Rupert Murdoch speaks out on recovery and opportunity missed
By Terry McCrann
The Daily Telegraph
November 07, 2009
A YEAR ago I spoke to Rupert Murdoch at the very darkest point of the global financial meltdown. What a difference a year makes. Then, the News Corporation chairman and chief executive was gobsmacked at the wealth destruction. Now he apologises for being "bearish" - I'd call it instead cautious and realistic.
He's not taking the US recovery for granted; he recognises only too well the deep structural problems America faces and has added to over the past year; he has some fundamental question marks over President (Barack) Obama and, even more, the US Congress.
While he emphasises the fundamental entrepreneurial strengths of America, and the driving spirit of the people, he thinks all the negative factors will ensure a very, very slow recovery in the world's biggest economy.
"I think the danger of a double dip (back into recession) is unlikely; and there's a case that can be made that it has turned the corner and will recover strongly," he said.
But the Fed has poured money into the banking system - the $US700 billion bailout was wrong in principle, in practice a necessity - and the banks were sitting tight on credit. Cutting it back even to their best customers. Officially the jobless rate was 10 per cent, in reality it was probably more than 15 per cent. There was as yet no sign of a jobs pick-up and the key driver of recovery - capital formation by small business - was not happening, he added.
A critical issue was political leadership.
OBAMA OF THE three choices for President in last year's election, did the US get the right one, I ask? He pauses, then says: "No. I think Hillary (Clinton) would have been a lot tougher.
"I wouldn't have liked everything she did. (John) McCain (the Republican candidate who stood against Obama) would have had policies more to my approval.
"Albeit he would also have been unpredictable," he adds.
Obama has very, very enormous charm and a great way with words. But there's his total inexperience of the real world, the commercial world. And the same goes for the whole White House, Murdoch says.
Further he doesn't listen. And like Rudd he wants to micro-manage everything.
He faces huge geo-political challenges. Take Afghanistan: he doesn't know what he should do. I do, Murdoch adds with emphasis. He should send the extra troops.
The core problem was indecisive leadership. Last month he came out with a speech on education, with which I agreed 100 per cent. And then he concluded with: "I look to Congress to send me a bill. They'll never send him a bill!" Murdoch thunders.
The question still to be answered is whether he was an ideologue.
How many times had you been to the Obama White House, I asked?
Never, he responds. Followed by "I only went once when Bush was there."
RUDD HE'S very intelligent, he's very interesting, Murdoch starts. But then moves quickly to "but he's kidding himself with the G20", the grouping of the top 20 countries which includes Australia and which Rudd has been pushing to replace the G8 - of only the top eight countries which does not include Australia - as the main global negotiating forum.
Obama had no interest in the G20. He even wanted to cut the G8 to the G4 and really to a G2 - just the US and China - to agree to all the big decisions.
Rudd was kidding himself that we could use the G20 to lead the world. Or that we could strike out alone with a cap- and-trade system for reducing greenhouse gas emissions - our ETS or Emissions Trading Scheme.
That we'd lead and the rest would follow. All it would do would be to push up the cost of living in Australia, and the rest of the world would laugh at us.
His efforts to "lead the world" were delusional. But was it hurting Australia? Not yet, Murdoch asks and answers his own question.
THE NATIONAL BROADBAND NETWORK THE Government had to decide whether the national broadband network should be built as a great national asset. To go to every school, to every hospital, to every business, to every home, Murdoch says striking his hand for emphasis at each destination.
But then it had to decide whether to hold it as a public utility or whether to sell it to private enterprise.
If the latter, it could only happen if the Government was prepared to write off half the cost openly upfront.
To spend $40 billion to build it; to be prepared to sell it for $20 billion, so that the investors buying it could have a chance of a return.
In all this would Telstra be the major shareholder in such an NBN? Its biggest shareholder, the Future Fund, would not want it to go there unless it could see an acceptable return.
MURDOCH AND THE MEDIA COULD he be tempted back into free-to-air television in Australia?
He pauses before responding with a yes. But then immediately adds "If I had my choice of buying Telstra out of Foxtel or FTA, I would take the former".
So the future is Foxtel rather than FTA, I respond?
"Absolutely," he comes back, and then immediately details the continual, slow but inexorable drop in the network audience in the US. And he digresses into musing about the future of NBC - one of the major networks, put up for sale by its parent GE.
"In its present condition , it's unsaleable," he says.
And while we couldn't buy a second network, we would be interested in NBC's Universal movie studio. We'd be allowed to own two studios, he says.
Interestingly while he would like to buy Telstra out of its 50 per cent stake in Foxtel, he has no interest in the 25 per cent owned by James Packer's CMH group.
Asked to comment on Packer, he says he has no comment. Then adds, he had made his bed with his decision to became a major global player in gaming. But he'd kept the two media assets - the 25 per cent of Foxtel and the half share of Fox Sports (NewsCorp has the other 50 per cent).
"I'd certainly be interested in Fox Sports, but not another 25 per cent of Foxtel. There'd be no point unless you were going to get the whole thing."
THE LOST CHANCE ASKED about the challenges and opportunities in media going forward, Murdoch comes up with a surprising nomination: the great opportunity missed. The Food Network.
No, it wasn't a simple "MasterChef moment", but a textbook example of building hugely profitable media business, which in classic Murdoch style, he thinks he should have done.
It takes years for a new station/network to get on the cable channels in the US, Murdoch says with the knowledge of exactly his own struggles over two decades. New channels generally ask for 15-20c per customer per month.
"The Food Network went in at 2c and achieved total distribution." That delivered all the food advertisers. With very cheap programming, it's now a $US350 million revenue business that throws off an incredible $US250 million profit! It's a business that's gone from nothing to a value of at least $US3 billion. And all that's still only charging the 2c! Murdoch adds with emphatic undisguised admiration. But they are about to renegotiate that.
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