Nothing in Fox’s television schedules last year was quite as exciting – or, at times, as profane – as the drama that played out in a closed probate court in Reno, Nevada.

Rupert Murdoch, the 94-year-old founder and controlling shareholder of Fox Corporation and its sister company News Corp, was trying to change the terms of a family trust to block three of his children from inheriting control of the companies upon his death. The high-stakes legal manoeuvre was rejected. An appeal – and thus a new season of morbid entertainment for media watchers – is in the works.

As the Murdochs continue their decades-long, multibillion-dollar family feud, the empire they are fighting over is flourishing.

This is doubly surprising. For one thing, succession crises and legal uncertainty tend not to bolster investors’ confidence in a company. What’s more, the Murdoch firms are giants in linear television and print journalism, declining industries that markets have not been kind to.

Why is a pair of legacy media companies controlled by a dysfunctional dynasty so popular with investors?

Start with Fox, the larger of the two, with a market value of $US24 billion ($37 billion). Its business is concentrated in American broadcast and cable television, which in recent years have witnessed a bloodbath.

As the Murdochs continue their decades-long, multibillion-dollar family feud, the empire they are fighting over is flourishing.

Over the past decade-and-a-half, the share of homes with pay TV has fallen from nearly 90 per cent to barely 50 per cent as viewers have defected to streaming services such as Netflix. As for broadcast television, Americans today spend half as much time watching it as they do streaming, according to Nielsen, a data company.

While other legacy media companies’ values have stagnated or worse, Fox’s has soared. The difference lies in its content mix. In 2019 Fox sold its general-entertainment assets to Disney for $US71 billion at what turned out to be the top of the market, deciding to focus on news and sport. It was the right call: streamers like Netflix have since grabbed the audience for general entertainment, while news and sport have mostly stayed on linear TV, and thus with Fox.

“They were always the most entrepreneurial company – they could always see around corners,” says Jessica Reif Ehrlich, a media analyst at Bank of America.

Despite streamers’ growing interest in sport, Fox’s audience is stable: its first showing of the Indianapolis 500 last month brought in 7.1 million viewers, the most for the motor race since 2008.

Fox News, meanwhile, recently recorded the most-watched quarter in the history of cable news, thanks in part to the chaos generated by the new occupant of the White House. Healthy audiences mean that, despite a shrinking cable market, Fox has had modest growth in its affiliate fees (the sums it charges cable providers for carrying its channels), from $US5.9 billion in 2020 to $US7.3 billion last year.

The return of Donald Trump has also helped Fox’s advertising business by normalising opinions that once made mainstream advertisers queasy about airing commercials on Fox News. Ads on the channel are no longer just for gold and magic pillows; in recent months the likes of Amazon, Netflix and General Electric have paid for spots on the network.

“Because of the election results, many advertisers have sort of rethought their positioning in this country and understand that the Fox News viewer really does represent middle America,” Lachlan Murdoch, Fox’s chief executive, said in March.

Having mostly sat out the ruinously expensive streaming wars, in which media companies lost billions trying to woo subscribers, Fox is now experimenting with the new medium. In 2020 it bought Tubi, an unglamorous free streaming service with ads.

‘Because of the election results, many advertisers have sort of rethought their positioning in this country and understand that the Fox News viewer really does represent middle America.’

Lachlan Murdoch

Tubi has since overtaken rivals such as Pluto, owned by Paramount, and is on track to bring in more than $US1 billion this year. In February, Fox aired the Super Bowl on Tubi, drawing 8 million new viewers to the platform. About 40 per cent of the audience was under 34, a group that is hard to reach on cable.

Its latest streaming experiment is Fox One, combining all of Fox’s linear content, which will launch before the US’ National Football League (NFL) kicks off in September. Unlike other legacy media companies, which must reckon with the trade-off that putting their best stuff on streaming will undermine people’s willingness to pay for a bigger bundle of entertainment content on cable, Fox faces no such dilemma.

“The beauty of Fox is, because they don’t have the long tail of crappy linear cable channels to protect, they’re very nimble,” says Jason Bazinet of Citigroup. On the transition to streaming, “they’re sort of agnostic, and so, from a strategic standpoint, they’re just in a very good position”.

News Corp, the other half of the Murdoch empire, which holds titles including The Wall Street Journal and the New York Post, is in favour with investors for different reasons. Print news looks no more promising than cable television, as circulations at many titles decline and the advertising business is swallowed by Google and Meta. By one estimate, more than 3000 newspapers have closed in America in the past 20 years – a third of the country’s total. Yet, like Fox, News Corp’s stock is buoyant, rising by nearly 50 per cent in the past two years.

One reason is the success of Dow Jones, the part of News Corp that holds the Journal. Whereas advertising-reliant titles like the New York Post are struggling with declines in web traffic, the globalised, subscription-focused Journal has thrived in the same way as rivals like The New York Times. Dow Jones also has a high-margin business supplying data to companies. Its revenue has risen by 40 per cent since 2020, offsetting a decline among News Corp’s other news businesses.

HarperCollins, a book publisher owned by News Corp, has also contributed to growth, helped by a boom in audiobooks.

Yet the biggest driver of News Corp’s share price has nothing to do with news. Among the company’s eclectic assets is a 61 per cent stake in REA Group, the ASX-listed, Australian property-listing platform. The Murdochs invested in the company in 2001 when it was on the brink of bankruptcy after the dotcom crash. It proved to be an inspired bet: following a housing boom in Australia, REA’s market value has grown to more than $US20 billion, some $US4 billion more than News Corp itself.

Shareholders’ excitement about News Corp has little to do with newspapers or books, argues Bazinet: “The market’s enthusiasm is for REA.” He calculates that between 2017 and 2024 there was an 84 per cent correlation between the movements in News Corp’s share price and those of REA.

As the Murdoch empire ploughs successfully on, the family continues to feud. Rupert Murdoch is apparently determined to protect the leadership of his eldest son, Lachlan – who as well as running Fox is chairman of News Corp – against a future challenge by three siblings, Prudence, Elisabeth and James, who disagree to varying extents with the right-wing politics of the Murdoch outlets.

Under the terms of the family trust, the three will have enough votes to oust Lachlan after their father dies. Unless he can amend the trust, or buy out the rebel siblings, change could be on the way for Rupert Murdoch’s companies.

Yet the prospect of such an upset seems to be stoking enthusiasm for the stocks in some quarters. Activist investors in News Corp have long lobbied for the company to spin off its stake in REA, arguing that the property company and the newspapers would fare better separately than they have as a bundle. Fox has likewise benefited from speculation that the company could become a target for acquisition as Hollywood’s studios rush to bulk up.

If control of the companies passes to siblings who are unhappy with the status quo, the chances of a sale or break-up rise.

Investors’ enthusiasm for Fox and News Corp is partly explained by the fact that Murdoch has run them so shrewdly. But it is also due to a sense that his time in charge is drawing to a close.

The Economist

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