Rupert Murdoch sold 21st Century Fox because even his media giant was too small to compete

The dramatic sale of 21st Century Fox to Disney is the opposite of everything we expect from Rupert Murdoch. Over 60 years as head of his companies, he has built a reputation as an acquirer, not a divestor. He’s taken bold risks to extend his empire, and purchased companies at prices others have often thought excessive, in his pursuit of ever-greater expansion.

When Murdoch does sell, he typically offloads only minor assets or proven failures. After more than a decade of sustained effort, he retreated from his Chinese ventures. He made some bad investments during the internet boom, such as MySpace, and eventually, belatedly, admitted failure and sold out. The only important, profitable property he sold off was in 2006, when he sold his stake in DirecTV to John Malone. The purpose then was to get Malone off Murdoch’s share registry, and ensure his dynastic ambitions for his children.

Now, in one move, Murdoch has sold to Disney two-thirds of the assets he has built up over so many decades. Why did he do it? And what does it imply for the future of his media empire, and for the media more generally?

On a practical level, it does seem that the deal is a win-win. For the Murdochs, in an increasingly uncertain media environment, they have sold out the majority of their assets at the best price they could get. In early November, 21st Century Fox shares were selling at about $24, while the Disney deal values them at around $40. It is not clear that such an attractive offer would come again.

It is also a win for Disney. Some have hailed the move by CEO Bob Iger as the strongest counter-attack yet by a traditional media company in the FAANG (Facebook, Amazon, Apple, Netflix, Google) age. It adds enormously to Disney’s library of films and TV series, which makes a future successful streaming operation more likely. It gives them a more strategic role in film and TV production, including the Fox television studio, and the 20th Century Fox film studio. It gives them some strong cable channels, including National Geographic. And Disney now has greater international reach, with Sky in Europe (including BSkyB in Britain) and Star in Asia, especially with its strong position in India.

Moreover, the deal is all based on exchanging scrip, so there will not be a great debt issue for Disney. It will dilute Disney’s already diversified share-holding even further, but the Murdoch family will have only 4.4% of the company’s total stock—hardly the base for a future coup.

Rupert Murdoch, with characteristic chutzpah, says that the move is not a retreat, but a pivot “at a pivotal moment.” Yet his nostalgic tone, and his statements about his pride in what Fox has built, suggested more a sense of resignation than enthusiasm. While reports have circulated about conflicts and tensions among the key Murdoch players—Rupert and his two sons, Lachlan and James—it seems that all three were in agreement that their company was not sufficiently big to face the coming challenges to the media industry. It either had to grow or vacate large parts of the field.

This decision is not a good omen for those who care about so-called legacy media. It means that even Murdoch thinks the future is quite uncertain, and also that even a giant as big as his corporation is too small to compete.

Meanwhile, Murdoch’s remaining 21st Century Fox properties look vulnerable. These consist of the Fox free-to-air TV channels; Fox News Channel; and the remaining Fox Sports channels.

The Murdochs are calling this “New Fox,” although Fox Lite might be a more appropriate name. The most immediately vulnerable would appear to be the Fox TV network, which no longer has a production studio. In coming years, it will have to change its programming model substantially, or perhaps the Murdochs will divest themselves of it.

In the short term, the sports networks are likely to remain profitable. Keeping them is consistent with a long-term Murdoch view that with the fragmenting of TV audiences and changing viewing habits spurred by Netflix, Amazon, and video on demand, the only huge audiences will be for sports, where live broadcasting remains important. However, times are changing in sports broadcasting also, with sporting bodies looking at controlling their own deals in the new environment.

Then there’s Fox News—the most commercially successful journalistic start-up of the last two decades. But while this is a pivotal moment for media in general, it is particularly pivotal for Fox News. It has been wracked by sexual harassment scandals, with giant payouts to both perpetrators and victims.

With its right-wing anti-establishment populism, Fox News has always positioned itself as the outsider. The peak of its power came with the election of US president Donald Trump, but that success brings its own dangers. Being the favorite network of the US president means Fox News enjoys access and favors, but also poses dangers if it is seen as a mouthpiece for the new establishment. While the younger Murdochs may have vague hopes of changing the network, it is not clear that its old audience, with its ingrained prejudices, will stay loyal, and not clear that a network with such an extreme brand can attract a new audience.

With the sale of the bulk of 21st Century Fox, Murdoch has made a very profitable retreat, and Disney has emerged as a much stronger powerhouse. But the future of Murdoch’s remaining media assets have more question marks than ever.

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