Murdoch eyes just one more deal as his empire strikes back

News Corp has emerged as a leading contender to buy publisher Simon & Schuster

Murdoch - Trump

When he was cured of prostate cancer, Rupert Murdoch assured News Corp shareholders that he was “now convinced of my own immortality”. Two decades later as he closes in on his 90th birthday, the last of the press barons has nevertheless spent most of 2020 safe and splendidly isolated just outside Henley-on-Thames, in Oxfordshire.

At Holmwood, a 14,200 sq ft Georgian country house perched on a southern knoll of the Chilterns, Murdoch and his fourth wife, the model Jerry Hall, have not endured a claustrophobic lockdown. The pair enjoy the run of 11 bedrooms, 26 acres of gardens and grounds, stables and an infinity pool, according to material published when the property was marketed two years ago.

Yet even in this idyll and at his advanced stage of life, it has not escaped Murdoch’s attention that the outside world is moving on, as he increasingly finds himself the subject of retrospective documentaries.

Meanwhile the question of dynastic succession, which concerned Murdoch for much of the last 30 years, is resolved, as his eldest son Lachlan gradually takes a tighter grip on News Corp and Fox. His other children have banked their billions from the sale last year of his television and film empire to Disney and are going their separate ways in business.

Meanwhile the pandemic has accelerated the decline of printed newspapers, triggered the electoral failure of Donald Trump and emboldened his political opponents in Australia to declare open war.

The sun may be setting, but Murdoch is not finished. As executive chairman of News Corp and co-chairman of Fox he remains king to a powerful court, prepared to go to war on his behalf. After retrenchment, Murdoch is empire building again.

Credit: Jason Reed/ Reuters

Last week News Corp emerged as a leading contender to acquire the publisher Simon & Schuster. Murdoch aims to combine the business, which has been put on the auction block by the broadcaster ViacomCBS, with his own HarperCollins arm to climb the ranks of the book world’s “big five”. The expected price tag of more than $1.7bn (£1.3bn) is more than 11 times Simon & Schuster’s estimated underlying earnings but modest compared with the $71bn Fox received for its Hollywood business. Seasoned Murdoch watchers say the significance of the bid to News Corp should not be underestimated, however.

“This is the deal they have been waiting for, at least for five years,” says one senior media executive. “It’s strategically very important to News Corp.” 

As printed newspapers have declined so has News Corp’s financial muscle. Since it was split from Fox in 2013, in a rare concession to investors following the phone hacking scandal, the company has bounced between profit and loss. Its latest annual financial update, released in August and covering the first four months of the pandemic, revealed its biggest spillage of red ink yet. Net losses reached $1.55bn as it wrote down the value of its Australian pay-TV arm booked a loss on the sale of its American marketing business.

Against such financial pressures, a takeover of Simon & Schuster would represent a bold expansion. It is also likely to run down the last of the $2.6bn cash reserve News Corp took as part of its divorce from Fox, which has previously helped pay for its $950m acquisition of the growing US online property listings operator Move Inc in 2014. News UK, the publisher of The Times and The Sun, spent a further £220m in 2016 to expand into radio via the takeover of Wireless Group, the broadcaster behind Talksport.

Credit: ANDY RAIN/ EPA

While a senior insider says “the jury is still very much out” on that move, Murdoch has made up his mind to back Brian Murray, the chief executive of HarperCollins, to deploy News Corp’s remaining cash.

“Brian is quietly very impressive,” says a fellow Murdoch executive. “While other parts of the business have struggled he hasn’t missed many quarters. Rupert backs people as much as strategies.”

Book publishing is one of the safer bets in traditional media, however. Fears digital reading would consign the industry to a similar fate as printed newspapers have proved unfounded. In the UK, overall book publisher sales rose 4pc to hit an all-time record of £6.3bn last year.

Amazon remains the $1.6-trillion-dollar blot on the horizon for publishers, which have been seeking consolidation partly to increase their clout against Jeff Bezos’s notoriously tough supplier negotiators. If it secures Simon & Schuster, HarperCollins will leapfrog Hachette, part of the French media concern Lagardère, to become the world’s second biggest book publisher. 

News Corp will also become publisher of some of the most critical titles to have emerged in America’s Trumpology boom. In just the last few months Simon & Schuster has been behind Watergate journalist Bob Woodward’s account of Donald Trump’s chaotic pandemic response and a coruscating attack from his former national security adviser John Bolton. A bestselling character demolition by a member of his own family, niece Mary Trump, hit shelves in plenty of time for the US election, too.

As power slips away from Trump, Murdoch will give no thought to the bruised feelings of his former golf buddy as he pursues Simon & Schuster, according to his allies and rivals in business.

In the imagination of many of his enemies, Murdoch abuses media influence to make and breaks politicians. Kevin Rudd, the former Labor prime minister of Australia, and Malcolm Turnbull, a former leader of the conservative Liberal party who blames Murdoch newspapers for his ousting, share this analysis and have mounted a campaign in recent weeks to loosen his hold over the country’s media landscape.

Credit: Lukas Coch/AP

Those who have competed or worked closely with Murdoch tend to see things differently. For the most part he does not wield power, but flatters it in service of his own business. They do not share Trump’s shock that Fox News has declined to back his campaign to overturn Joe Biden’s election win.

Victory at the Simon & Schuster auction will require all of Murdoch’s will to win, along with financing help from News Corp’s advisers Bank of America. The competition is strong and includes the world’s biggest publisher Penguin Random House, owned by the German media giant Bertelsmann.

At News Corp’s annual shareholder meeting last week, Robert Thomson, its chief executive, a former editor of The Times warned Bertelsmann would become a “book behemoth” if competition authorities allow it to acquire Simon & Schuster. The German company has dismissed such concerns, arguing the strength of Amazon is a barrier to dominance.

Murdoch allies concede that regardless of its monopoly claims, which will draw hollow laughs from his opponents in Australia, the auction will test News Corp’s mettle. Failure could even signal the end of an era as Lachlan takes command and alters the company’s appetite for a bidding war. His father has previously stretched the case to acquire assets such as Dow Jones, the publisher of The Wall Street Journal, bought for $5.6bn in 2007.

“In the old days News Corp would have paid whatever it takes to get the asset,” says a media source. “When Rupert wants something he has been willing to over pay.

“Everyone inside the company is watching now whether that still stands. The question is really whether this is Rupert’s last deal for News Corp, or Lachlan’s first.”

Credit:  Andrew Harrer/ Bloomberg

The gradual handover is also raising new questions of succession. The race to replace Thomson, whose contract runs to mid-2023, is viewed as competition between two executives, one close to the father and one to the son. Michael Miller, who runs News Corp Australia and is close to Lachlan, has “Foxified” Sky News down under (owned outright by News Corp) with opinionated Right-wing evening hosts.

Meanwhile Rebekah Brooks, the chief executive of News UK, who has kept a low profile since returning to her job in 2015 after her acquittal on phone hacking charges, remains Rupert’s favourite. She is investing more in radio and preparing to enter television production. Both are focused on cost-cutting at newspapers.

There are signs that Brooks, who has maintained much of her strong network in British media circles, including via a Zoom book club that includes Alex Mahon, Channel 4 chief and Elisabeth Murdoch, may seek a higher profile as the competition to run News Corp heats up. 

Industry sources say senior communications experts have been approached in recent weeks about a role handling her public image though sources close to News UK dismissed the claims this weekend as “nonsense”. For now the phone hacking scandal continues to cast a shadow, however, as dozens of civil claims against The Sun make their way to court and are settled by News Corp before trial. The cost of the settlements, which do not admit wrongdoing, ran to $90m last year but are indemnified by Fox as another parting gift to News Corp.

Lawyers for the claimants have told the High Court a trial would expose new evidence about the behaviour of senior executives though so far none of their clients has refused a multimillion-pound settlement.

Regardless of whether he claims Simon & Schuster the power of Murdoch’s money may be tested again next November, when the Duke of Sussex’s phone hacking allegations against News Corp are scheduled for trial.