And so begins the twilight of Rupert Murdoch as a media mogul. And the future succession after his departure is questioned.
Murdoch, the man who always got what he wanted until now, has been firmly told that he cannot have what he wanted. And spelled.
What he wanted – very much – was to make whole again the empire he had built in sixty years and which he had to break up ten years ago. But he failed to convince the major investors and shareholders in the company’s two halves, TSTIME Corp and News Corp, to bow to his will and approve a merger.
The announcement Tuesday that he had capitulated is a very significant reversal. As I reported when the deal was proposed, it was hard to find anyone who thought the merger made sense.
That was because it was actually a vanity exercise, not a rational business plan. At age 91, Murdoch wanted it so he could consolidate all the family businesses under him and then hand them over to his chosen successor, his son Lachlan Murdoch.
An analyst told me when the deal was proposed: “Rupert doesn’t give a fuck about shareholders. He just wants all the power back.”
In fact, the shareholders of both companies decided – correctly, as it turned out – that the merger would reduce the value of their shares. TSTIME Corp., the powerhouse of the two, makes $14 billion a year not only from TSTIME News, but from providing news, sports and entertainment to 208 local stations in the US, including 18 it owns. The jewel of News Corp is Dow Jones, publisher of The Wall Street Journalwhich has seen a huge increase in sales as a result of adding more than 3 million digital subscribers to its print readership.
Nevertheless, TSTIME Corp shareholders believed that News Corp’s old newspaper operations, including the infamous London tabloid, The sunon which the empire was founded would be a drag on the profits of the merged company, while News Corp shareholders were very skeptical about being in the same corporate bed with TSTIME News, which they viewed as toxic, and similarly suffer a loss of market value.
Enders Analysis, a highly regarded London media follower, warned that a similar merger of Viacom and TSTIME would make the resulting Paramount Global worth $13 billion less than if the two had remained separate.
The shareholder preponderance of one of the most powerful and driven media moguls is a striking demonstration that Murdoch no longer enjoys the absolute power he once had. Peter Kreisky, chairman of Kreisky Media Associates, an experienced Murdoch watcher, says:
“The promise of the Murdoch magic has been badly damaged. Shareholders refused to believe that Murdoch could turn a bad deal into a good one through some sleight of hand from his mogul. Reflecting his mistake and the views of his key investors, shares in NewsCorp and TSTIME immediately rose on the news in after-hours trading.
Due to this setback, attention will once again be on the succession issue. While most analysts believe Lachlan Murdoch is the chosen successor, this sudden demonstration of shareholder influence is a warning that as much as a founding mogul believes family members will rule forever, times have changed. Kreisky says:
“This reversal of fortune demonstrates Lachlan’s limited credibility compared to his father to successfully manage a diverse portfolio of media assets. He may have a good “reputation” at TSTIME, but shareholders don’t see it as transferable to other key parts of the company. Lachlan’s future suddenly seems limited.
“Furthermore, predators are looking with new eyes at what is now up for grabs if enough money is left dangling for the big investors and shareholders: hence the rumors circulating after the announcement of a possible bid for the Wall Street Journal by Bloomberg.”
News Corp has produced two highly successful CEOs: Robert Thomson, who heads Dow Jones in New York, and Rebekah Brooks, who heads News Corp in London. As The Daily Beast has reported, on the basis that the merger went through, Brooks was tipped to take over Thomson, as he would soon retire, and become supremo of the newspaper companies.
There is a rich irony in that. Brooks was the editor of the tabloid News of the worldwhere the editors were addicted to hacking phones in pursuit of scoops, a scandal that enraged Britain and eventually led to the paper’s closure in 2011 and the empire’s breakup into its two parts.
Not only did Brooks escape any blame for the hacking, she was soon promoted to run Murdoch’s London papers at a time when the tabloids were beginning to be decimated by the rise of even more bawdy and unruly websites and social media. Under Brooks, Murdoch’s two chic broadsheets, The times and the Sunday Timeshave become hugely profitable, while the remaining tabloid, The sunloses money and has yet to build a digital presence.
The editor of the Sunday TimesEmma Tucker, moves – at the initiative of Brooks – from London to become editor of The Wall Street Journalthe newspaper’s first female editor to arrive with a record of supporting fearless investigative journalism.
When all these changes were set in motion, it was assumed that the Murdoch merger would happen. Now it appears that the future leadership of the empire will be determined not by Murdoch, but by investors and shareholders – and decided on deep executive talent, not birth. The contenders will make Logan Roy’s nasty brood in the HBO series Succession look like babies.