Terry McCrann: Great Rupert Murdoch sale gets more interesting

THE battle for control of what might be termed the ‘disposable parts’ of Rupert Murdoch’s global media and entertainment empire has just got more complicated and more interesting, writes Terry McCrann.

THE battle for control of what might be termed the ‘disposable parts’ of Rupert Murdoch’s global media and entertainment empire has just got more complicated and more interesting.

DISNEY AND 21ST CENTURY FOX DEAL A WIN FOR CONSUMERS

MURDOCH’S 21ST CENTURY FOX IS OUT AND RUNNING

Three months ago it all looked pretty clear-cut and straightforward. Two semi-giant US media and entertainment groups, Disney and Comcast, had looked at buying Murdoch’s 21st Century Fox group. In December, Disney and Fox announced an agreed merger.

In practical terms it meant Disney buying the bulk of the Fox assets and businesses — the two key ones being the Hollywood film and TV studios and the 39 per cent stake in the British Sky pay-TV business — leaving the Murdoch family in control of a much more tightly focused media business centred on the extremely profitable Fox News Channel.

This was and is all quite separate to the other Murdoch-controlled company — the print-based US, British and Australian NewsCorp, publisher of course of this paper.

But it would have meant that, across the two companies, Murdoch would be returning essentially to his media and journalism roots in a post-Google post-Facebook world.

Since the big announcement we hadn’t heard a squeak out of Comcast, a name that is probably unfamiliar to an Australian audience, but is one of the biggest cable (pay) TV groups in the US and owns the NBC FTA-TV network.

It was CBS, by the bye, another of the four US networks, which of course snatched the local Ten Network away from Lachlan Murdoch. Disney owns ABC and Fox has the fourth network, Fox.

MERGER TO PUT FOXTEL, FOX SPORTS IN BOX SEAT

It was CBS, which of course snatched the local Ten Network away from Lachlan Murdoch.

This week Comcast finally ‘squeaked’: it didn’t go head-to-head with Disney for (most of) Fox; but launched a bid directly for Sky in Britain; in the process directly competing with Fox itself which has been in a long-running struggle to increase its stake in Sky from 39 to 100 per cent.

This opens the door for a number of scenarios. They are complicated and potentially messy but cannot but be positive for Murdoch and Fox. For starters he is a seller who now has two determined bidders out and public. Until this week he only had the one. They might not be bidding head-to-head for all the bits Murdoch’s selling, but the dynamics of the bidders and their strategic positioning make them direct competitors. Or, potentially, co-operators — in relation to Sky.

Under the Disney deal, Fox was to persist with its bid to get 100 per cent of Sky — even though it would end up in the belly of Disney not the ongoing, reborn Fox.

In a way, using Fox as a proxy to buy Sky into Disney is more than a tad odd, if more than a tad understandable because of the financial and tax complications of selling it out of Fox and into Disney.

It has become crystal clear, at least to me, that there is no way a Murdoch-controlled Fox was going to be allowed to buy 100 per cent of Sky. Presumably though, if the merger deal with Disney was locked in, Fox would be allowed.

There is no way a Murdoch-controlled Fox was going to be allowed to buy 100 per cent of Sky. Picture: AFP

If Comcast follows through with a formal bid for Sky — it’s only indicated an intention to bid — there is no way the current Fox offer could succeed, quite apart from the approval issue.

That would raise questions about the overall Disney deal. I doubt that Disney would want a 39 per cent stake in a Comcast-controlled Sky. But what about a 50-50 joint venture between Disney and Comcast?

You would have to assume the die remains cast, so to speak, for Sky — it will end up 100 per cent owned either by one, or some combination, of Disney and Comcast; and remains cast as well for Fox — there is just too much at stake for Disney in a post-Google/Facebook world.

This leaves Murdoch in the most unusual position in the context of his 60-year journey: a seller. He’s making a virtue out of a necessity — ceding the mass media/entertainment battleground to bigger traditional media groups like Disney and Comcast, and the even bigger (more accurately, huger) new digital cannibals.

Included in the ability to leverage his and Fox’s position is his role as proxy buyer/seller for Disney of the core stake in Sky.

FNC and sports programming are not isolated from the global, continuous and ever-building, tsunamis unleashed by Google and Facebook (and Amazon and Netflix and Apple). But they are very focused eyeballs in the case of FNC and ‘bought-and-paid-for’ eyeballs in the case of sports.

Virgin Australia chief executive John Borghetti.

VERGING ON WHAT EXACTLY?

WE see similar flavours of seminal positioning for the global aviation future on the Virgin register.

In a sense the problem is the opposite of what’s happening in the ‘global content business’ — no one wants to be a seller while equally no one can buy the others out.

The four major Virgin holders — two Chinese airlines, Etihad and Singapore — are struck with 20 per cent stakes, unless they decide to follow Air NZ out the exit. None dares or faces any particular pressure to do so.

CEO John Borghetti keeps the business ticking over reasonably: it’s now locked in a steady-state broadly 35-65 per cent domestic share with Qantas. The big guy makes a profit, Virgin washes its face.

In that context Borghetti is able to pretty reasonably deliver to all his holders. The two Chinese players want point-to-point delivery of tourists into Australia (and some the other way).

Singapore wants networking out of its island hub; Etihad wants it out of its Gulf hub — and with Qantas ‘reworking’ its networking with Emirates, there’s both a threat and a big opportunity for both Etihad and Virgin.

But Borghetti doesn’t have the flexibility Qantas has displayed. His — and Virgin’s — position is both complicated and interesting.