Has Murdoch Deceived the Dumbos on Board at Disney?
Is Iger’s Disney Paying a Premium to Murdoch for Propaganda Support for an Iger Presidential Bid in 2024?
December 29, 2017 / Murdoch Media Madness Section / NYC Business & Politics / News Analysis & Opinion / Gotham Buzz NYC.
ADD PIECE IN ABOUT HOW JAMES WILL BECOME THEIR CEO.
Has Murdoch Deceived the Dumbos on Board at Disney?
Is Iger’s Disney Paying a Premium to Murdoch for Propaganda Support for an Iger Presidential Bid in 2024?
December 29, 2017 / Murdoch Media Madness Section / NYC Business & Politics / News Analysis & Opinion / Gotham Buzz NYC. Continued.
I couldn’t help but watch with interest at the huge merger announced by Murdoch’s 21st Century Fox [FOXA] and Disney [DIS]. What I found most interesting was the media narratives crafted around it and how it appeared that Murdoch might possibly managing it – just like he seems to manage the narratives around political campaigns.
Murdoch appears to have been successfully manipulating public perceptions of candidates and issues on three continents in English-speaking nations for decades. He appears to have perfected the sort of mass media manipulation first used by Adolph Hitler and Joseph Goebbels back in the 1930’s.
How the Hell did they Justify the Value this Acquisition?
Today Murdoch is in the process of disposing of many of his 21st Century Fox assets, which Murdoch somehow convinced Bob Iger to sell to the Disney Board at an unbelievable price of $66 billion for only a PORTION of Murdoch's company, which includes Disney’s assumption of $14 billion in Fox debt.
Only months ago, Murdoch’s ENTIRE COMPANY, 21st Century Fox, was valued at about $48 billion, a value at which it has been circulating for the past five years. Why? Because it’s business model no longer works.
Did Rupert Murdoch and Bob Iger Cut A Side Deal?
So, why would Disney pay $52 billion AND assume $14 billion of Fox debt for only a portion, and arguably the least valuable portion, of Murdoch’s company? This is pure conjecture, but I have to ask whether Rupert Murdoch and Bob Iger cut a side deal whereby Murdoch agrees to promote Iger into the presidency in 2024, in exchange for convincing the Dumbos on the Disney Board to do this deal? A deal which seems to royally screw Disney shareholders and likely thousands of employees at both companies.
I. Guesstimated Value of Fox Assets that Murdoch is Selling
THIS IS A WORK IN PROGRESS - COME BACK FOR FINAL GUESSTIMATES
Let’s see what Murdoch gets. He reduces his leaner Fox company debt by $14 billion. He keeps the assets that it appears will hold value going forward which is live news, live sports and the TV stations group. Using the Tribune company as a very poor surrogate analogy, the TV stations are worth about $4 billion [huge guess $2 billion in revenue].
And Fox News and Fox Sports are the core of any potential venture to recreate a network. Fox generated about $8 billion in revenue in advertising in the U.S. in 2015. At the time sports revenue was growing, as were news ratings. Let’s assume these two pieces of the company are worth two times revenue or $16 billion.
I’m guessing that the content part of the company generated about $20 billion in revenue, excluding the TV stations group [and I’m really guestimating here]. Given the stations valuation of $4 billion, the News, Business & Sports at $16 billion and Sky TV at $10 billion, we have accounted for about $30 billion - $20 of which Murdoch appears to be keeping. I’m going to guesstimate that these prices haven’t changed because the Sky valuation is per merger contract [with his son James negotiating for Sky as its Chairman – got to love the way Murdoch seems to rig these things] and the News, Business and Sports are staying so they’ve not been bid up as part of the deal.
That means that the market valuation of $47 billion a few months ago, leaves the content side / production side of the business and miscellany cable assets & investments [$4 billion so take those out too] at $47 - $30 - $4 = $13 billion a few months ago – being bid up to $66 - $30 - $4 = $32. Now that’s what I call a Murdoch propaganda payout. Almost three times the value of a few months ago for his shit assets. CAVEAT - This is a work in progress and I have to check these numbers.
Why would Iger do this for a film studio that has had only two of the top 30 films in the 21st century in the past seven years [they had five in the first decade of the 21st century]? According to one report [LA Times?] some of the rights to the Star Wars films Disney gets in a couple years anyway – I think the only one they wouldn’t get is the first.
But step back – these aren’t great assets. Why would you pay what seems a HUGE PREMIUM as the market is taking a hard turn to video gaming and the internet social media / interactive content while the traditional markets / means of delivery are drying up? I understand why Iger might do it – he wants to become president and Murdoch can help make that happen.
But the Board? This seems like dereliction of duty or breaking their fiduciary responsibility [Iger too?].
This is like loading up on printing presses just as the newspaper industry circulation takes a nose dive because of the internet.
TV stations ratings are declining as people spend more and more of their time on the internet and zap many of the ads in recorded viewing. Live shows differ as they are live so you kind of have to stay tuned and watch the ads if you don’t want to miss anything. Thus there’s a downward pressure in both audience viewing, and in the business model of showing / producing of non-live content as people don’t stick around for the ads – making them less effective / less valuable.
Filmed Entertainment and Fox Studios represent a lot of what Murdoch is selling Disney. Theater audiences are trending lower and ticket prices are rising. I assume this trend will continue as real estate, production costs and wages rise – so will ticket prices – which will dampen availability to the masses, who have other options for non-social entertainment viewing. A lot of people will wait.
Ditto the content they produce for television stations. As audiences decline, and the TV station advertising business model falters – except for live news and sports – the value of that content / revenue generated from it, will decline. And those old world studios have considerable overhead that’s just not competitive in todays world where a couple of computer savvy Millenials with a mac and camera and good idea can create compelling content and deliver it on the internet.
STATIONS GROUP. Murdoch is hanging onto his stations group, which continues to be profitable, and somehow isn’t held to the FCC rules for duopolies while the Sinclair Broadcasting merger is? Murdoch’s Fox has a half dozen or more duopoly markets. Sinclair is paying $4 billion for Tribune TV stations with some other assets. TV stations that likely aren’t as well positioned as Murdochs, so let’s assume a value of $4 billion for the TV Stations group.
FOX SPORTS NETWORK is a slew of Contracts that Periodically are Rebid. Much has been made of the Fox Sports Network, which is an agglomeration of local sports broadcast rights and how this will bolster ESPN’s presence in the local market. But these rights aren’t in perpetuity, and a few years from now Disney may find itself bidding against a leaner Fox – that doesn’t have the bloated debt Disney is taking on and the underperforming assets that Disney appears to be buying at incredibly inflated prices … in my opinion.
HULU. The same is true of all the fuss about HULU, which begs the question of whether the sly old fox, Rupert Murdoch, manipulated the narrative around this merger to serve his own selfish purposes, not the audiences he ‘supposedly serves’. My experience in watching the Murdoch is that he only seems to serve himself and you have to watch and question every single move he makes which is why I am writing this.
Back to Hulu. It’s a streaming service about 15% the size of NetFlix the market leader. Hulu reportedly does $1 billion in revenue, while NetFlix does about $8 billion. NetFlix is valued at $83 billion which is about 10x revenue. NetFlix should command a premium being by far and away the leader, but even if we ignore that, that puts Hulu’s value at $1 billion and Murdoch’s Fox only owns 30% of it so it seems reasonable to value that at $300 million.
$4 BILLION INVESTMENTS. Dunno.
CABLE NETWORK PROGRAMMING. Here they list Amstrad, LAPTV [Latin America], Sky PLC, Star TV [China] and Tata [India]. Let’s start with the foreign operations where Murdoch’s stakes are generally minority shares. So Disney won’t be calling the shots and these are in nations, which don’t trust foreigners to run their media. Given Murdoch’s operations in the English speaking world – who can blame them?
Somebody [Murdoch?] put out the narrative that this would provide Disney with a great opportunity to market its content abroad. I say poohey. How many Chinese and Indian movies have YOU watched in the last decade? Content is cultural and while some of us enjoy foreign films, most people seem to prefer content representing their own cultures.
Murdoch’s Fox has 39% of Sky, the satellite TV network in Europe, and he’s offering $15 billion to buy the remaining 61% so this stake is worth $10 billion. The Brits are questioning this acquisition – which as well they should given how Murdoch seems to recklessly and abusively use his media power to jerk the entire country around like he did with the Brexit vote.
II. Media coverage by Murdoch owned outlets reporting on the subject.
Fox News appears very favorable.
Barron's, who are generally quite good at evaluating these sorts of deals, seems at least in part to have lost its way.
NY Post talks about closing down the studios and the great cost savings.
Wall St Journal appears very favorable, but then the best journalists and reporters in that company - according to reports hundred(s) - have left since Murdoch acquired the company in 2007. If you want solid financial reporting you might want to check out Reuters or Bloomberg, both of which reportedly picked up those who decided to leave.
Their reporting seems like their FBI bashing narrative - skewed so much as to leave their credibilty in question.
Talks about Hulu which is a gnat on nut. What will the government say?
Market Watch talks Hulu and Sports. There's too little talk about an outdated business model for content, the large mass of old world / depreciated assets that Iger appears to have convinced to pay for as if it were the 1960's. And so forth.
None of them seem to talk very much about the media market havoc created by technology changes, or the deteriorating financials the past five years, or what Disney is really getting ... SCREWED.
And most of the rest of the media follows the Murdoch Fox's narrative lead.
III. Conclusion – Is Murdoch Digging into his Dirty Bag of Tricks to do Sucker Disney to do This Deal?
It sure looks like it. I don't think he can help himself. It seems to be who he is.
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