Fox’s Lachlan Murdoch Expects Regulators to Put Conditions on Paramount-WBD Merger
Fox Corporation CEO Lachlan Murdoch expects that regulators will impose a third-party content licensing condition on Paramount and Warner Bros. Discovery’s $110 billion merger.
“We wish them the best of luck. We’ve seen this, regardless of whether it was Netflix acquiring Warner Brothers Discovery or Paramount acquiring Warner’s Brothers Discovery, there will be conditions put on this transaction which would require a producer of that size to continue to sell their content to third party platforms,” Murdoch told a Morgan Stanley investor conference on Monday when asked about the news. “We think that’s that’s very important and we would expect that to be a condition put upon any transaction.”
Murdoch also anticipates that CNN under David Ellison will remain a “strong competitor” to Fox News.
“We have been winning and we win amongst strong competition. Under the Ellisons, I think CNN obviously will be a strong competitor, as we’d expect, but we like competition,” he said. “Running news is hard. Fox News has been going over 30 years and something like 100 of the staff at Fox News have been there the whole time. They’re deeply engaged, they’re deeply committed to the business, have tremendous skills and it shows up in the in the ratings.”
As for Fox’s own strategy around M&A, Murdoch emphasized that the media giant doesn’t believe in “scale or scale sake.”
“We don’t think we you just need to get bigger to be better. In fact, we’ve seen a number of occasions, and we’ve executed deals on a number of occasions, where smaller scale has worked better for us,” he said. “There was the the sale of our entertainment assets to Disney, which gave us a focused, live news, live sports, highly engaged, concentrated brands strategy, which has proven incredibly successful the last six years. Before that, we split the company between News Corp and Fox, that transaction also worked for both entities incredibly well. So our history and our education of this by doing it has proven that scale is not necessarily good for scale sake.”
He reiterated that the company would make strategic acquisitions that will extend the company’s engagement with its audience and reach in core verticals. Notable acquisitions by Fox include the podcasting company Red Seat Ventures and the podcast creator subscription platform Supercast.
“We don’t have anything at hand right now to announce, but we’d like to do more M&A at a more substantial level,” he said. “You won’t see us investing substantially in businesses that are reliant on the traditional cable subscription ecosystem.”
In addition to the Paramount-WBD merger, Murdoch also addressed Fox’s upcoming media rights negotiations with the NFL, calling the company’s over 30-year relationship with the league “very strong” and “mutually beneficial.” However, he noted that there’s been no “material” renewal conversations yet.
“We have four more years on our contract before any presumed opt out would take effect. So we feel comfortable with where we are,” Murdoch added. “Prices were renegotiated only three years ago, and they went up over 100% three years ago. So we think our current pricing is at market but to the extent that there was any incremental cost for that NFL programming, the key thing for people to realize is that incremental cost would would flow through to local affiliates, to our distributors and ultimately to consumers and the fans.”
As for Fox One,, Murdoch reiterated that the streaming service has exceeded expectations with subscribers and financially, but he did not disclose any specific figures. However, he touted the platform’s news viewership, noting that the audience is watching over 10 hours of programming per week. In addition to being offered as a standalone platform, pay TV viewers can access Fox One through their cable subscription.
“Fox has been the most pro-cable, pro-pay television bundle of any content company. For Fox One, we have been extremely focused on not creating churn. We don’t want any churn from a traditional cable subscriber from one of our distribution partners onto Fox One and it actually doesn’t make financial sense,” Murdoch said. “So because of that, you’ve seen no promotion of Fox One in linear Fox News or linear Fox Sports, none at all. Because of that, we haven’t churned or it’s a very small percentage of people who might churn from traditional cable into Fox One.”
As Fox heads into renewal discussions with distribution partners, Murdoch said he has “strong confidence” that the company would continue to drive subscription pricing, noting it increased by about 4% in its latest quarter.
“If you have a lot of scale and you buy a lot of channels, but no one wants to watch, you spend all your leverage in your distribution negotiations trying to protect the weaker channels. So you lose leverage,” he said. “Because we’re so focused, we’re really being able to drive pricing and really share of wallet for the for the cable subscriber over our competitors. We have great confidence we’ll be able to continue to do that.”
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