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Time Warner Rupert Murdoch

Rupert Murdoch's Time Warner bid signals a media industry heading for consolidation

By Warren Johnson |

July 22, 2014 | 5 min read

Rupert Murdoch’s offer to buy Time Warner is evidence that the media industry is currently undergoing a transformative moment. The initial rebuff surely won't stop the media mogul from achieving what he wants and regardless of the outcome of this offer, consolidation in the industry will gain momentum, marking the beginning of a new era.

After three long, torrid years of shocking revelations brought to light by the hacking scandal, Rupert Murdoch is clearly trying to regain control of his image and expand his core US business, before handing it over to the younger generation.

His bid to acquire Time Warner seems to signal an attempt to leave a mark as arguably the greatest-ever media titan, simultaneously securing a dramatic final act for his legacy, while pushing the fragmented media landscape toward consolidation.

As ever Murdoch is ahead of the pack and has identified consolidation of entertainment as key, as distribution networks of cable companies consolidate too. He is clearly not the only person with this view as a number of the key hedge funds have been long on Time Warner stock since the beginning of the year.

In recent years, the growing power of cable companies and the rise of internet giants like Netflix, Amazon and Google have deeply shaken the media industry and reshaped consumers' habits. While Murdoch could have gone after them, his strong appetite for the 'BIG' and the 'Known' appears to be a stronger pull.

In the past, Murdoch has invested in new, upcoming and disruptive media ventures such as MySpace and Vice, but the traditional business of TV, movies and newspapers remains his greatest passion. When Murdoch bought the Wall Street Journal there were gasps of amazement, and although the paper may have lost a degree of credibility, under Murdoch’s ownership it has become the biggest selling paper in the US.

However, the relentless decline of the newspaper business is now pushing the media mogul to shift his attention to the more lucrative entertainment and sport business. The split between News Corp, now encompassing the publishing division of the Murdoch’s empire, and 21st Century Fox, is clear evidence of Murdoch’s ambition to scale the TV and entertainment business.

Rupert Murdoch’s decision to distance himself from his publishing assets also comes from the need to put the hacking scandal behind him – a move that has been followed by his son, James.

James Murdoch, recently tasked to develop Fox’s pay-TV global strategy, has been working very closely with his father in the pursuit of closing one of the biggest deals in the history of the media industry.

However, the merger, which puts greater emphasis on programming and films as the future of the Murdoch’s empire, is likely to put Elisabeth back in pole position for the leadership of the business.

Undoubtedly the media veteran is planning a smooth transition of power to his sons, and his offer of non-voting shares to Time Warner as part of the deal further proves his wish to secure total control of the company and maintain it within the family.

This merger would absorb Time Warner’s biggest broadcast brands: HBO has been at the forefront of many of the most acclaimed and successful TV productions in the US over the past 15 years and Warner Bros Pictures, one of the greatest Hollywood studios, which has produced some of the most successful movie. Lots of tradition, prestige and heritage remain in these brands.

The deal, if it goes through, is likely to kick start a series of takeovers, and content producers may find themselves forced to merge to compete. Tech companies like Google and Apple may also fight back by moving into the world of content.

My view is that as with all Murdoch deals, this isn't a whim but is some thing that MUST be acquired meaning that the price is likely to go even higher, possibly up to $100 per share. I wonder whether another offer will appear – either an opportunistic approach from another entertainment company or simply something sought to drive up the price Murdoch must pay?

Warren Johnson is the founder and managing director of PR agency W Communications

Time Warner Rupert Murdoch

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