News Corp. Bull's Pen
by Yi-Hsin Chang ([email protected])

Late one night in Washington, D.C., FBI Agents Fox Mulder and Dana Scully are sharing a four-cheese pizza and a bottle of Chianti at Pizzeria Paradiso in Dupont Circle. Assistant Director Skinner has just assigned them a new case, one that Mulder thinks has little to do with the X-Files and, in fact, may be a diversionary tactic to keep them from finding out the truth about the government's involvement with UFOs and extraterrestrials.

"Any ideas on this case so far?" Scully asks, taking a bite of a slice of pizza.

"It's not much of a case, if you ask me. Rupert Murdoch, the chairman of News Corp., disappears, and they call us? There's something deeper here, Scully."

"Like what? Are you suggesting Rupert Murdoch was abducted by aliens?"

"No, I mean, maybe he just decided to lie low for a few days, stay out of the spotlight. I think the real mystery here is why News Corp. stock is so undervalued, especially compared with its competitors. We're talking about a vast media empire here, Scully. For starters, Fox Filmed Entertainment made Titanic, the highest-grossing movie ever (close to $1.8 billion in worldwide box office sales), not to mention Independence Day, the biggest movie the year before. The film group also won rights to distribute the Star Wars prequels to theaters and on video -- Episode 1 is expected to open in U.S. theaters in May. It also was responsible for several small-budget films, including There's Something About Mary and The Full Monty, which cost less than $4 million to make but grossed $250 million at the box office. Anastasia also became the most successful non-Disney animated feature film ever."

"You've been watching too many movies, Mulder."

"Then there's the FOX Network, which beat ABC and CBS last season on a total prime-time basis in the all-important 18-49 age group with such talked-about shows as Ally McBeal, The Simpsons, King of the Hill, Party of Five, [and of course The X-Files]. And Twentieth Century Fox Television also produces successful shows for other networks -- NYPD Blue, The Practice, Buffy the Vampire Slayer, Dharma and Greg, and Chicago Hope."

"Buffy the Vampire Slayer? That's right up your alley, Mulder."

"Trust me, the TV show is much better than the movie. Anyway, FOX has reportedly offered Monica Lewinsky $3 million for an exclusive interview, which certainly would boost ratings. Plus News Corp. has a huge TV presence besides the FOX network. For movies and general entertainment, you've got FX, fXM, and Fox Pay-Per-View. For kids' programming, there's Fox Family Channel and Fox Kids Network. For news, there's Fox News Channel (FNC), which also provides national and regional news feeds to FOX broadcasting affiliates.

"In sports," Mulder continues, "FOX captured 43 million viewers as they watched the game in which Mark McGwire of the St. Louis Cardinals beat Roger Maris's 37-year-old single-season home-run record. FOX is also broadcasting this year's World Series and the Super Bowl. The network signed an eight-year contract for rights to broadcast half of the National Football League's games. What's more, News Corp.'s Fox Sports Net cable sports channel, a joint venture with Liberty Media and a formidable foe to Disney's ESPN channel, saw its number of subscribers nearly triple to 61 million in the fiscal year ended June 30."

"Gosh, Mulder, you've done a lot of research on this company," says Scully.

"I've got stacks of files on Murdoch and his operations going back to 1976, when he bought The New York Post. Last year, he also bought the Los Angeles Dodgers, plus options to acquire minority interests in the L.A. Lakers (9.8%) and the L.A. Kings (40%). News Corp. also has a 40% stake in the New York Knicks, the N.Y. Rangers, and Madison Square Garden. Plus the company is in the process of buying Britain's Manchester United soccer team for $1 billion."

"And owning such popular teams means the company has all broadcasting rights to games without having to pay out a single dime, plus the instant loyalty of sports fans, especially the 18-49 male crowd," Scully says.

"Exactly. Then there's the company's book publisher HarperCollins, which published a number of New York Times bestsellers in fiscal 1998, including Men Are From Mars, Women Are From Venus, James Cameron's Titanic, Marilyn Manson's The Long Hard Road Out of Hell, The Dilbert Principle, and Dr. Laura Schlessinger's How Could You Do That?! The company also has successfully published 'tie-in' books related to shows such as The Simpsons, [The X-Files], and King of the Hill, and movies like Lost in Space. And its Zondervan Publishing House subsidiary is the largest commercial Bible publisher in the world."

"Isn't News Corp. also a dominant force in newspaper and magazine publishing?"

"Right, and that's not just in Murdoch's native Australia, where the company owns 117 papers, but also in the U.K., where it owns two broadsheets -- The Times and The Sunday Times, as well as two tabloids, The Sun and The News of the World. In the U.S., it publishes The New York Post, political magazine The Weekly Standard, and TV Guide, the country's leading weekly magazine with a circulation of 13 million."

"Didn't News Corp. sell TV Guide this summer?" Scully asks.

"Yes and no. In June, News Corp. announced it was selling TV Guide to United Video Satellite Group in exchange for $800 million in cash and about $1.2 billion in United Video stock, giving News Corp. a 40% stake in the company and combining the efforts of TV Guide and United Video's Prevue Networks, which reaches more than 50 million U.S. households."

"So the two will complement each other and even expand their offerings on air and online."

"Yep. And even if you don't watch TV or movies or read the company's publications, you come in contact with its products every time you go grocery shopping. Not only does News Corp. print advertising inserts such as coupons in Sunday newspapers, it supplies in-store promotional products, including 500,000 coupon machines in more than 27,000 supermarkets and drug stores nationwide."

"Wow, Mulder, so why is the company's stock undervalued? Don't people realize how big News Corp. is and how fast it's growing?"

"That's the problem. People don't fully understand or even know about the company. In part, it's because the company is so large and diversified, it's hard to get a handle on it. Plus it's based in Australia and considered a 'foreign' company, even though 72% of its operating earnings are derived from the U.S. It'd probably do better as Fox Corp. since Fox is its main brand. I mean, it's pretty obvious with Disney, and even more so with Time Warner. Spinning off the Fox Entertainment Group should help in that department."

"Fox Entertainment Group will include TV and movies?" Scully asks.

"Right, the U.S.-based entertainment operation plus the L.A. Dodgers and interests and options in other U.S. sports teams," Mulder replies.

"You're right, Mulder, News Corp. is certainly undervalued by the market. It just goes to show, you can TRUST NO ONE."

"No one who's a BEAR on News Corp."

TO BE CONTINUED...

Next: The Bear Argument