Murdoch isn't playing games with ESPN

The News Corp. CEO will need to spend big to take on the 'Worldwide Leader in Sports.'

By Jonathan Berr Mar 29, 2012 11:53AM
mage: Man changing TV channels with remote control (© Flying Colours/Digital Vision/Getty Images)News Corp. (NWS) CEO Rupert Murdoch is ready to spend big bucks -- perhaps billions -- to enable his so-far theoretical all-sports cable network to catch up to Walt Disney Co.'s (DIS) ESPN. 

His timing is curious, given the struggles of the cable industry lately, including ESPN's declining ratings.

During its fourth-quarter earnings conference call, Disney CEO Bob Iger attributed ESPN's viewership decline to the National Basketball Association lockout. Unfortunately, the problem goes beyond one sport. For instance, ratings for "Monday Night Football" were down almost 10% this year, the sixth year the network broadcast the program -- though it remains the most-watched show on cable. Ratings for the BCS National Championship Game were the second-most watched in the history of cable television but were nonetheless down 8% from the previous year.

The ratings decline isn't endemic to ESPN. People are watching less TV overall. As The Wall Street Journal recently noted, "So far this year, the average audience for 11 of the 15 most-watched cable channels at any time of day has fallen from a year earlier." News Corp. also faces rivals such as Comcast's (CMCSA) NBC Universal and CBS (CBS), which are both trying to increase their footholds in sports programming.

Of course, ESPN -- the "Worldwide Leader in Sports" -- remains a formidable competitor. The network, which first aired in 1979, attracts more than 1.3 million viewers in prime time and was nominated this year for 52 Sports Emmy Awards. It will take Murdoch's empire several years to catch up to ESPN, if it can be done at all.

Nonetheless, News Corp., which owns 20 regional sports networks, puts its money where its mouth is when it comes to sports. It has secured the TV rights to the World Cup in 2018 and 2033, along with the Pac-12 Conference and Big-12 Conference games. The company's Fox network broadcasts National Football League and Major League Baseball games. It also owns Speed, a motor sports channel, and Fox Soccer Channel.

Along with its formidable assets, News Corp. also employs top-notch talent such as the baseball commentator Ken Rosenthal. But as Bloomberg News, which broke the story Wednesday, notes, Murdoch's sports empire lags ESPN in affiliate fees, a huge money-maker for media companies. ESPN gets about $5.06 per subscriber per month this year, according to SNL Kagan data cited by Bloomberg. That's the most of any cable network.

Whether Murdoch's sports ambitions will be realized is an open question. Murdoch, though, is especially dangerous for ESPN because he has been known to pay more for assets than people think they are worth -- and he's willing to wait years for his investments to pay off. 

Dow Jones is a case in point. In 2007, he paid more than $5 billion for the publisher of The Wall Street Journal, about a 65% premium -- a shockingly high amount for a company that no one else was interested in buying. Fox Business Network, launched by Murdoch in 2007 as a more business-friendly alternative to CNBC, has struggled in the ratings, attracting about 54,000 prime-time viewers. News Corp recently unveiled a plan to revamp the channel's line-up to boost its anemic ratings. Murdoch has said he remains committed to Fox Business, although many pundits have argued that he should have pulled the plug on it long ago.

If Murdoch is willing to make bets on newspapers, which experts argue are dying a slow death, and on a business cable channel that few demanded, taking on the ESPN colossus should be a piece of cake.

Jonathan Berr doesn't own shares of the companies discussed here.


4Comments
Mar 29, 2012 1:18PM
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I thought Rupert and his son were in jail by now?
Mar 29, 2012 2:30PM
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This guy should not be allowed to have any dealings with sports.With his ethics he will turn the sports into a joke. Game fixing point shaving and other cheating will be the normal.And if you complain he will use his papers to destroy you.This monster in a suit uses his money and power to get his way does not matter to him if it's legal or not. But that's just my opinion
Mar 29, 2012 2:01PM
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Rupert should be in jail by now  he has  helped people hack into other cable systems to wreak them for a takeover by Fox
Mar 29, 2012 1:42PM
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Thank God someone is going to shutdown ESPN.  They ruin sports with their idiotic, unfunny announcers.  Is there a bigger loser on TV then that fat, drunk slob, Chris Berman?
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