Murdoch Solves Empire Succession by Getting Rid of the Empire
Disney ends Murdoch’s ultimate-media dynasty with a $52 billion buyout deal
(Bloomberg) -- For decades, investors, analysts, busybodies, columnists and gossips have loved to chew over the ultimate media-dynasty question: When Rupert Murdoch was at long last forced to step down -- whether for age, coup or scandal -- which of his children would assume the throne of his vast empire? James or Lachlan or Elisabeth? Now we know the answer.
There will be no vast Murdoch empire to inherit. There will be no throne.
On Thursday, Walt Disney Co. announced it has agreed to pay $52.4 billion to acquire much of the sweeping territory Murdoch spent a lifetime assembling. Among other assets, Disney will take control of 21st Century Fox Inc.’s TV and movies studios, its slate of cable TV networks, including FX and National Geographic, its stakes in the satellite-TV networks Sky and Star India, and its 22 regional sports networks. It may even get one of Murdoch’s children in the bargain: James is expected to help Disney with the integration process and may stick around to play a larger role.
Not that Murdoch is out of the picture entirely. He’ll still rule over a major broadcast network, a cable sports channel and Fox News. In an interview with Sky News, Murdoch said he will remain executive chairman, likely with his eldest son Lachlan as chief executive officer. And the Murdochs will hold a stake of more than 4 percent in Disney, ranking them among the largest shareholders. But that’s hardly an empire. In a world increasingly dominated by global tech giants, it’s more like a province. Maybe an enclave.
Jockeying for Control
Perhaps, as some have speculated, the new Fox will reclaim the newspaper and publishing assets Murdoch spun off in 2013 into a separate company, News Corp. But even if that happens, the resulting company will be minuscule in comparison with the sweeping realms of Amazon, Google, Facebook and Apple, all of whom who are jockeying to control the future of media, news, information and entertainment.
“The Murdochs spent all year talking about how they had scale,” says David Folkenflik, the author of “Murdoch’s World: The last of the old media empires.” “And then suddenly they were like, we have to sell to someone else so they can get bigger, so they can fight the giants. It’s too much for us.”
In the wake of the Disney deal, questions about family-power dynamics will surely persist. But the stakes will be dramatically lower. There is no longer a pressing need to find some brilliant global visionary to replace the patriarch and deftly navigate the complex, multi-variable calculus of the emergent global-streaming sphere. For Fox, the challenges and opportunities will be much smaller, much less daunting.
‘Next Great Leg’
Murdoch, for one, says the sale to Disney is not a retreat. It’s a pivot. “With today’s announcement, we launch the next great leg of our journey,” he said on a call with investors Thursday. “The world of media has obviously been undergoing rapid change. New technologies, competitors and shifting consumer preferences have redrawn the whole media map.”
And diminished Murdoch’s place on it.
It’s to Murdoch’s credit that he recognized sooner than most of his peers the existential threat Alphabet Inc.’s Google and its ilk posed to the expansive media empires of the last century. These days, you can’t go five minutes at a future-of-media conference without everyone fretting about the so-called online advertising “duopoly”: Google and Facebook Inc. will rake in 63.1 percent of all digital-advertising spending in the U.S. this year, according to eMarketer. For everybody else, that leaves just crumbs.
Redstone’s Mess
Murdoch, for one, is cashing in his chips. Along the way, he is doing the kind of empire estate-planning his onetime rival, media mogul Sumner Redstone, long neglected. That inadvertently touched off one of the most tangled and bitter succession battles ever.
By trimming his empire now, Murdoch may be saving his own heirs from a similarly bloody fate. Ultimately, it’s a practical move, somewhat out of character for the serial acquirer.
“This is the end of an era,” says Tom Watson, deputy leader of the U.K.’s Labour Party, who played a key role in the campaign against phone hacking at Murdoch’s newspapers in 2011. “The Murdochs, after 30 years of aggressive empire expansion, are now in retreat.”
--With assistance from Anousha Sakoui
To contact the reporter on this story: Felix Gillette in New York at fgillette@bloomberg.net.
To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, David Gillen at dgillen3@bloomberg.net, Rick Schine, Melinda Grenier
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