TIME: Almanac 1993/TIME Almanac 1993.iso/time/111990/1119220.000

Text File | 1992-08-28 | 5.6 KB | 117 lines

                                                                                PRESS, Page 94

Fortune to the Brave and Canny


Rupert Murdoch's latest coup underlines his bias toward video

    Ever since he started the Hearstian buying spree that made
his News Corp. the world's most diverse media company, rivals
have been waiting for Rupert Murdoch to overreach and fall. They
mocked his ambition to become the first press lord to bestride
three continents: Europe, North America and his native
Australia, where his holdings account for 60% of total
daily-newspaper circulation. They belittled his free-spending
plunge into book publishing. They scoffed when he spent more
than $2 billion for seven U.S. TV stations, plus a movie studio
to provide programs, for his high-risk start-up of the Fox TV
network. They predicted a comeuppance when he lavished at least
$600 million  more on launching Sky, a satellite and cable TV
service for Britain and Ireland that purveys movies, sports and
24-hr.-a-day news in competition with established broadcasters,
including the government-funded BBC.

    Even supporters got nervous as Murdoch exploited permissive
Australian accounting rules to run up $8 billion in corporate
debt (vs. assets worth perhaps $20 billion), much of it
short-term and in need of frequent refinancing. But Murdoch
continued to insist to stockholders that "fortune does favor the
brave." Says Steve Rattner, head of the media department at the
investment bankers Lazard Freres: "Of all media moguls, Rupert
has been the boldest. If Fox or Sky had crashed and burned, he
would have burned too. He has an enormously strong
constitution."

    But if fortune favors the brave, it can also favor the
cunning and prudent. Faced with losses from Sky of nearly $4
million a week and beset by British Satellite Broadcasting, a
well-financed but smaller competitor losing four times as much,
Murdoch this month negotiated a merger ofthe rival TV ventures
on highly favorable terms. The result: a virtually certain
monopoly for the service, projected profit as early as 1992 and
-- most important to fretful financial analysts -- an immediate
$300 million improvement in the cash flow of News  Corp., which
has suffered an advertising slump in all its markets. Says media
analyst John Reidy of Smith Barney: "This greatly reduces the
pressure on Murdoch to scrounge around and put up some
properties for sale." Murdoch sounded a touch regretful: "With
Sky and BSB, it was like two boxers tiring and declaring a draw.
If times had been different, they might have gone another round
or two."

    Like almost every other media company, News Corp. has
responded to a softening ad market with consolidations and
cutbacks. Murdoch deferred construction of newspaper printing
plants in two Australian cities, delaying capital costs of about
$500 million, and folded two money-losing afternoon newspapers
there into morning counterparts to save $20 million a year. He
closed a proposed U.S. magazine, Men's Life, after a single test
issue. Says Murdoch: "Newsstand sales were not enough to justify
having any more issues, and it didn't grab me."

    Last June he sold the Star, a supermarket tabloid that he
launched in 1974 at a cost of $12 million, for $400 million in
cash and preferred stocks from the parent of the rival National
Enquirer. He is retooling other properties, including his
costliest, TV Guide, for which he paid nearly $3 billion in
1988. Since then, circulation has dropped 7%, to 15.8 million,
and ad pages have dwindled 28%.

    Murdoch executives are still seeking to cross-fertilize
among the properties. It has been nice to be able to feature the
Fox network's hit The Simpsons in TV Guide and to make Fox's
crime show America's Most Wanted the subject of a paperback from
Murdoch's HarperCollins publishing house. It surely helped to
feature HarperCollins author Bernie Siegel on the cover of
Murdoch's magazine New York in June 1989, days before
publication of his Peace, Love & Healing. But the company wants
to develop more systematic and profitable "synergies."

    Perhaps the most significant trend in Murdoch's latest
maneuvers is that he continues to be willing to risk billions on
video-related enterprises while balking at mere millions for
print undertakings. Says analyst Rattner: "Clearly he has
decided that the future of news and entertainment is electronic.
Even buying TV Guide is tied in to that philosophy."

    Murdoch, the son of a newspaperman, professes to love print
-- "It's going to be around a long time after me, I hope" -- but
concedes that his vision of the 21st century has more to do with
cathode rays and satellites than with ink and paper. "Certainly
in the medium future it appears there will be more growth in TV
than in global print," he says. "We are focusing our expansion
in electronics until we've got a better balance in our
portfolio."

    What is the optimal balance? Murdoch says he has no target
in mind. But even in Eastern Europe, where he invested "a tiny
$4 million"  in two Hungarian publications and is making a
profit, he will pursue print ventures only if he can find
partners. "Nothing on our own," he vows. "You don't get in in a
big way, because there is no money there and the situation is
totally competitive." The ideal newspaper investment, he says,
is "the security of a monopoly." He has the same goal in
television. Having attained it after a fashion in Britain, he
may yet prove that the Sky is the limit.


By William A. Henry III. Reported by Helen Gibson/London and
Leslie Whitaker/New York.