Rupert Murdoch says he is “pivoting at a pivotal moment” in the US$52.4 billion (A$68 billion all paper) carve up of 21st Century Fox and asset sale to rival Disney. “We are paving the way for a new Fox and a transformed Disney to chart a course across a broad frontier of opportunity,” he said. “I know a lot of you are wondering: Why did the Murdochs come to such a momentous decision? Are we retreating? Absolutely no, we are pivoting at a pivotal moment.”
Gobbledygook from a master of spin and double speak. Remember, this is the second split in the empire in four and a half years. We all remember the Murdochian enthusiasm for the brave new world of 2013 dismemberment. The reality is that this split is a retreat — a sort of back-to-the-future moment for the family and its 86-year-old patriarch.
“Those of you who know me know that I’m a news man,” Murdoch told media at a briefing in the US on Thursday. He noted that “our journey started several decades ago with a single newspaper in Adelaide, Australia”.
But if the future is news in 2017, why did he split the company in 2013, and why didn’t he keep News Corp in house?
Let’s go back to when Rupert Murdoch justified the splitting of News Corp into two companies. Rupert Murdoch said in that memo to staff on June 28, 2012:
It is with much enthusiasm and personal pride that I share with you today’s news regarding our plan to drive towards the next, transformative phase of this organization you and I have built together into one of the largest, most innovative media companies of our time … That very size and breadth has created an opportunity to separate News Corporation into two global leaders in their own right — we will wow the world as two, as opposed to merely one.
Our aim is to create the most ambitious, well-capitalized and highly motivated publishing company in the world, consisting of the largest collection of our news and publishing brands, as well as our groundbreaking digital education group; we will also work to create the world’s top media and entertainment company, encompassing our premier broadcast and cable networks, leading film and television production studios and highly successful pay-TV businesses.
Digital education was a US$500 million flop over the years. The company’s newspapers went backwards in the US, UK and Australia, and News Corp’s fortunes and share price have only been saved from ruination by the strong performance of the 61% owned REA Group and the smart decision to try and repeat that in the huge US property market through the successful US$1 billion takeover of real estate listing business Move. Impairments and write-downs have totalled close to US$2 billion. News Corp share price was US$15.61 at the time of the split — they reached US$16.50 on Wednesday, But the peak was US$18.11 in October 2013. It has been a long slide until recently when the Fox split story broke and breathed new life into the share price.
The Fox share price was US$30.39 in June 2013. They closed Wednesday at US$32.75, but remain far below the peak of US$38.39 reached in December 2014. In fact the Fox split story saved the shares and the Murdoch family fortune. Fox shares had fallen to US$24.97 at the end of October, a couple of weeks before the dismemberment story, and Disney’s interest emerged. For Fox, the ultimate insult is a deal as big as the Disney purchase couldn’t drive the Fox share price to new record highs.
The reality is that Facebook, Google, Netflix, Apple and Amazon have already proved to be far better at being “disruptive” than the Murdochs could ever hope to be. The increasing pressures from these tech giants is why the Murdochs agreed to Disney’s overtures and split Fox. After the ignominy of shareholders forcing his retreat from the US$80 billion bid for Time Warner back in 2014, the Murdochs and Fox have been left behind by the rapidly growing tech giants.
Netflix, Facebook, Google (Alphabet), Amazon and Apple blew up the rationale for the 2013 split and the Murdoch self-congratulation, forcing the family to sue for peace by agreeing to sell much of the empire to rival Disney (which has always been bigger, richer and run by smarter people than Fox) which reckons it can do better with the Murdoch’s unwanted assets than the Murdochs could ever hope to do.