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Anybody still needing evidence of the radical shift in media-land should look no farther than News Corporation. Having fought only a few years ago to secure a controlling stake in satellite operator DirecTV, Rupert Murdoch is now willing to offload it. Why?
The claim that content companies benefit from controlling distribution is becoming less credible in the digital world, as new online options spring up. That is particularly true for satellite – which is being squeezed by its inability to adapt. It remains effective for video distribution, particularly in rural areas. But it lacks cable’s ability to bundle video with broadband and telephony. To match cable’s offering, satellite needs heavy investment or a merger.
The catalyst for Mr Murdoch, however, is his desire to neutralise John Malone’s 19 per cent voting stake in News Corp. That is too big for comfort. Having failed to get rid of his rival by offering other assets, DirecTV makes some sense for both sides. It is roughly the right size to swap with Mr Malone’s $11bn News Corp stake. It would turn Mr Malone’s Liberty Media into more of an operating company than a collection of media investments. He could then milk DirecTV for cash, invest in it or try a deal with Echostar or a telecoms operator.
Mr Murdoch, meanwhile, could stop looking over his shoulder. And he could make a statement that his content and internet presence are powerful enough without the crutch of old media distribution.
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