FILE: Rupert Murdoch, chairman of News Corp., listens as U.S. President Barack Obama, not pictured, speaks at the Wall Street Journal CEO Council annual meeting at the Four Seasons Hotel in Washington, D.C., on Tuesday, Nov. 19, 2013. For decades, investors, analysts, busybodies, columnists and gossips have loved to chew over the ultimate media-dynasty question: When Rupert Murdoch was at long last forced to step down -- whether for age, coup or scandal -- which of his children would assume the throne of his vast empire? James or Lachlan or Elisabeth? Now we know the answer. Our editors select the best archive images of the Murdoch family. Photographer: Drew Angerer/Bloomberg
Though it almost bankrupted him in its early years, Sky became a central part of Rupert Murdoch's empire © Bloomberg

After almost 30 years Rupert Murdoch is selling Sky, one of his most treasured assets, as part of the dismantling of an entertainment empire that took him decades to assemble. The confirmation this week that his 21st Century Fox group would sell its 39 per cent stake in Sky to Comcast represents the end of an era for pay-television in Europe.

It would have been unthinkable even a year ago to imagine Mr Murdoch severing his ties with Sky. He had a strong emotional bond with the company and it almost bankrupted him in its first years of operation. But it went on to become a central part of his empire, revolutionising English football, giving the BBC a run for its money in news and providing much-needed competition to broadband providers when it began offering internet services 12 years ago.

Mr Murdoch and his children exit with a small fortune, but this does not draw the curtain on their involvement in media. Yes, the family will not have any television investments in the UK, Germany or Italy, where Sky operates. It will also no longer be directly involved in Hollywood content creation, having sold its film and television production assets to Walt Disney in a $70bn deal.

But “New Fox”, the name given to the company Mr Murdoch and his eldest son Lachlan will run, has the potential to become a sizeable player in US media. It has kept its Los Angeles base, which includes the 50-acre movie studio lot and its 15 stages, although most of the space will be leased to Disney as part of its purchase of the Fox production businesses. New Fox will also house the assets not being sold to Disney — namely the Fox sports channels, US broadcast network and Fox News Channel, its polarising but highly profitable news and conservative opinion network.

This combination of assets will generate free cash flow of more than $2bn a year, which raises the question of what the Murdochs plan to do with the money. They will initially pursue a live sport strategy and have accumulated a hefty portfolio of sports rights — including NFL American football, Ultimate Fighting Championship and World Wrestling Entertainment. But the broadcast network will need programming to run in between all that sport. Will they get back into the content business and buy a production company?

Sony Pictures Entertainment, the studio behind shows such as Breaking Bad, would be one option. Lionsgate, the producer of Mad Men, Walking Dead and other hits might be another. Or New Fox could develop its own production entity. Netflix went from a standing start to the biggest producer of content in Hollywood in a matter of years. New Fox could take a page out of its book.

Making its own original content for the Fox broadcast network would be more economical than paying a premium for entertainment produced by other companies. It would also generate a second revenue stream: programming could be sold to other networks, channels and streaming services.

Lachlan will steer New Fox as chief executive. His brother James is leaving the family fold but it is unclear what he will do next. He is a board member of Tesla and may do something with his friend, the film producer and director Matthew Vaughn. An investment fund is also a possibility, according to people who know him.

Reuniting New Fox with News Corp, the home of Mr Murdoch’s print assets such as the Wall Street Journal and The Times, has been mentioned as a possible move for Mr Murdoch. But this is unlikely in the short term — getting New Fox up and running is his main goal. It has better growth prospects than News Corp, which continues to grapple with the woes afflicting the news industry, although it has diversified its revenue base with a move into digital real estate services.

Yes, the sun has set on the Murdochs’ involvement with Sky. They have broken up the family empire and its international businesses, with Star of India going to Disney as part of the asset sale. But the Murdochs will continue to be a major media force. The cash generation capability of New Fox, and the ability of live sport to attract viewers and advertising dollars, means Rupert and Lachlan will continue to play a big role. And with the sale of Sky to Comcast and the entertainment businesses to Disney, they will be billions of dollars richer.

matthew.garrahan@ft.com

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