Rupert Murdoch: Always
Moving, Always Shaking
TBS Contributing Editor
Chris Forrester caught up with Murdoch to talk about News Corp's expansion
Preparing for a snapshot interview with Rupert Murdoch is a difficult challenge
for any journalist. First, the man is, for all the publicity that surrounds him,
something of an enigma. We all know him so well, yet we know so little about him.
One week recently he was reported to be in discussions with leading figures in
China, in London, in Paris, in New York, in Moscow and in Hong Kong. Can one man
really travel, Superman style, quite so quickly around the globe, or were some
of the reports simply fictitious? Either way, this most powerful of media men
is without doubt one of the planets top "movers and shakers." Only Microsoft’s
Bill Gates can compare with Murdoch.
But at the end of last
year he did grant a few moments of his time, and in his formal presentation revealed
just why he has such importance. The reason was the launch of News Corporation
Europe, a fresh venture. He made a few vague promises to expand his News Corp
media empire into mainland Europe--and instantly wiped 8.5 percent off Canal Plus
share price (Nov. 23). Murdoch, at a Savoy Hotel press conference, said News Corp
Europe (NCE) would not have a set budget but instead would examine each project
on a case by case basis. Canal Plus, at the time, made no response to Murdoch's
First step would be an
Italian pay-TV joint-venture, then NCE's first specific project would be a new
channel, set up with Paris-based network TF1, targeted at 15-24 year-olds, due
to launch in 2000 on the Television Par Satellite (TPS) pay-TV bouquet. Mrs. Letizia
Moratti, formerly head of Italian pub-caster RAI, will be chairman of NCE, and
will join the main News Corp board and BSkyB. Murdoch said BSkyB would be welcome
to join the new Europe-wide venture as partners, "if that was the decision of
the board of BSkyB."
The Italian pay-TV venture
would have been a direct confrontation with Canal Plus, which is already heavily
involved in Italian pay-TV. The real battle between the two platforms will be
fought over the TV rights for live Italian league football for the period 1999-2005.
Murdoch has already offered L4,200 billion (£1,470 million) for the exclusive
contract to transmit all league games in pay-TV. More will be known on December
3 when the TV rights issue will be discussed by the Italian Football League (FIGC).
Preoccupied with the imminent arrival of Murdoch, Telepi has been actively buying
up the TV rights from the best clubs such as Juventus, Milan, Napoli and Inter.
In London, Murdoch would not comment on Italian football rights, beyond noting
that there were "a lot of rights still available in Italy."
Later Murdoch said "There
are two great markets in the world, one is in North America and the other is Europe."
He added, "You cannot globalize your company’s activities without having a major
presence in Europe. We place the greatest importance on this." Moratti said mainland
Europeans typically spend only $300 a year on entertainment, well behind the typical
$900 spent in North America and the U.K. No comment was made on how much the Arabic-speaking
community spent on its televisual entertainment, but it’s probably a great deal
News Corp has spoken to
virtually every major European player at some time in the past few years, notably
Silvio Berlusconi ("We speak all the time") and Leo Kirch ("Talks are progressing,
but very slowly"), and he hinted that if the Telecom Italia/Stream talks falter
he has other ideas in mind for the Italian and European markets. Those plans could
include fellow-News Corp investor Prince al-Waleed from Saudi Arabia, long reported
to want to expand his media interests in Europe.
Murdoch, in fine humor,
spoke for almost an hour and touched on almost every European market, but his
strategy seemed to come from the success in France of Television Par Satellite
(TPS), the rival platform to Canal Plus. "When TPS began I have to confess I was
a skeptic and thought they were late to the scene. They have done remarkably well
and have shown that it is quite possible to start second and build a viable and
strong alternative." One region not on his agenda is Eastern Europe: "We are constantly
being offered possibilities but have not yet been tempted."
Since the interview much
has happened. In mid-February the Italian talks between News Corp and its suggested
partner Stream fell apart, only to be replaced--almost on the same day--with high-level
discussions between Murdoch and his Canal Plus opposite number Pierre Lescure.
One highly skeptical observer
summed it up as the latest "rumor du jour," but any talks between Murdoch (via
his BSkyB London-based pay-TV organization) and Paris-based Canal Plus were bound
to make headlines around the world. A Wall Street Journal report added fuel to
an already blazing fire, speaking of Murdoch and Lescure having held "preliminary"
Officially BSkyB remains
silent, but a Canal Plus spokesman stressed that Canal Plus had conversations
with Murdoch from time to time and that this latest meeting required no special
comment. But over the following days details emerged which give this latest report
some legs, not least well-placed sources which suggest that the talks are, in
fact, already past the preliminary stages.
According to analysts
the options for the two media giants are varied. A full merger into one company
might be the best way forward, and while the regulator may validly argue against
the creation of such a dominant force in European broadcasting, the new entity
could respond that when measured against other European players, it was a minnow.
BSkyB's annual revenue
for last year was $2.3 billion, slightly less than Canal Plus’s $2.8 billion.
But Germany alone (on 1997 data) accounts for some giant media players. CLT/UFA
takes in $2.67 billion, RTL Germany $2.14 billion, and Pro 7 $1.1 billion. In
France the giant TF-1 had an income of $1.83 billion.
However, any talks of
merger still have some way to go before they find credibility among all London
analysts. Mathew Horsman, senior media analyst at investment bankers Henderson
Crosthwaite, says on first blush the deal is unlikely to get approval from the
Brussels media regulator Karel van Miert.
But there are elements
in this already complex relationship that are worth restating. The first is that
Canal Plus already holds a stake, via another company, in BSkyB. French media
conglomerate Pathe has a 17 percent holding in BSkyB (prior to last November it
was slightly greater). Canal Plus, and its major shareholder Vivendi, on January
25 acquired a 24.6% stake in Pathe, which in a roundabout way makes Murdoch and
Canal Plus Lescure fellow investors in BSkyB. And in return News Corp holds a
10 percent stake in Pathe.
The net result of these
cross-holdings suggests that if the French investments were treated as one entity,
then News Corp and France would each end up with around 25 percent of a merged
Another option is for
BSkyB and Canal Plus to carve Europe up, as one analyst put it. A more acceptable
suggestion is that some sort of nonaggression pact would emerge between the two
rivals. Canal Plus is active in France, Italy, Spain, Poland and the Scandinavian
countries where, either on its own or with strong local partners, it has analogue
and digital distribution. It is also active in the UK via a software agreement
with digital terrestrial pay-TV outfit ONdigital, which uses Canal Plus-developed
MediaGuard conditional access and MediaHighway software systems.
BSkyB, meanwhile, dominates
UK and Ireland pay-TV. The missing market is Germany, and some three years ago
BSkyB came close to agreeing to a joint-venture with Leo Kirch to take a significant
stake in the DF-1 digital platform.
Another name that is also
linked from time to time with most of these players is Saudi Arabia’s Prince al-Waleed
of Kingdom Holdings. He has investments in News Corp, and he is close to Italy’s
Silvio Berlusconi (and has investments in Berlusconi's Mediaset). Al-Waleed is
known to be keen to see his already considerable media-related investments grow
and sees Europe as a logical next step.
With or without Prince
al-Waleed, a merged BSkyB/Canal Plus operation will have the media Euro-regulators
scratching their heads, not to mention provoking anti-trust examination. Additionally,
the numbers of hurdles, obstacles and egos that each would have to overcome would
be immense. Which is not to say it cannot be done. A News Corp Europe spokesman,
speaking in Milan earlier in February, said News Corp was still very much interested
in Italy. Or, as an analyst suggested, "It's all part of a normal negotiation."
These negotiations are
a constant game of bluff, and double-bluff, of never letting your friends (let
alone your enemies) know what you are doing, and seems to be a core element of
Murdoch's strategy. But one of the shrewdest European operators is the former
head of RTL in Germany, Dr. Helmut Thoma. He retired at the end of last year,
having led RTL from zero income to being Europe’s most profitable broadcaster.
By any measure Dr. Thoma is one of the characters in this business, and as recognition
of his status he was awarded the highly prestigious 1999 Nymph d'Honneur at the
Monte Carlo TV Festival in February.
Speaking after the award
ceremony, Thoma just about summed up what Murdoch is all about, and gave Murdoch
a pointer as to where he should seek to make his next fortune. "Forget about Italy
and Russia and Eastern Europe," he said. "Instead Murdoch should look to Germany,
where he will find the most money and the least governmental restrictions."
But whichever country
he selects, Murdoch creates a high degree of controversy. He is loathed and admired
in more or less equal measure. But have no doubt, his action can make governments
tremble and competitors anxious. One London-based analyst summed up the situation
perfectly, saying, "Working with him is more desirable than working against him."