Dear Mr Murdoch: Save yourself 80 billion bucks

Jul 20 2014, 19:00 IST
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Rupert Murdoch’s aim was to construct an entertainment-information conglomerate on top of his existing newspaper properties. (Reuters) Rupert Murdoch’s aim was to construct an entertainment-information conglomerate on top of his existing newspaper properties. (Reuters)
SummaryRupert Murdoch’s aim was to construct an entertainment-information conglomerate on top of his existing newspaper properties.

The first time Rupert Murdoch tried to acquire Warner, Ronald Reagan was completing his first term as president, the Bell System break-up was nearly finished, and the first Macintosh had just gone on sale.

Murdoch’s aim was to construct an entertainment-information conglomerate on top of his existing newspaper properties. When Warner (or Warner Communications, as the parent company was called then) spurned his 1984 offer, he promptly went on to purchase 20th Century Fox as his bedrock and from that base built an international company that includes a American broadcast network, 28 terrestrial US television stations, several satellite broadcasting entities, a profusion of cable television channels, an immensely profitable news network, and more.

Thirty years later, the 83-year-old Murdoch is throwing $80 billion at TimeWarner, which recently shed its print properties, for a new reason. Having exceeded his infotainment empire goals, Murdoch still needs to expand his business to compete with other jumbo-sized media conglomerates, such as the number one revenue-generating conglomerate, Comcast — which owns NBC and Universal, and has a bid pending regulatory approval for Time Warner (no relation anymore) Cable — and number two conglomerate Disney, which owns a line-up of properties similar to that of Murdoch. If Murdoch’s number four conglomerate, 21st Century Fox, succeeded in swallowing number three, TimeWarner, it would become the new number two.

Getting bigger for bigness’s sake makes sense for a sumo wrestler. But does that apply to a media conglomerate?

Although Fox’s proposed purchase of TimeWarner sounds like a film-studio deal, the film units are secondary at both companies, with cable networks producing the greatest revenues at both — and Disney and Viacom as well. The screen at home eclipsed the screen at the multiplex long ago, and is still growing, which is a main reason Murdoch covets TimeWarner’s cable channels (HBO, TBS, TNT) which out-earn those of the other media conglomerates.

A woman walks past the Time Warner Center near Columbus Circle in Manhattan, New YorkBy combining his cable networks (Fox News, et al) with TimeWarner’s, Murdoch will gain the bulk he needs for future negotiations with Comcast. Comcast currently dominates deliberations about which channels get piped to American home screens and how much they’re paid. Murdoch’s proposed deal could give him the sort of leverage Disney has with Comcast, thanks to its control of ESPN.

There’s a panic element to the Murdoch offer, too. At the age of 83, how many more deals can

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