At the Allen & Co. media confab in Sun Valley last week, Rupert Murdoch walked less briskly than he did just a few years ago, his shoulders stooped, his head shorn of all but a stubble of white hair, making him look his age (eighty-three). But Murdoch’s mind has not slowed. He attended the morning panels, listened intently, and near the conclusion of many he rose to ask acute questions. Nor has he lost his ravenous appetite to acquire media businesses. On Wednesday, the Times revealed that Murdoch has made an eighty-billion-dollar bid to digest Time Warner, a television and movie company whose revenues and profits outpace his Twenty-First Century Fox.
Neither lack of appetite nor excessive caution has ever hindered Murdoch. His father died when he was just twenty-two, leaving him two frail Australian newspapers, one of which was sold to pay taxes. Within a decade, Murdoch had built an Australian newspaper empire. Hungry for more, he eyed England, where, in 1969, he swallowed the News of the World, a tabloid with a circulation of six million. He bought three more newspapers there, eventually claiming a third of daily newspaper readers in the U.K. Unsatisfied, he bounded across the Atlantic to acquire media holdings in the U.S., including the New York Post, New York magazine, TV Guide, and Harper Collins. Unlike the old press lords, like Hearst, Beaverbrook, and Luce, who were dominant in a single country, Murdoch now reigned on three continents. And his appetite was not restricted to print. He acquired TV stations and the Twentieth Century Fox Studios, and defied naysayers by launching the Fox Broadcast Network and satellite networks and platform that sweep across Europe, China, and South America. Nor is this the first time Murdoch has sought to buy Time Warner. In 1984, he purchased seven per cent of what was then Warner Communications, saying that he would buy more; he was foiled when Warner’s C.E.O., Steve Ross, persuaded Chris-Craft Industries to purchase a fifth of the company. In 1995, Murdoch directed his lawyers and investment bankers to come up with a plan to block Time Warner’s purchase of Ted Turner’s empire by making a bid for both companies. This plan also fell through. But these moves demonstrate Murdoch’s constant yearning to own more content, to gain more leverage.
Today, that leverage seems to have shifted to those who own Internet platforms. As Brian Roberts, the C.E.O. of Comcast, and Randall Stephenson, the C.E.O. of A.T. & T., appeared on one of the Sun Valley panels, there was a palpable anxiety among the network executives and content creators in the room. With Comcast’s upcoming purchase of Time Warner Cable, and A.T. & T.’s acquisition of DirecTV, two dominant broadband providers will also control two dominant television platforms. This fear mingled with concern about Google, Apple, Amazon, and Facebook’s efforts to expand their television and movie offerings, and divert some of television’s sixty-five billion advertising dollars. But if Murdoch could acquire Time Warner products like HBO (which, without ads, generates close to two billion dollars of income), Warner Bros.’ film and top-ranked television studios, and cable networks that produce three and a half billion dollars of income, then he would regain considerable leverage for content.
Two other impulses drive Murdoch’s urge to merge, starting with that overused word “synergy.” His team estimates that consolidating News Corp and Time Warner’s marketing, sales, finance, and leadership would save an estimated billion dollars at the two companies. The other impulse driving Murdoch is one common to corporations but rarely uttered publicly: to take the risk out of capitalism. Ted Turner and Rupert Murdoch intensely dislike each other, but on this point the two agree. Turner once described his business philosophy to me as, “You need to control everything. You need to be like Rockefeller with Standard Oil. He had the oil fields, and he had the filling stations, and he had the pipelines and the trucks and everything to get the gas to the stations. And they broke him up as a monopoly.” He smiled and added, “The game’s over when they break you up. But in the meantime you play to win. And you know you’ve won when the government stops you.”
Government, of course, is one impediment to a potential Fox/Time Warner merger. No one, including Murdoch, believes that the federal government will allow him to claim ownership of CNN as well as Fox News. It’s also unclear whether the government, which rejected A.T. & T.’s acquisition of T-Mobile because it would reduce the number of national telephone companies from four to three, would allow the six major Hollywood studios to shrink to five, or allow two TV factories, which between them produce about a hundred shows annually, to consolidate. When the Department of Justice approved Time Warner’s acquisition of Turner Broadcasting, in 1995, it stipulated that for ten years Time Warner’s HBO and Turner’s cable networks had to lessen their combined leverage by negotiating separately, and never at the same time, with cable and other platform owners.
Before you get to government questions, there are business issues to address, starting with whether Time Warner would accept the offer. The Time Warner C.E.O. Jeff Bewkes and his board have rejected it. One former Time Warner director believes that Murdoch’s offer is simply too low. He thinks that Time Warner might be willing to sell, but only at the right price, which would probably be around a hundred billion dollars. “If you’re going to sell your company you do it when there’s competition. Who else is now there to challenge Murdoch?” he asked. The phone and cable companies are preoccupied with their own deals. The other networks and studios are probably not ready for an auction. The digital behemoths—Google, Apple, Amazon—have enough on their plates. “The guys who will show up at an auction are not there yet. Which is why Murdoch made his low bid now,” this former director concluded. He thinks that a sale is probably a couple of years away.
A person familiar with Time Warner’s thinking did not dispute this time frame. He said that Time Warner projects “robust earnings growth” over the next several years, and under the circumstances “it makes no sense to sell in this manner,” without other bidders. This well-plugged-in person pointed out another perceived weakness of Murdoch’s offer: about half of his purchase price is funded by Fox stock, not cash. Instead of being acquired outright, Time Warner is being asked to invest in Fox. “What you’re being asked to do is buy forty to sixty per cent of their company,” he said. “You have to look at the risk of their company and its management and how well it will do over the next five years.”
It is true that, during his six years as C.E.O., Bewkes has been a seller. But when he sold Time Warner Cable and AOL, and spun off his magazine division, he did so under pressure from Wall Street, since his stock price had plummeted as low as fourteen dollars per share due to the belief that the company was unfocussed and burdened by declining assets. Today, there is scant market dissatisfaction with Bewkes. His stock price has tripled in the past five years, soaring to more than seventy dollars per share before the Fox announcement.
One digital venture capitalist says that if he were to affix a headline to a Fox/Time Warner marriage it would be “Old Media Buys Older Media.” But Murdoch has always tried to look to what’s coming next, and he knows that as consumers increasingly watch film and television online, and stop paying expensive monthly cable bills, and as the audience for network television dwindles, Fox may start to deliver programs directly to viewers on the Internet. As Richard Greenfield, a media analyst at B.T.I.G., noted in a blog post on Thursday, a merged entity could offer “a far more powerful content company” in a post-channel world. A library consisting of Time Warner’s “Sopranos,” “Game of Thrones,” “Batman,” “Casablanca,” and “West Side Story,” combined with Fox’s N.F.L. games, “The Simpsons,” “Modern Family,” “The Voice,” and “X-Men,” would be waived through the tollgate of any broadband provider.
When I profiled Murdoch two decades ago, I asked him whether he ever tired of his quest to get bigger, to swallow more companies. He found the question so strange as to be incomprehensible. Murdoch is one of the planet’s foremost risk-takers, a man who’s succeeded in building a thriving empire because he’s unafraid to fail. Introspection is not his forte. “You go on,” he answered opaquely. “You are competing everywhere.… And I just enjoy it.”
But it's only the opening round. This looks like a prolonged match that will one day probably lead to what Murdoch provoked: the sale of Time Warner. Whether it will be to Murdoch is the lingering question.
Photograph by Lionel Bonaventure/Reuters.
