The question the media community has woken up to this morning is, “why on earth would Rupert Murdoch sell now?” Details of the proposed Disney and 21st Century Fox deal are at best a bit sketchy, and at worst propaganda released by Murdoch’s own publications, but there is little doubt that for the first time in his life Rupert is selling rather than buying. Given leopards rarely change their spots, it’s interesting to speculate as to why this may be.
The most obvious answer is first mover advantage. There is little doubt that there are too many film studios in an era of cost synergies and heavy-handed accountants, so rather than wait for the inevitable, it appears that the he has decided to strike first, while he can. The US economy is strong, the political climate favours his historical political agenda and the dynamics of the market are being heavily disrupted by new players such as Netflix and Amazon.
Rather than being forced into a defensive strategy, he has cleverly realised that he is better off doing a deal on his terms. Knowing full well that his terms would be supported by Trump, who has already praised the deal for “creating jobs”. (Let’s not forget that this is the same president who has blocked an AT&T and Time Warner partnership.) However illogical Trump may be, Murdoch is canny enough to know he has him on side and that a Trump style presidency is a once in a lifetime opportunity.
A second reason could be a strategic realignment back into core competencies; and ink runs through the Murdoch blood. Ink may not be relevant anymore, but certainly what he has always understood is news. He describes himself as a "newsman with a competitive spirit", and this could be a very simple return to type.
While he has been a very successful proprietor of the studio business, it is not core to what he is interested in. Of late studio performance hasn’t been up to expectations and the New York Times suggests they have “struggled to keep pace with the changing way younger audiences view content — namely on an internet-connected device.” Thanks to Harvey Weinstein and others, the timing to get out could not be more perfect.
But most importantly he knows that he is not immortal, and the likeliest argument is that he is desperately trying to create a successful legacy for his sons. And that could manifest in two ways. The first way being that Lachlan wants to run the traditional news related business, and James wants to run the entertainment business. The deal further cements this. In which case, James’s ascension to the CEO role at Disney when Bob Iger retires, will absolutely be locked into the deal (even if they are saying otherwise).
The second way being the potential for the family to pivot into other areas of business, and use the massive financial windfall to do so. While the $68 billion would only buy the Berejiklian government another 22 redundant stadium upgrades, it’s still a vast amount of money. Lachlan is obviously close to James Packer who has become his own man by moving the family business into gambling and away from traditional media. So perhaps we could see a major shift into new areas, or a minor shift into adjacent business categories. The phenomenal success of REA group will surely not have gone unnoticed.
Regardless of happens with Rupert and the Murdoch’s, this certainly signals that 2018 will likely be a year of interesting media deals, both globally and locally.
By Speed CEO Ian Perrin