At age 91, Rupert Murdoch has been working hard. News UK this week launched his latest pet project, the TalkTV news channel, featuring Piers Morgan’s interview with Donald Trump. Morgan’s nightly programme is being screened also on News Corp’s Sky News Australia and Fox Nation, in the US, in a much trumpeted global deal which includes the former newspaper editor writing in the company’s newspapers and for its Harper Collins book publisher.
Murdoch is betting a lot on Morgan across the News Corp world. But there are four real reasons why the News UK broadcasting plans are groundbreaking:
- Multi-media: TalkTV – available online, via an app, online and on all TV platforms in the UK – is effectively a nightly schedule of TV programmes; the rest of the 24 hours is News UK’s TalkRadio (with 540k weekly listeners). The new channel is slickly produced and pre-existing TalkRadio presenters have been smartened up for TV but, fundamentally, this is a single channel that’s available to its audience both as radio and TV. In some ways, it addresses the basic truth that, even the best-funded TV news, often features static reporters with little real use of video, so most of it works well on radio. It also exploits the simple fact that the largest audiences in the morning belong to radio and in the evening to television. The new TalkTV complements Times Radio, launched in 2020 by News UK’s Times of London. Both use journalists from that paper and also from The Sun, which is all over its TalkSport radio. News UK’s Virgin Radio and its other music stations in Ireland seem incongruous. But the news and talk broadcasting complete an increasingly digital group including its traditional news brands: almost 70% of The Times subscriptions are digital, and The Sun has now overtaken Mail Online as the largest news web site in the UK (the Mail remains the worldwide leader). News UK is believed to have more than £100m of broadcast revenue – some 25% of the total (and rising). From its multi-media operations overlooking London Bridge, the company is no longer all about newspapers.
- Spreading the cost: TalkTV’s nightly news programme is fronted by Tom Newton Dunn, a born broadcaster who has actually been a journalist, and latterly political editor, of The Sun (yes) for more than 20 years. But the whole channel and also Times Radio is dominated by contributions from News UK journalists, many of whom broadcast as part of their regular contracts – and for no extra pay. For a company which employs more than 1,000 journalists – and which was last year granted regulatory clearance to merge the separate operations of The Times and Sunday Times, as and when it wants to – this may be a significant opportunity to reduce and/or leverage its journalistic budgets.
- Big reach, small budgets: The News UK broadcasting operations – like its TalkTV channel – is produced at modern, well-equipped studios at its headquarters and also at a production base in west London. But it’s all pretty low budget. Times Radio – whose original rationale had been to counter the daily newspaper’s plan to sponsor a morning show on the rival LBC radio – is believed to have an annual budget of £8-10m, about 10% of the BBC’s Radio 4 (audience:10m), 3-4% of the total costs of The Times/Sunday Times, and 15% of their salaries budget. Times Radio – with a weekly audience of 500k (50% is socio group AB) – is expected to breakeven in 2-3 years. But, at these cost levels, it may almost be serving its original purpose as a high-value promotion for the newspaper. The channel has a staff of some 50 – about 25% of the total employed on all the News Corp radio channels in the UK. TV rivals have been even more surprised to discover that TalkTV has a team of less than 180. But, then, News UK’s state-of-the-art broadcasting centre has been installed for a total cost of under £10m: TV and video production uses fewer people, less capex, and less space than ever.
- Data-charged advertising: The future of the News UK multimedia strategy is the push towards first party data as its newspapers shift towards digital subscriptions and its broadcasting increasing reaches its audience via web apps, podcasts, smart speakers, and online. These connected audiences – and the first party data they generate – have a dramatic effect on advertising rates. It is believed that such first party advertising yields are £8.50-10 per 1,000 viewers/ listeners, compared with £2-3 per 1,000 for linear TV and radio. But the real prize for News UK is a growing share of the UK’s £4.5bn television advertising, almost 45% of which still goes to ITV, the terrestrial broadcaster whose share of viewing continues to fall. It’s a juicy target.
The News UK broadcasting plan was kick-started, in 2016, with its £220m acquisition of the Wireless Group of radio stations in the UK and Ireland. Ironically, News Corp had been a 30% shareholder in the radio group when it was launched by former Sun editor-in-chief Kelvin MacKenzie. With neat timing, the publisher had helped MacKenzie to acquire the radio group in 1998 – just as the former editor was being linked with a potential Axel Springer bid to buy The Sun’s close rival, the Daily Mirror.
News Corp’s subsequent decision to acquire 100% of Wireless Group marked its first foray into broadcasting after its 2013 split from 21st Century Fox. It was described as “an excellent strategic fit” but no one could have seen what would happen next.
Rupert Murdoch became a seller.
In 2019, Disney acquired the bulk of 21st Century Fox for $71bn and Comcast bought the UK-based Sky TV for $39bn. The deals left the enriched Murdoch family with control of the $20bn Fox Corp (principally Fox News and Fox Sports) and of the $12bn News Corp, with its UK, Australian, and US newspapers, Foxtel pay TV in Australia, the Wall Street Journal, Harper Collins, and its digital real estate group. Some consolation.
The sell-off to Disney was rationalised by the formidable growth and high-spending of Netflix, but the valuation (like that of Sky TV) was simply irresistible. But the deal was completed a year before the pandemic struck and the Disney financial performance underlines the extent to which the $200bn US company is now seen to have egregiously overpaid for the Murdoch business. Disney’s EBIT in 2021was less than one-third of the 2019 total and it’s not forecast to get back to pre-Fox levels until 2024 at the earliest. (And its Disney+ streaming launch has also been blown off course.)
The assumption that the rich divestments were some kind of farewell for Murdoch, 50 years after he had landed in the UK to start the internationalisation of his Australian newspaper business, has proved to be wrong. He has been all over the detail of TalkTV – 40 years after his launch of Sky TV.
What eventually became Europe’s most profitable TV network had been the fulfillment of an ambition to use newspapers to fund what Murdoch saw as the future of media: TV. But it was a long battle which started with the £10m acquisition of a small English-language ‘pan European’ satellite channel, which he renamed Sky in 1982.
That was three years after Margaret Thatcher had become UK Prime Minister and had waved through Murdoch’s 1981 acquisition of The Times and Sunday Times, even though it increased, to almost 40%, his share of UK national newspapers. The losses of the separately-staffed The Times were used to shroud the then super-profitability of The Sunday Times and allowed the government, astonishingly, to view the newspapers together as a failed business.
In 1987, the News Corp newspapers supported Thatcher’s third general election victory, just a year after Murdoch had boosted his profits – and political profile – by stealthily moving his newspapers to a new digital site at Wapping in London’s former docklands. He locked-out 6,000 striking printers. For months, the pitched battles between printers and police at “Fortress Wapping” resembled those of the fiery coal miners which had defined Thatcher’s first government.
The bold move, which consigned to history “Fleet Street” (London’s former centre of newspapers), unsettled many of Murdoch’s fellow newspaper publishers. But it transformed their fortunes too. News Corp UK doubled its profits to £145m -and pushed into television in the UK and US.
Murdoch had failed in a bid for the official UK satellite broadcasting licence. And – when the successful bidder, British Satellite Broadcasting (BSB), refused to let News Corp into the consortium alongside UK media giants Pearson, Reed, Granada, and Virgin in 1988 – he announced that that the Sky Channel would be relaunched as a UK-based service, using the Luxembourg-based Astra satellite. It was a smart move to lease channels on the Astra system rather than launching its own satellites (as BSB was doing) – and to get there first.
Sky TV went on the air in February 1989, while BSB was repeatedly delayed by technical problems and finally made it in April 1990. Even then, the launch was a fiasco with few set-top boxes even available for store demonstrations, while Sky had raced to 750,000 dishes – cheered on and promoted enthusiastically by News Corp’s newspapers, which also gave prominent coverage to their rival’s tech problems.
Sky’s cheap-and-cheerful satellite dish seemed to have beaten the BSB’s high-tech (but untested) “squarial”. But UK viewers, brought up on the tax-funded BBC and commercial free-to-air ITV, needed price-cutting persuasion to sign-up for pay TV – especially since it mostly involved the purchase of a satellite dish: few Brits had access to cable. It became an expensive campaign, with Sky initially incurring weekly losses of £4m after start-up costs of £120m.
Coming so soon after the investment in his new London newspaper presses, News Corp’s UK subsidiary was running close to empty and, in August 1990, reported annual losses of £257m. The British TV venture posed a real threat to the survival of News Corp itself soon after Murdoch had paid a dizzy $3bn for the world’s largest listings magazine, the 17m-circulation TV Guide, in the US. (Warren Buffet’s advice to the existing TV Guide owner faced with Murdoch’s unsolicited offer was memorable: “Run for the bank”). News Corp’s financial pressures were mounting.
Its frantic expansion had been funded by borrowings from a myriad of separate lenders in multiple currencies all over the world. As recession hit the UK and US, News Corp’s debts threatened to crush it. In the event, Murdoch struggled through months of personal negotiations with, literally, hundreds of creditor banks by selling-off publishing assets and cutting out losses. He made some great pressure-relieving divestments: His travel information business fetched 140% more than he had paid Ziff Davis three years before. The company’s 50% of Elle magazine raised $160m only two years after its $5m launch. And the US supermarket tabloid The Star (in which News Corp had invested less than $10m) was sold for $400m.
But Murdoch’s survival would still depend on a satellite TV merger in London.
Everybody needed a merger. Sky was losing £2m a week. BSB – with weekly losses of £8m – struggled to achieve even 25% of the 400,000 satellite customers it had budgeted, not helped by “squarial” design problems. Spending had gone through the roof as it splashed £400m on Hollywood film rights, and out-bid ITV for a four-year football rights deal – before demanding yet more money from its shareholders.
The secret merger talks took place in the leafy splendour of the Lucknam Park Hotel, near Bath in Britain’s south west. Murdoch played ‘hard to get’ and appeared to leave most of the negotiating to others. But, even without him in the room, the talks stumbled across the cultural differences: BSB people, including its gilt-edged shareholders, saw Sky as an example of their idea of the “Philistine” Murdoch. Sky people thought BSB was filled with elitist British fat cats. Murdoch himself couldn’t forget the personal slight when Pearson had refused him a place on its board even after he had become a major shareholder in the 1980s.
BSB’s shareholders were too preoccupied with their own losses and investor pressures to realise they were negotiating with a wounded soldier. But BSB had become a world-champion spender and estimates that it would need a further £500m just to get to breakeven in 1993 were blithely increased to £650m and, then, to £1.3bn. The company’s flashy headquarters on the Thames had cost £26m to build. They featured £70,000 granite desks, and stationery cupboards stacked with Montblanc pens. A carpet, alone, was said to have cost more than the whole of Sky’s headquarters, on an industrial estate unfashionably near London’s Heathrow airport.
Even BSB’s launch delays had been managed typically, with its highly-paid advertising team receiving commission on theoretical sales they would or could have made – if only the station had been on the air. The shareholders soon had enough of their free-spending company – and started to get scared of Sky. Virgin pulled out, and Granada, Reed and Pearson decided to push for a merger at all costs.
By October 1990, Murdoch had played a blinder of a poker game and achieved a merger funded by the BSB shareholders. News Corp – still struggling to service its £4bn of corporate debt – became the largest single shareholder. Although each side owned 50% of the ‘new’ Sky, it was effectively a takeover. Even the eventual flow of profits would go first to News Corp. BSB shareholders gratefully funded the “merger”, just relieved to find an exit
Murdoch’s relationship with Prime Minister Thatcher presumably helped to secure regulatory approval of the deal, seemingly ignoring the fact that the Sky merger seemed like a clear breach of the terms of BSB’s government-awarded licence – and also of cross-media laws in the UK, where Murdoch’s newspapers might have prevented him owning more than 20% of any TV channel. That the new channels would be broadcast via a Luxembourg-based satellite was the “offshore” defence used to justify approval of the merger.
By 1992, with News Corp slowly emerging from its own debt crisis, Sky moved into operating profit, although it was still paying almost £3m week in interest charges from the start-up losses of £1.25bn. The game changer was the 1992 formation of English football-soccer’s Premier League and Sky’s agreement to pay £304m for television rights for the first five seasons. Before then, pay television had been an untested proposition in the UK – like live televised football. But a combination of Sky’s strategy, the star quality of the new Premier League, and the UK public’s evident appetite for live games made it the start of a period of rapid expansion for Sky. Within two years of securing Premier League football, the satellite broadcaster had 3.5m subscribers. By 2010, its multi-channel services were in 10m homes.
Successive attempts by News Corp/Fox to take 100% control of the listed Sky TV were eventually killed-off by the phone hacking scandals which enveloped some of its newspapers from 2011. And then came the knock-out bid from Comcast which had been beaten by Disney in the race for 21st Century Fox itself.
Despite the reputational success of Sky News and the huge profits of Fox News, in the US, much of the Murdoch TV track record has been in sports and entertainment: operating in parallel with the newspapers which had started it all.
That’s why TalkTV is so interesting.
It happens to be exactly 100 years since the pioneering William Randolph Hearst brought together media interests in newspapers, magazines, movies and radio, in the US: the first “media” group. Murdoch has been his successor for more than 40 years.
The world’s most successful media entrepreneur has now identified integrated radio-TV broadcasting as the perfect bridge between the print and digital output of its news brands. The logic is clear. Daily newspapers everywhere are haunted by the simple reality that it has proved much easier to build audiences online than to shift revenue from print; even in decline, print is sustaining the profitability of many news brands. And, even in News Corp, there are executives (out of the earshot of the boss) who predict that newspapers will “soon” print only on and around the weekends – editions which, in the UK, already account for more than 100% of the profit of the country’s national news brands.
Suddenly, that scenario is less important to News UK than its strategy of using the content, brands, relationships and methods of its famous news brands to build integrated direct-to-consumer, all-media services. Those brands already reach approximately 70% of adult news readers in the UK (39m people).
TalkTV is just the start. We might expect News UK’s powerhouse TalkSport (with a market-leading weekly audience of almost 3m and employing some 95 people) to develop a TV channel (although TV sports rights are a possible obstacle). The Wall Street Journal might just launch into the business TV-digital market currently dominated by Bloomberg and MSNBC.
Not for the first time, daily news brands everywhere have a lot to learn from a Rupert Murdoch venture. But – with TalkTV’s costs – there are multi-channel options too for special interest and lifestyle publishers like DotDash Meredith, Future, and Hearst. Just think.