Rupert Murdoch will hand over the reins of his communications empire to his son Lachlan Murdoch in November. Far from the Succession series’ scripted twists inspired by Tycoon, it was a decent relief, at least for now. But the final chapter will be written only after the patriarch’s death, when the voting shares of News Corp and Fox Corp, which he controls through a company based in Reno, Nevada, are transferred to his four eldest children. (Prudence, Elizabeth, Lachlan and James). This will open the door to alliances and fights for control in the search for a new balance.
In any case, succession is not the most pressing problem for a group that consists of two large, independent sister companies: Fox Corp, which manages the television business in the USA, and News Corp, a conglomerate that also includes pay television in Australia, newspapers and publishers and real estate brokerage. Business inheritance is also complicated.
The empire’s assets are of the highest quality, the companies are well capitalized and profitable. However, several companies are in decline or transition, their linear television networks’ audiences are aging, newspaper sales are declining and the group’s size pales in comparison to giants like Comcast, Netflix, Disney or Charter. Rupert Murdoch, 92, attempted to merge News and Fox in 2022 (which would have a market value of about $25 billion), but faced opposition from investors.
News Corp has been able to look for new revenue streams and has 50% digital revenue, but sales fell in four of its five divisions last year, closing on June 30. Dow Jones, publisher of The Wall Street Journal and Barron’s, was saved from bankruptcy, already having 4.5 million digital subscribers (+12%) and entering new services businesses. Sales were $2,153 million (+7%) and gross operating profit (Ebitda) was $494 million (+14%).
In the division that combines the rest of the newspapers (including the British The Times and The Sun, the American New York Post and the group’s Australian newspapers), sales fell by 6% to 2,266 million. These newspapers are significantly less profitable and their Ebitda fell 28% to 156 million as subscriptions and digital advertising cannot offset the decline in print. The publishing business fared worse, with Harper Collins achieving sales of 1,979 million (-10%) and whose Ebitda fell by 45% to 167 million.
News Corp owns Realtor.com, the second-largest American real estate portal, and REA, its Australian counterpart. Additionally, there is streaming television in Australia (branded as Kayo for sports and Binge for entertainment). But sales and results also fell in both business areas. Overall, News Corp’s revenue fell 5% to $9,879 million and EBITDA fell 15% to $1,420 million.
The empire’s most valuable pillar is Fox Corp, which is resisting with enviable strength despite changing audiovisual consumption habits. Trading began in 2019 after 21th Century Fox’s entertainment assets were sold to Disney. Fox’s revenue rose 7% to $14,913 million in the fiscal year ended June 30. Earnings improved 3% to 1,239 million, despite paying Dominion 787.5 million to avoid a defamation lawsuit.
Its sports, news and financial channels are bundled into multi-channel offerings (cable television, but also broadcast via satellite or Internet) and distributed through its own network of affiliated channels and streaming services. Cable revenue fell 1% to $6,043 million (including $4,175 from distributors and $1,403 million from advertising). The other segment, simply called television, achieved sales of 8,710 million (+13%) and tripled Ebitda to 1,009 million, after a great advertising year thanks to the Super Bowl and the World Cup.
“You’ve heard me say this many times: Fox’s strategy is different than its competitors. It is exceptionally good. “Nowhere is this more evident than in the current environment,” Lachlan Murdoch told analysts at the annual results presentation. The influence and controversy comes from Fox News, the leading news network, but much of the audience and revenue comes from Fox Sports. Its financial channel has surpassed CNBC and the Fox website’s viewership of 75 million users. Fox multiplies that figure tenfold from the next conservative outlet, The Washington Examiner.
Additionally, its streaming service Tubi has had “surprising” success, according to BofA Securities analyst Jessica Reif Ehrlich, or “spectacular” success, according to Lachlan Murdoch, who bought it for $440 million in 2020. The company has grown by 79% and is now the leader in ad-supported video-on-demand services that complement the group’s offering.
But the threats are there. At a conference organized by BofA, Reif Ehrlich highlighted the huge changes in the industry, the decline in subscriber numbers and how “it is shifting towards direct-to-consumer or streaming”. “As consumer tastes change, we will strive to make our content and our brands available to them in the way that best suits them,” Lachlan Murdoch told analysts.
Adding to the sectoral trend is the fragmentation of conservative audiences due to a growing range of podcasts, blogs, networks and television alternatives such as Newsmax. In 2020, Fox embraced Donald Trump’s grand hoax that the election was stolen from him after a portion of its audience sought refuge on Newsmax. Targeting the lies its audience wanted to hear, Fox received defamation lawsuits, including the one that ended with Dominion paying $787.5 million and Smartatic’s seeking $2.7 billion.
This reliance on Trump is another risk just over a year before the presidential election. Murdoch’s media bet on Florida Gov. Ron DeSantis after the November 2022 election, but his candidacy has faded. There is a love-hate relationship between Trump and Fox. This relationship is influenced by “The Fall: The End of Fox News and the Murdoch Dynasty,” published this week with the gift of opportunity by Michael Wolff, Rupert Murdoch’s biographer. The prologue is an obituary for the age-of-death mogul in white, but the Fox News autopsy seems a little premature.
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