THE only media mogul still bestriding his industry in old-fashioned style is used to being a predator rather than prey, a builder of empires, not a dismantler of them. So Rupert Murdoch’s reported willingness to sell off much of 21st Century Fox, whether to a rival such as Disney or to a distribution firm like Comcast or Verizon, has come as a shock to many. It should not.
If Fox does follow through with selling the assets—its film and TV studio, its stake in Sky, a European satellite broadcaster, and many of its cable networks—it may well be remembered as one of his cleverest moves. Mr Murdoch would have correctly judged a shifting media and regulatory landscape and sold high (perhaps for $50bn or more; see chart). He would retain lucrative assets in news and sports broadcasting, notably Fox News Channel, which could serve as the base for a new fief of a different sort. Mr Murdoch would also retain plenty of political sway through his newspaper businesses, housed at separately listed News Corp.
Three powerful trends explain why it makes sense for him to contemplate retreat. First, the entertainment businesses the family would be exiting are in secular decline (Mr Murdoch admits that the newspaper business is similarly afflicted). In America viewership of traditional pay-TV has been falling since 2010. Providers saw combined subscription losses of more than half a million customers per quarter in five of the past nine quarters. Younger viewers especially are “cutting the cord”: about six in ten of those aged 18 to 29 say the primary way they watch television is via streaming services delivered over the internet. Nor are they going to the movies much: this summer’s box office was the weakest in 25 years for tickets sold. Viewing habits are not just changing fast, they are doing so in unexpected ways: according to new data from Netflix, 12% of Americans who watch television shows or films outside the home admit to having done so in a public lavatory.
To have any hope of competing, scale is vital. This is the second big feature of the media landscape. Companies such as Facebook, Amazon, Netflix and Google (with YouTube) are investing heavily to seize consumers’ attention and money. Disney, which has a market capitalisation of $155bn, has lots of clout because of its premium film franchises: “Star Wars”, Marvel and its animated blockbusters. Last year it had all of the top five films at the global box office. Fox does not measure up: its best entertainment network, FX, is losing viewers, it owns only a few stellar franchises, like X-Men, and its film studio ranks fourth with 12.6% of the American box office this year. Even for those Fox assets that are growing strongly, such as Star India, the writing seems to be on the wall.
Third, it is far simpler to sell than build. On November 20th America’s Department of Justice (DoJ) sued to block AT&T’s $109bn acquisition of Time Warner, arguing that the vertical merger would create an anti-competitive behemoth. (Many suspect a reason may be President Donald Trump’s dislike of Time Warner’s news channel, CNN.) In 2014 Fox had itself made a bid to buy Time Warner, a gambit that was swiftly rebuffed by the larger company but that would have attracted intense regulatory scrutiny had it gone further. Selling off Fox in pieces—the studio and cable-network assets to Disney, for example, and Sky to Comcast or Verizon—would be relatively easy.
Regulators of various sorts might have much to do with Fox’s precise timing in considering a sale. If Time Warner ends up back in play because of the DoJ’s decision, the Fox assets might appear less unique and could fetch a lower price later on. As for Sky, Fox had hoped to finalise a years’ long effort to buy the 61% of the pay-TV firm that it does not own by the end of this year. Instead the transaction has been mired in concerns about media plurality and the firm’s governance. On November 20th Britain’s Competition and Markets Authority, which is reviewing the bid, heard testimony on accusations of racial and sex discrimination at the Fox News cable network. (A firm like Disney would face fewer obstacles, although it is not immune to the sexual-harassment accusations sweeping the media business; this week John Lasseter, the co-founder of its animation unit, Pixar, took a leave of absence after unspecified “missteps”.)
If this shifting media landscape warrants a sale of Fox assets, however, it would also be an admission of defeat. Things could have been very different. At the same time as Mr Murdoch was busy buying and integrating MySpace, a once-promising social network that he bought for $580m in 2005, and then pursuing an acquisition of the Wall Street Journal, which he purchased for $5bn in 2007, Bob Iger at Disney was buying Pixar (in 2006) and Marvel (in 2009). Mr Murdoch could have bought Netflix for a relatively cheap price, in around 2011; instead both Fox and Disney began supplying content to Netflix that year. Now both companies are pulling content off the platform. A streaming rival, Hulu, in which Fox owns a 30% stake, lags far behind Netflix and Amazon.
If a sale goes ahead, Mr Murdoch would be left with a rump business worth around $45bn, and one not so easily disrupted by streaming services. Live news and sports account for more than half of Fox’s advertising revenue, according to MoffettNathanson, a research firm. Fox News is the largest cash-generator in the company, with an estimated $2.2bn in earnings before interest, taxes, depreciation and amortisation in the current fiscal year, according to Wells Fargo, a bank. Analysts question the value of the Fox broadcast network without its studio to make shows, but the plan is probably to become even more sports-focused, which makes sense.
Even so, this is not the scale of business that Mr Murdoch’s sons, James and Lachlan, expected to be running. That is especially true of James, who was made chief executive of Fox in 2015 and who is chairman of Sky; he also did a stint at Star India. (Lachlan is executive chairman of Fox and co-chairman of News Corp.) James has made no secret of his discomfort with Fox News; in the wake of the sale reports, some speculate that the elder Mr Murdoch is in effect pushing James out of the family business, unlikely though that seems. There is even talk that James might want to work for one of the suitors in a Fox sale.
One certainty is that after such a disposal, Mr Murdoch would have a replenished war chest of billions of dollars to expand again if he chose to. He could, for example, take advantage of newly loosened media-ownership rules from the Federal Communications Commission and buy up local TV stations, to contend with another conservative media empire, Sinclair Broadcast Group, which this year agreed to buy Tribune Media, another station group. His attachment to Fox News, in spite of its recent travails, may be a sign that, even at the age of 86, he has ambitions left. A media observer who knows both Fox and News Corp well cautions against any temptation to see the family as a diminished force. “It is safe to assume that they are not over having a Murdoch empire.”