James Murdoch Talks Aereo, Deals, 'Super Exciting' Online Video Services

Courtesy of 21st Century Fox
James Murdoch

UPDATED: The 21st Century Fox deputy COO also discusses what a new Disney carriage deal means for Dish's Hopper and says the company will watch the proposed Comcast-Time Warner Cable combination "very closely."

21st Century Fox sees its TV networks business as its key growth "engine" and remains more focused on organic growth than expansion via acquisitions, deputy COO James Murdoch told an investor conference in San Francisco on Wednesday.

He also discussed how the entertainment conglomerate approaches the proposed Comcast-Time Warner Cable combination and such technology issues as online video services, Dish's Hopper and the litigation against Aereo, which allows users to view live and time-shifted over-the-air television.

Speaking at the Morgan Stanley Technology, Media and Telecom Conference, Murdoch said that recent 21st Century Fox sales of non-core businesses abroad, including in China, help with "ventilating the roof" and freeing up financials to reinvest into the core business, particularly such areas as sports channels. But he also said the company will continue to be opportunistic should potential acquisitions at the right price come up.

Murdoch also addressed recurring suggestions that 21st Century Fox could acquire full control of German pay TV giant Sky Deutschland, which it already controls, or U.K. pay TV giant BSkyB, on which it made a run in 2011. Murdoch said Wednesday that "at this point, we are pretty happy with where we are." The time and opportunity that existed a few years ago is history now, he said, but signaled that the company would keep all options open longer-term.

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Murdoch, son of 21st Century Fox chairman and CEO Rupert Murdoch, also oversees the company's international operations as chairman and CEO of international.

The deputy COO on Wednesday also faced questions about new technologies and digital players.

"It is super exciting," Murdoch said about the opportunity that so-called over-the-top, or broadband video, services provide. "We see this as really great opportunities to distribute" our programming via third parties or the company's own TV Everywhere solutions as Sky Deutschland, BSkyB and Sky Italia have done. "Over-the-top developments are super exciting...and we think it's very healthy really," he concluded.

Asked about this week's new Dish-Disney carriage agreement and its agreement on Dish's Hopper service, which requires it to disable its ad skipping function for three days for programs on Disney's ABC, Murdoch said "overall, it really looks like a positive step forward." In a comment on the fact that ad skipping will be disabled for three days, he said: "Protecting certain windows is important."

Asked about the latest Aereo rulings, such as a Utah injunction against the service, Murdoch said Fox looks forward to the Supreme Court hearing in a couple of months and to "getting clarity" on the issue. Fox and other broadcasters have argued that Aereo is stealing broadcast signals.

Discussing TV distributor consolidation in the wake of the Comcast-Time Warner Cable deal, he said this specific deal "we have to watch very closely," even though he said increasing scale generally makes sense for content and distribution companies. He said that regulators and critics would look at a range of topics, including the combined firm's broadband market share.

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Asked about weaker-than-expected financials at 21st Century Fox in recent quarters, Murdoch said that the company had "some ratings headwinds," some films that didn't perform as hoped and foreign exchange headwinds, but that he felt optimistic as management could manage such challenges.

He said the company is confident that the networks business in particular would reach its annual $9 billion operating cash flow target in the next two-plus years. He cited the new Fox Sports 1 and various international channels as providing upside for the company. And he said the business has "reasonably good visibility" given carriage deals.

Murdoch also said Wednesday that he was excited about "how rapidly [the industry] is moving" in terms of new ways for people to consume content and new distributors and digital players. "It is one of the most exciting times to be in TV and movies," Murdoch concluded.

U.S. advertising trends are looking "reasonably" healthy, he also said in answering a question. In Europe, economic weakness has affected ad trends at the company, although that is a smaller contributor to the business, and consumers' willingness to buy pay TV subscriptions. But he signaled confidence in improving trends.

Murdoch also mentioned Wednesday that the company's team is just starting to discuss what shows will replace the canceled The X Factor on Fox. While the show leaves a hole to fill, he said "we think we can program that night pretty well."

"We love the sports business," the executive said when asked about it. "We will continue to invest in it, but we have to make choices." For example, the Champions League soccer rights in Italy have exceeded the value the company is able to pay, he said. But Murdoch touted Fox Sports 1 as being "in good shape" and a recent deal with the YES Network, which ensures his company an increased stake of 80 percent in it, as big growth opportunities.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai