Will Fox And News Corp Be The Next Media (Re)Marriage?

Now that the two halves of the late Sumner Redstone’s media empire have gotten remarried after being “divorced” for more than a decade, will his fellow tycoon Rupert Murdoch follow suit?

Murdoch, 89, split up his News Corp empire in 2013 at the urging of Wall Street. The company’s slow-growing publishing business, including the Wall Street Journal, New York Post, and the Times of London, became part of a company that retained the News Corp. name.

20th Century Fox film studios, the company’s television stations, Fox News Channel, and the Fox broadcast network became part of 21st Century Fox. Murdoch sold 20th Century Fox and the bulk of the company’s entertainment assets to Walt Disney Co. DIS  for $71 billion (about twice the gross domestic product (GDP) of Jamaica) last year. 21st Century Fox is now called Fox Corp FOXA. 

In an email to Forbes, veteran media analyst Michael Nathanson said a marriage of Fox and News Corp “had been suggested to me by many.” He was not more specific, but Nathanson is respected on Wall Street, as shown by his high rankings in surveys by Institutional Investor and others. A spokesperson for Fox didn’t respond to a request for comment for this story.

With its $16 billion market capitalization, Fox would be in a better position to buy News Corp., which the stock market values at around $9 billion.

 In a note to clients yesterday, Nathanson argued that the current Fox structure makes no sense considering how much the business has changed in recent months and how low Wall Street is valuing its Television GTN  operations. 

“When the company had a bouquet of overpriced cable networks like the RSNs (Regional Sports Networks) that needed to be carried on new cable networks that needed to be launched, owning Fox Network made a ton more sense,” Nathanson, a founding partner at MoffettNathanson, wrote. “When the company also had a big TV studio with talent deals and global syndication/distribution operations, the ownership of a broadcast network to launch IP was strategically important.” 

 According to Nathanson, the $10.9 billion enterprise value implied in Fox’s valuation “severely undervalues” its assets. According to the analyst, the market also overlooks the importance of Fox’s investments in the burgeoning sports betting market. 

 Whether Fox Chairman Rupert Murdoch and his son Executive Chairman and CEO Lachlan Murdoch will follow Nathanson’s advice still is to be seen.  

 The elder Murdoch has defied the naysayer’s decades. When he and Barry Diller launched the Fox broadcast network in 1986 with six affiliated televisions, the New York Times described it as “a high-stakes gamble of more than $150 million that may well fell.” Of course, Murdoch was right about Fox thanks to massive hits shows like Married with Children, The X-Files, and The Simpsons.  

 Fox also topped the ratings for the 2018-2019 season in the coveted 18 to 34-year-old demographic. It was the only broadcast network to gain both younger viewers and total viewers, thanks to the popularity of new shows, including The Masked Singer, LEGO Masters and 911-Lone Star. 

A decade later, the odds were against him Murdoch when he launched Fox News. The channel started in 17 million homes, less than a third of the reach of CNN. MSNBC, which started a few months earlier, was being delivered to 22 million homes. A CNN.com report noted that Murdoch was “undaunted by the competition, vowing to offer an alternative to what he considers to be the media liberal slant.”

Like it or not, Murdoch was right about the appeal of Fox’s conservative take on the news. Fox News Channel was the most-watched channel in July and August in prime time, beating both cable and broadcast networks despite calls by activists to boycott its advertisers,

Finally, Murdoch’s decision to dismantle the media assets he spent decades cobbling together and selling them to Disney may have been the biggest surprise.

Under Fox’s dual-class stock structure, Rupert Murdoch has about a 39 percent ownership interest. The Murdoch Family Trust holds about 34 percent, according to the most recent Fox proxy. That means that he can do whatever he wants with Fox.