RUPERT MURDOCH: THE SULTAN OF SWEAT
Suddenly, it's Rupert at the Bat. Rupert Murdoch, that is. The 63-year-old media czar and News Corp. chairman is fast becoming global sports fanatic No.1 as he scours the planet for games to fill the hours on the worldwide TV mega-network he has spent the past decade building. By the time Murdoch is through with his $3 billion global splurge, pro sports will be, well, a whole new ballgame.
Murdoch is looking to sports to get his big cleats in the doors of millions of TV viewers worldwide--and thus attract advertising and pay-TV subscription revenues. Sports is "the most important ingredient to increase penetration into homes," says Lehman Brothers Securities European media analyst Alastair Smellie. "It's absolutely vital."
In the process, Murdoch's moves are upsetting some well-entrenched interests. If a rival network seems to have the inside track on broadcast rights, he outbids it. If a pro league refuses to play ball with him, he starts his own rival league. In some cases, Murdoch is going for vertical integration, with part or total ownership of the players, the league, the programming, the media outlets, and the ad revenue. Says Chase Carey, chairman of Murdoch's Fox Television: "We will continue to be aggressive opportunists. Where we think sports makes sense for us, we won't be afraid to go out and bid for it. We intend to stir things up."
Murdoch's latest coup: co-sponsorship of the proposed $25 million World Golf Tour Inc., in which lords of the links would play in eight $3 million tournaments in North America, Japan, and Britain, with a top prize of $600,000 per event and a $1 million bonus for the eventual overall winner. The tour is the brainchild of fellow Australian and golf impresario Greg Norman. The PGA Tour, the Royal and Ancient Golf Club of St. Andrews in Scotland, and other governing bodies of golf are not amused. PGA Tour officials are refusing to release players to participate in Norman's rebel tour and threatening to suspend any who switch. Murdoch has been a staple of sports-page headlines for a while now. Jaws dropped last year when Murdoch outfoxed CBS Inc. with a $1.6 billion bid for rights to air National Football Conference games on his Fox Network. CBS had broadcast football for 38 years.
That foray into the National Football League is Murdoch's costliest sports venture thus far. Golf may prove to be his most controversial. Both are pieces of a global jigsaw puzzle Murdoch has been piecing together since 1992, when he struck his first big sports deal in Britain. At the time, he paid $400 million for exclusive broadcast rights to four years of soccer games played under the aegis of Britain's Premier League. The games appear on Sky Sports, an all-sports channel on British Sky Broadcasting (BSkyB), a satellite-TV service that is 50% owned by News Corp.
BIDDING WAR. Now, Murdoch is waiting to hear from the All England Lawn Tennis & Croquet Club, custodians of the annual Wimbledon tennis championships, on whether it will accept his $30 million bid for worldwide broadcast rights, excluding Britain. A just-expired, four-year contract split U.S TV rights between NBC Inc. and Home Box Office, and both are bidding again. In China, Murdoch just inked a 10-year exclusive deal to broadcast International Badminton Federation games on Prime Sports, a channel on Star TV, which is 64% owned by News Corp. The deal is a sweet one, says David McConnell, Asia sales director for Trans World International, the television-programming arm of sports marketer International Management Group, which negotiated the Chinese package. Besides boosting ratings for Prime Sports and getting new Chinese viewers hooked, "having this type of product is going to help [Murdoch] get into countries like Indonesia and Malaysia," McConnell says. Indonesia alone has some 30 million TV households.
In November, Murdoch unveiled plans to start a rugby league in his native Australia, in competition with the old-guard Australian Rugby League. Murdoch will invest $375 million to ensure the new league's success. Just days earlier, he signed a separate deal with state-owned telecom company Telstra Corp. to start a 64-channel pay-TV network. ARL games are broadcast by longtime Aussie media rival Kerry Packer, but Murdoch may persuade Packer to work with him to their mutual benefit, analysts say.
Packer's innovations in sports broadcasting probably inspired Murdoch's lust for sports programming in the first place. He hired away David Hill, the mastermind behind Packer's sports coverage. It was Hill, now 48, who launched Sky Sports in Britain for Murdoch, negotiated the landmark soccer contract, and then moved to Fox to close the NFL deal.
Advisers now say Murdoch believes Hill's British soccer contract was the deal that saved BSkyB from buckling under a load of debt. BSkyB lacked much in the way of original programming, so viewers tuned out and advertisers passed. With soccer in hand, BSkyB now churns out so much cash that it's going public. On Dec. 8, the company will sell 20% of its shares in an offering that's expected to raise $1 billion for Murdoch. He'll use the proceeds to fund even more acquisitions of sports programming, says one adviser.
Murdoch is even convinced he can sell American football to Europeans. The World League of American Football, a previous European invasion by the NFL, failed after two seasons and a $50 million loss. Now, Murdoch and the league are jointly putting up $40 million to revive the World League.
Having switched the $7.5 billion News Corp.'s emphasis from print to television, Murdoch now is scrambling to prevent a slowdown in the growth of advertising and cable-TV-subscription revenues throughout his empire. "There's a shortage of sports programming for advertisers right now," says Paul Schulman, president of Paul Schulman Co., a New York media buyer. With his step-by-step assembling of a global sports company, it looks as if Murdoch is headed for the catbird seat. "Others have used sports to boost ratings and ad revenues," says John Mansell, a media analyst at Paul Kagan Associates Inc. in Carmel, Calif., "but he's a pioneer in recognizing the importance of global rights."
Not everyone is so sanguine about Murdoch's game plan. He has used innovative ways to find sports programming, but he may be paying dearly for it. The NFL games have failed to match last year's ratings at CBS, and Fox is likely to lose money on football this year and next. (Carey contends that over the next four years the contract will show a profit.) London sources say NBC and HBO have the inside track for Wimbledon, in part because Murdoch's aggressiveness has turned off the mossbacked tennis club. The PGA Tour's intransigence may stop Greg Norman's rebellion at the first tee if players face excommunication from the Tour. The National Hockey League, which Fox paid $155 million for rights to air its big games, may wind up being shut down for the entire 1994-95 season. And while American football does boast thousands of diehard fans in Europe, it will be a yard-by-yard struggle to win masses of viewers.
Still, Murdoch stands virtually alone in the brave new world of global sports programming. Viewers and marketers alike can't get enough of the sweaty stuff. Right now, it's Rupert at the Bat, nobody much on the mound. Odds are Mighty Rupert won't strike out. Assembling Sports Corp.
Murdoch's News Corp. has been busy signing sports deals around the globe:
U.S. FOOTBALL $1.6 billion for five-year rights to air NFL
games on Fox Network
ICE HOCKEY $155 million for TV rights to big NHL games
GOLF $25 million for 10-year broadcast rights to a
startup golf tour
BRITAIN SOCCER $400 million for four-year rights to broadcast pro
EUROPE FOOTBALL Estimated $40 million in joint venture with NFL
AUSTRALIA RUGBY $375 million to start own pro rugby league
CHINA BADMINTON Signed 10-year deal to sponsor badminton and volleyball
VOLLEYBALL tourneys to be aired on 64%-owned Star TV network
DATA: BUSINESS WEEK
Paula Dwyer in London, with Pete Engardio in Hong Kong and Ronald Grover in Los Angeles