Australian rules may dent Murdoch’s home advantage

Marc Sidwell
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AFTER the calamitous failure of its BSkyB bid, Rupert Murdoch’s News Corporation has decided to advance its pay TV ambitions in his birth country, bidding A$1.97bn (£1.27bn) for Australia’s Consolidated Media Holdings. If the deal is accepted and gains the necessary regulatory approval, it will double the media giant’s stake in Foxtel, the island continent’s biggest pay TV firm, and give News Corp full ownership of Fox Sports Australia.

Murdoch may be hoping to use this asset to start to regain the global initiative in pay TV, just as his Australian newspapers paved the way for later UK and US print acquisitions. Still, that will be harder to pull off this time around. Full ownership of BSkyB would have positioned the octogenarian businessman to consolidate his other European satellite broadcast assets – Sky Italia, which News Corp owns outright, and Sky Deutschland, in which it has a 49.9 per cent share. After today’s deal, the entertainment company’s worldwide television holdings, including stakes in India’s Tata Sky and New Zealand’s Sky Network TV, still seem dispersed.

There are a few local difficulties as well. Australia gives legal preference to free-to-air television for the rights to big sports events. That’s tricky for Murdoch, who wrote in a 2011 letter to stockholders that sporting events “deliver the mass audience that advertisers crave... and will remain a critical driver of our growth.”

This problem has led some to suggest Murdoch’s next move might be to acquire a free-to-air Australian asset. Ten Network Holdings perhaps, of which his eldest son Lachlan is a director and non-executive chairman. However, that strategy may bring its own risks. Another 25 per cent of Consolidated Media is owned by the largest shareholder in rival Seven West Media,which may fear a competitor with free-to-air ambitions taking such a powerful position. Seven Group Holdings could still resist the News Corp bid.

What’s more, the immediate market conditions in Australian media are tough. The bid was accompanied by the news of News Corp cutting two thirds of its east coast print divisions, and the rival Fairfax Media announcing almost 2,000 layoffs. Pay TV is not exempt. Foxtel’s chief executive announced in February that Australia “remains a tough environment in which to win new customers”.

But Murdoch has always declared that the News Corp ethos is to see opportunity where others see only challenge. Foxtel has just completed a merger with Austar, the region’s biggest rural subscription TV provider. And if his bid for Consolidated Media goes through, Murdoch will end a rival Australian media empire, this one built up by his old sparring partner, Kerry Packer. Half of Consolidated Media is owned by Packer’s son James, now keen to sell his last controlling interest in a media company in order to invest in casinos. Whatever the challenges, for Murdoch media is still the better bet.

Marc Sidwell is City A.M.’s managing editor.