it ‘total surrender’.

The threat of new multimedia platforms

To simply view Murdoch’s strategy as seeking growth and financial gains based purely on the same mantra as that of popular entertainment is to underestimate what it takes to be as successful as he has been. In reality, the reason he has been so much more successful than his contemporaries is because of his endeavour to remain at the forefront of all media formats and innovations, and to never grow complacent.

Murdoch once said “the world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow.” Based on this idea of remaining ‘fast’ rather than complacent, he was able to lead the way in the vast majority of media-businesses he has tried his hand at – most notably in the growth of populist newspaper formats and pay-tv providers in the latter half of the Twentieth Century.

Now, however, he faces a new challenge. While he is still aware of the new, up and coming ‘fast’ approach – the growth of online, multimedia platforms – he has in recent years been unable to meet its demands. In 2005 he acquired Imagine Games Network, the owner of social media website Myspace, for $580 million. This foray into the world of online media was mismanaged and not a success; in 2011 he sold off the dying Myspace for $35 million dollars.

Having failed to beat the online challengers at their game, Murdoch then saw his natural counter-move as one of consolidating conventional competition into something stronger. In 2014, he attempted an $80bn takeover of Time Warner, the owner of CNN and HBO – but was thwarted by regulators at the Justice Department.

Regulatory problems have similarly hindered his ambitions to buy the 61% of Sky he does not already own. As recently as May this year there were reports of Murdoch attempting a bid for Tribune Media, the owner of several newspapers and television stations.

The sale to Disney is akin to an admittance from Murdoch that he has failed to consolidate assets himself, and must therefore sell them off to allow others to do so in order for those assets to survive and prosper. But this move in itself is an affirmation of the very reason he has been so successful in business: not because of vain ambition, but because of a strategy of remaining at the forefront of business developments. Thus it is so, that a long-term move to prevent future potential financial problems – the consolidation of his and Disney’s assets – trumps any desire to hold onto Fox’s assets simply to maintain the huge scale of the original media business. ‘

Disney chief Bob Iger is similarly aware of the need to address non-conventional media competition. In recent years Disney has acquired Pixar Animation Studios, Marvel Film Studios and Lucasfilms – all production companies in possession of consistently marketable and profitable brands. It was announced, too, this year that Disney will pull all its movies from Netflix to start its own streaming service – and now it will be able to add Fox movies as well. Disney is not a declining or complacent company by any means, and Murdoch would have been attracted to that.

Murdoch might be admitting that he is no longer certain of the continued prospects of his film and television assets if they are to remain as they are. Yet it is arguably more a tactical, pre-emptive avoidance of commercial defeat than an outright defeat in itself – which in turns signifies the continued success of his business acumen.

A question of legacy

 It must also be remembered Murdoch is 86 years old and inevitably looking to secure his legacy. Rather than have that legacy being an incohesive and unspecific array of differing media companies without certain financial prospects, Murdoch has decided to centre that legacy around his first love: news and newspapers. “Are we retreating? Absolutely not,” said Murdoch in a conference call following the announcement of the deal. “Those who know me know I am a news man with a competitive spirit. Fox News is probably the strongest brand in all of television. We are pivoting at a pivotal moment.”

Murdoch is a conservative at heart, and news is his self-confessed first love; the “pivot” to which he refers is a realignment of his priorities to focus on news. To that end, Murdoch said on Sky News that in two or three years time he might look to merge his remaining 21st Century Fox’s news assets with News Corp, the holding company for his publishing and print media ventures.

At a time when many proprietors of newspapersand print media are questioning the continued viability of their businesses, Murdoch must be able to see a future for his own ventures. Indeed, Trump and Murdoch are in many ways an ideal tie-up. For where Murdoch panders a conservative agenda whose historical success has been dependent on his ability to entertain through news, Trump is a conservative president who cannot help but entertain in nearly everything he does. The two men certainly have a close relationship, reportedly speaking every day.

In re-focusing his business on news and newspapers, Murdoch has also indirectly indicated another aspect of his legacy: his successor. By breaking up 21st Century Fox, of which his son James is the CEO, Rupert is effectively factoring James out of the business to make Lachlan, his eldest son and co-executive chairman of News Corp, his successor.

The Guardian reports Claire Enders of Enders Analysis suggesting that it is “a fundamental parting of ways between James and his father… Fundamentally, Rupert believes that his son has not made a
great fist of running the entertainment assets.” Not that this deal is to completely leave James out; it has been widely suggested that he could have an executive role in the newly-enlarged Walt Disney Company.

A re-focused strategy for the future of the business

The Fox-Disney deal has been to secure Murdoch’s future strategy and the future of his companies more generally. Having failed to meet the demands of new online streaming companies and competitors in visual media platforms, he is to sell off those businesses affected, rather than watch them gradually decline. He will focus then on his true passion: news, and the disseminatingof his particular brand of populist, entertainment-focused stories. Further, in re-focusing his agenda in this way, Murdoch clearly signifies his son Lachlan to be his successor. It would seem that the son who left the business in 2005, but returned in 2014 to lead the family businesses alongside his father, is set ultimately to take over the family company for good.

Image credits: Creative Commons

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