Why Murdoch wants Time Warner: leverage

Rupert Murdoch

Rupert Murdoch (C), walks with Lachlan Murdoch (L) and Sarah Murdoch at the Allen & Company Sun Valley Conference on July 10, 2014 in Sun Valley, Idaho.

 

 

As chairman of 21st Century Fox, Rupert Murdoch owns many things: cable networks, a broadcast network and a big movie studio. As head of News Corp. he also owns some newspapers and a book publishing house. Now he’s also made a bid for Time Warner, which owns HBO, other cable networks and another big movie studio. Time Warner has turned him down, for now, but it’s worth asking what he wants with it.

Analysts say Time Warner has finally shrunk itself to the exact right size and shape for someone like Rupert Murdoch to be interested in it.

“Time Warner used to have AOL as part of its portfolio— that’s no longer true,” says Jim Goss, managing director of Barrington Research. “It obviously had Time Inc., the magazine publishing group, but as of about a month ago, that’s no longer true.”

Most importantly, Comcast's proposed takeover of Time Warner Cable creates a huge potential adversary on the other side of the bargaining table: Distribution. That’s Murdoch’s adversary too.

Together, the two media companies gain clout. “Fox with Time Warner would have incontestable leverage against any distributor in terms of audience demand,” says Porter Bibb, managing partner at Mediatech Capital Partners. “People would go beserk if they couldn’t get what Fox would own.”

Think: Game of Thrones. And sports: Turner Broadcasting has a lot of NBA games.

Conventional wisdom holds that this marks the beginning of a long campaign. Over a decades-long career, Murdoch has pursued other deals relentlessly.

“He likes to win,” says Samuel Craig from NYU’s Stern School of Business. “I think he’ll persist.”  

Craig says Murdoch may find allies on the other side of the table. “I think when the shareholders of Time-Warner look at it — and the price goes up a bit — they may say, ‘This is a pretty good deal, and we should do it.’”   

About the author

Dan is a sustainability reporter for Marketplace.

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