If anyone but Rupert Murdoch was at the helm of 21st Century Fox (FOXA), it would have been easy to dismiss speculation about his interest in buying Time Warner (TWX) — which surfaced in the mountains of Idaho at the Allen & Co. conference — as merely a sign of oxygen deprivation.
But Murdoch is at the helm, and even though such a deal would be enormously complicated under the most optimistic of scenarios … you have to imagine a FOXA-TWX marriage is at least a possibility.
Fox and Time Warner, Together?
Naturally, Murdoch is eager to get his hands on some of TWX’s crown jewels, such as the Warner Bros. film studio, Turner Broadcasting and HBO.
Combining Warner Bros. with 20th Century Fox seems intriguing, as both currently control about 17% of the global movie box office, and there would be synergies on the television production side.
But there would be a lot of questions, too.
First, exactly what Murdoch would do with TWX’s all-news channel? Integration with the rest of the Fox empire would be a challenge — you don’t have to be psychic to guess that CNN lifer Wolf Blitzer wouldn’t take kindly to being on the same channel as conservative firebrand Bill O’Reilly, and vice versa.
Maybe Murdoch would try to sell CNN … but who would buy it given its continued ratings challenges?
And when it comes to media companies, investors need to remember that bigger isn’t necessarily better. It’s like baseball, which offers plenty of proof that past performance doesn’t indicate future returns. Just ask fans of the New York Yankees, who are playing near-.500 baseball despite a $209 million payroll, the second-highest in the sport. My hometown Phillies rank third in salary with $180 million and have performed dismally this year, sitting in the National League East basement.
Money helps, but it doesn’t guarantee success — not in professional sports, and not in media companies. Remember AOL Time Warner?
Murdoch’s recent acquisition history doesn’t generate much confidence, either.
Over the past four or five decades, the Australia-born tycoon has repeatedly shown that he will spend whatever it takes to get whatever he wants whenever he wants. In 2005, his company — then just News Corp (NWSA) — acquired MySpace for $580 million only to sell it six years later for $35 million. (Ironically, his rival Sumner Redstone fired Viacom (VIAB) CEO Tom Freston for failing to acquire the pioneering social network. Freston didn’t get a belated thank you.)
Two years later, Murdoch spent $5 billion acquiring Dow Jones & Co., the parent of The Wall Street Journal, paying a 67% premium for a struggling company that no one else was interested in buying.
Murdoch’s spendthrift ways don’t end there.
In 2007, Murdoch decided that CNBC wasn’t sufficiently “pro-business” and decided to launch Fox Business Network. While it has grown ratings, they’re far from robust. According to data from Nielsen cited by TVBytheNumbers, the channel on July 1 attracted a prime-time audience of merely 14,000 among viewers age 25 to 54 — the target audience for advertisers — despite adding such well-known personalities as Maria Bartiromo.
Then there’s the New York Post. The scrappy tabloid is certainly entertaining and does get its share of scoops. Veteran media watcher Michael Wolff, among others, have noted that the Post hasn’t earned a dime in profit in years. Wolf pegs the losses at about $80 million a year. Given such dismal performance, the Post would have been shuttered years ago if it were a typical paper owned by an owner driven solely by profits and losses.
None of those claims, however, applies to Murdoch. He owns the Post to stick it to the New York Times. That’s probably why he acquired the WSJ, which has been home to one of the most conservative editorial pages in the country for decades.
For years, though, Murdoch has been able to shelter these properties with more profitable businesses in his media empire. That’s no longer possible since Murdoch split off his publishing businesses into the News Corp. enterprise earlier this year.
No wonder there have been layoffs at the WSJ, which would have been unthinkable not long ago.
Shares of FOXA are flat this year, underperforming both the broader market and Walt Disney (DIS), which thanks to Frozen has surged 13%. TWX hasn’t done much better, gaining 3%.
Murdoch is anxious to boost his share price, as his counterpart at Time Warner, Jeff Bewkes, so a combination of the two companies isn’t that far-fetched.
Nonetheless, investors should be worried anyway given how poorly many recent media deals have performed.
Jonathan Berr has done freelance writing for CNBC. As of this writing, he did not hold a position in any of the aforementioned securities.