Rupert Murdoch Reworks His Pay-TV Script
Los Angeles, Sept. 16 (Bloomberg) -- A month in the life of Murdoch, after all, is more eventful than most Hollywood scripts, as he plots to force-feed the planet with his sports, news and entertainment programs.
Now, the cameras cut to Murdoch, the driven News Corp. chairman, who appears hard at work on a business problem that has haunted him for 15 years: cracking the pay-television market in the United States via satellite as successfully as he did in Britain.
The clock is ticking on a 30-day plan he's hatched with an old rival, John Malone, to bid for control of Primestar, an existing (but troubled) pay-TV provider. The deal is shrouded in mystery: News Corp. won't confirm the existence of an agreement, set to expire at the end of September, according to the Wall Street Journal.
Is the audience tiring yet? Not Murdoch. He excels at outlasting, outmaneuvering, outspending or merging with competitors to achieve his ends. In this case, he hopes to placate government regulators and his enemies in the cable-TV industry, who have thwarted his most recent efforts to enter the direct broadcast satellite business in the U.S.
Money Problem
Now, a flashback. In the early 1980s, Murdoch detected an opportunity to deliver programs via satellite. But the receiving dishes were unwieldy and costly; he scrapped his first U.S. satellite venture in 1983.
Murdoch also scuttled a second attempt in 1990, as News Corp. teetered from overspending on its satellite venture in Britain and a rash of acquisitions, including TV Guide.
Then, in 1995, Murdoch saw a way to tap the market using someone else's money. He got MCI Corp. to invest almost $1 billion in a satellite venture called American Sky Broadcasting. In 1996, MCI talked of delivering an array of data, information and training services to its business customers. But its ardor soon cooled. Murdoch was forced to look for new partners, as MCI sought to reduce its stake.
Merger Move
Murdoch vowed he would launch ASkyB in late 1997, making it the sixth entrant in the over-crowded satellite-TV field. Analysts were betting that only two or three companies might succeed, because all offered essentially the same programs. As Lawrence J. Haverty, an analyst with State Street Research & Management Co., said at the time, Wall Street regarded the looming shootout with ''sheer terror.''
With a showman's timing, Murdoch announced at an analysts meeting on his Twentieth Century-Fox movie lot in Los Angeles that ASkyB would merge with a competitor, the fast-growing EchoStar Communications Corp.
Gleefully, Murdoch lieutenants talked of winning over disgruntled cable-TV subscribers to the new satellite service, soon dubbed the cable industry's ''death star.''
Cable operators were not amused. Industry analysts said Murdoch might have trouble selling new programs to the cable-TV industry if he pressed the attack. The deal with EchoStar soon collapsed, however. EchoStar sued News Corp.; News Corp. counter- sued.
New Partners
Meanwhile, Murdoch tried to smooth over his relations with the cable industry. He proposed transferring ASkyB assets to Primestar, an older satellite service controlled by four cable-TV operators, in exchange for a non-voting stake.
But the Department of Justice sued to block the deal. Antitrust officials said the plan might thwart competition, if the cable industry gained control of the ASkyB's well-positioned satellite slots, ideally suited for TV service.
Of course, this has left Primestar in a bind. As an older service, it has been dependent on medium-powered satellites that deliver fewer channels and require subscribers to use larger antennas. It needs to migrate to higher-powered satellites to compete effectively with DirecTV and EchoStar.
While Primestar prepares for a court date with the Justice Department, we return to a scene with Murdoch and Malone working on their own solution to take Primestar off the cable companies' hands.
Malone will be shedding his mantle as the leading cable-TV operator if his deal to sell Tele-Communications Inc. to AT&T Corp. is completed, though he'll be left with vast programming assets at Liberty Media and $5 billion in cash. He can afford to dive deeper into satellite broadcasting.
Guide Pool
Through a Liberty-controlled company called United Video Satellite Group, Malone has already struck an important deal with Murdoch, to pool their television guide services (including Murdoch's TV Guide).
Now it appears that the two men will use United Video to bid for the cable operators' shares in Primestar. With the removal of the cable TV operators, they hope the Antitrust Division will drop its objections to a merger of Primestar and ASkyB. That will require the Department of Justice to overlook Malone's expected role as a director at AT&T, of course, which will become a cable TV titan itself with the acquisition of TCI.
The price --as reported by the Wall Street Journal --could be as low as $6 per share, but the weary cable operators may not put up much of a fight.
In a war of attrition, Murdoch usually wins |
