James Murdoch Touts Studio Success, Talks Succession

James Murdoch Headshot - P 2013
Courtesy of 21st Century Fox

James Murdoch Headshot - P 2013

The Fox co-COO says "the real killer app in digital actually is TV," that he wants "tranquillo" carriage talks and that pay TV operators haven't innovated enough

On Tuesday, 21st Century Fox co-COO James Murdoch touted the recent studio success the conglomerate has seen and talked succession issues for whenever his father, chairman and CEO Rupert Murdoch, steps down. He also told an investor conference that "the real killer app in digital actually is TV" and that release windows must continue to adapt.

Speaking at the 42nd annual UBS Global Media and Communications Conference in New York, when asked about TV windows, Murdoch said "the windows have never been set." Rather, they emerged to increase the availability of content. "Now that system...doesn't really apply." He added: "They need to adapt" and will continue to evolve, with some premium windows before a theatrical release. In some markets, such as India, he said Fox is "buying out all the windows" to better manage content. Pricing must be figured out over time, he said.

Read more Netflix's Ted Sarandos Says TV Ratings Discussions Are "Negative"

Asked about succession at the top of the conglomerate, he said Fox has a "pretty broad and deep executive team" and that the board will decide succession. But he said there was also a "pretty clear leadership structure at the top" that gives investors a clearer signal than at competitors about who is in line to take over the company one day. The company "has a number of folks: [COO] Chase [Carey], me and [CFO] John [Nallen]," Murdoch said. "There is a lot of big depth there." He added that he was often surprised by people's questions about succession. "I don’t know why they like to talk about [succession] so much," he said.

Murdoch cited the recent FXX marathon of The Simpsons as an example of new windows, which he said gave the network complete flexibility.

He predicted that TV production would continue to remain an active part of the industry, saying commissioning or launching networks would in the future likely get more rights to get shows off the ground.

He was also asked about a key topic that has emerged in many sessions at the UBS conference: the question of whether advertising dollars are moving from TV to digital media. At this stage, Murdoch said, he isn't seeing a shift in ad spending from TV to digital, but marketers seem to be more cautious and spending less. Discussing challenges, he said new ratings measurement methods are key, citing Nielsen and Rentrak, but he also said on-demand and SVOD monetization must improve, such as via dynamic ad insertion. "We'd love to see more of that in the U.S.," he said, adding that the pace of innovation in VOD and other new platforms was at times "frustrating."

Is it a better business to stream rather than wholesale to pay TV operators? Murdoch said companies don't necessarily have to choose but can take both approaches. The Fox broadcast network could be made available over wires, Internet, cable or whatever else if the company decides that it makes sense.

Pay TV operators have still "not really been creating the best products for customers," but authenticated apps and digital offers can help drive usage and are part of Fox's new carriage deals, Murdoch said. He said pay TV operators haven't innovated enough to make content available in new, convenient forms for consumers. He called European pay TV giant Sky, in which Fox owns a 39 percent stake, a modern pay TV company for the digital age.

On carriage fee disputes, he said Fox wants no drama, just "tranquillo" talks.

"We really like the film business," Murdoch said when asked about the studio unit. He said companies must look at the business over multiple years, given the hit-and-miss nature. He said "across the board," the company had "a very, very diverse slate" that did well this year. "That tells me the creative engine is functioning well." He said the studio wants to make films on a "broader canvas" rather than just making X Men movies.

Asked to describe Fox's digital strategy more generally, Murdoch said the industry doesn't spend enough time looking at customer experience. There are new ways to consume video and more flexible and more useful platforms, he said, citing Netflix and Hulu as setting the pace. "We see TV programming and films really finding new legs," he said, because traditional pay TV doesn't always offer the best customer experience.

Based on this, Murdoch said, "we are organizing our investments and concentrating our investments" on "premium scripted entertainment" and refocusing networks from niche channels, such as Fuel, to networks with broader appeal, such as Fox Sports 1.

Read more CBS Research Chief Sees Flattish 2015 Broadcast Networks Ad Sales

Questioned about Hulu, Murdoch said it is growing well and the company is happy with it, predicting it would become an even more substantial player over time. "We love the Hulu business," he said. "We can do better." Asked if it could become an industry solution for TV Everywhere, he said he expects individual players to innovate on their own rather than the whole industry coming together.

Fox Sports 1 is doing well and must make viewers develop viewing habits, Murdoch said. ESPN has a "huge head start" in sports TV, he emphasized.

Discussing Fox's international business, Murdoch said India will likely grow faster than other regions for the company, citing affiliate fee and advertising revenue upside.

He also touted the growth upside for Sky, the newly formed pay TV giant combining BSkyB, Sky Italia and Sky Deutschland. He said Germany is a particular area with room for subscriber growth.

Asked about China strategy, he said Fox was "reasonably cautious," as it was "very, very challenging" from a regulatory point of view. While there continues to be opportunity in the market, the company has sold various TV assets because it felt it had more upside in spending resources elsewhere. But he said the company continues to look to get its films into the second-biggest movie market in the world.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai