James Murdoch

This interview originally appeared in the MIPCOM 2014 issue of World Screen.

James Murdoch began his career at News Corporation, working for the conglomerate’s Asian satellite television group STAR TV and serving as chairman and CEO from 2000 to 2003. During his tenure he turned the company into Asia’s leading pay-TV channel operator, amassing a portfolio of pan-regional brands as well as thriving local businesses in high-growth markets like India. He then moved on to BSkyB, one of the world’s leading pay-TV platforms, where he was CEO from 2003 to 2007 and chairman from 2007 to 2012. Murdoch was then named chairman and CEO of News Corp.’s operations in Europe and Asia.

In June of 2013, News Corp. split into two companies. News Corp. held on to the publishing interests, including The Wall Street Journal, The Times of London and the New York Post. A new company was formed, 21st Century Fox, of which James Murdoch is co-COO alongside Chase Carey, encompassing the television, cable and satellite businesses, as well as various feature-film and television studios, including Twentieth Century Fox, and their distribution arms.

Today, James Murdoch has direct responsibility for 21st Century Fox’s global television business. This includes the Fox Networks Group and the company’s holdings in BSkyB, Sky Deutschland, Sky Italia and STAR India. He oversees the management of a portfolio of brands that includes FX, National Geographic Channel, Nat Geo WILD, FOX Life, FOX Sports 1, FOX Deportes, and their digital extensions, such as FXNOW and FOX Sports GO. Fox Networks Group also contains FOX Broadcasting Company, FOX International Channels (FIC), MundoFox and Fox Sports Enterprises.

Murdoch remains a strong proponent of the pay-TV business. He is quite bullish on the newly enlarged Sky business in Europe—BSkyB recently acquired part of Sky Deutschland and all of Sky Italia—of which 21st Century Fox owns nearly 40 percent. Certainly scale matters in today’s media landscape, but, according to Murdoch, quality content matters more.

In fact, as the industry questions the future viability of linear channels, given the increasing number of viewers who prefer to watch their movies and TV shows on-demand, Murdoch approaches the issue from a different viewpoint. He sees the challenge less in terms of linear versus on-demand, and more in terms of how to best fuel both—and that’s with quality movies, sports, entertainment and factual programming that matter to customers, because in the end, it all comes down to them. Murdoch tells World Screen that as long as 21st Century Fox can continue to deliver differentiated high-end product, its future is bright.

WS: What has been fueling the success and expansion of FOX International Channels (FIC) around the world?
MURDOCH: Over the last number of years FIC has been able to expand pretty quickly in a lot of markets where there is also natural pay-television growth, everywhere from Malaysia to Brazil. The group’s growth started with the National Geographic brand and the FOX and FX entertainment channels internationally. Now FIC is getting much more substantially involved in sports. We’ve acquired a number of sports companies. Fox Pan American Sports was a joint venture, of which we acquired the other half [we didn’t already own], as was the case with ESPN Star Sports, where we acquired ESPN’s half. We have been able to consolidate the sports business into the FIC business and that has created a new dimension of growth for the company. We are very excited about it.

We have always been a company that has a global outlook and we have operated in markets that are very diverse for a very long time. It was a natural outgrowth of our general sensibility to invest in the international channels business and invest in programming that works in these markets at a new scale. FIC has been pioneering in a lot of areas, from global debuts of programming to investing in local programming, particularly in places like Taiwan, where it has resonated and created scale. It’s a diverse portfolio of businesses but it’s something that, alongside the STAR business in India, has created an ex-U.S., if you will, footprint and profile for the company that I think is really unprecedented amongst our competitors.

WS: Do growth opportunities internationally outpace growth in the U.S.?
MURDOCH: Our affiliate growth is faster internationally than it is in the U.S., but growth in the U.S. is pretty good in our business. It’s driven by investing in new services to create brands and products that really matter to our customers. We see very good prospects in the U.S. business and continue to invest there. For instance, we can always change the mix, as we have with Fox Soccer in the U.S., turning it into FXX in the last year. That has added a new dimension to the company and a real scale in the cable business. We see a lot of growth in global pay-television consumption with the proliferation of platforms and new innovations for customers. It is a very competitive market and it is super-competitive creatively. But if you make things that really stand out for customers and that are differentiated and special, like the sports business and the scripted-entertainment business, then we think there is an enormous amount to play for.

WS: Given the skyrocketing cost of sports rights, how do you decide which are the must-have sports championships or events?
MURDOCH: We’ve been deeply involved in sports in the U.S. through our broadcast business and through our regional sports networks, and around the world, traditionally through joint ventures, like ESPN Sports and Fox Pan American Sports, which we have now acquired, and through the Sky businesses in Italy, the U.K. and now Germany, as well. We’re a big believer in programming that is fundamentally high quality, hugely engaging and differentiated. When it’s live—as it is in sports—that adds something as well. We have been able to make sports work and they are very profitable businesses. But you have to choose and there is nothing that is really must-have at any price. You try to make agreements and find the products and the partners that you can work with to create a lot of value. We are very pleased with our partnerships with various sports bodies and teams around the world. There are some things that we pass on if we don’t think the economics can work. For example, the Los Angeles Dodgers baseball team in the L.A. market was something that we stepped away from at the same time we were acquiring the YES Network last year in New York. We felt that was a better fit for us and a partnership that would create more value for both sides. It’s a question of making choices. Even though we’re a significant investor in the cricket business in India, we broadcast BCCI Cricket as well as numerous cricket boards from around the world, we are also creating with partners a new Indian sports league around the traditional Indian sport of kabaddi, which we think will be a very attractive proposition. It’s just in the middle of the first season now and the numbers are really encouraging. You can find opportunities in sports in surprising places. As long as you are committed to bringing outstanding production quality and a real commitment to offer a sport to customers in the best way you can, which merits the quality of the sport being played on the field, then sports can be a great business. Really unique, differentiated programming is more valuable than ever. It gives us the best position in the marketplace as it evolves.

WS: As viewers increasingly watch films and TV programs on demand, how do you keep linear channels relevant? Is appointment viewing, like a live sports event, critical to doing that?
MURDOCH: We look at the channel business generally as an engine for creating content and programming. Up until now the best way to get a lot of choice and quality in front of customers has been to bundle linear channels together, because that’s the way the technology works. Increasingly, customers are enjoying streaming programming and having more on-demand viewing and for us that’s really not that different; it’s actually a really great product to make. We are pushing ahead very hard on our over-the-top services, with our investment in Hulu, [and] also our authenticated nonlinear services. For example the FXNOW app, an authenticated app in the U.S., is a tremendous product for the FX brand, which stands for unique quality television programming. The FXNOW app offers on-demand viewing of series, full series stacks in many cases. It’s a great product, which really resonates with customers. We think that the channel business generally speaking will move increasingly to streaming services and that’s why it’s so important for us to have a number of brands that really stand for something and are destinations where people in an on-demand environment can find programming they love. There is no question that the live viewing of sports is very unique and is something that drives a lot of value for some of these brands. But it’s not a defensive game, it’s more about how can you make products for customers that really work, that deliver the programming that they are going to love, in the easiest way possible. Increasingly, that’s streaming services and that’s why we are very involved in that marketplace.

WS: The FXNOW app is amazing. You have one addicted customer to The Strain!
MURDOCH: Isn’t The Strain amazing? It’s really special. And it’s exciting for FX to be able to attract a storyteller like Guillermo del Toro to create something that is so different and so special. It’s something we are really proud of.

WS: How do you see consumption of content evolving in the next two to five years?
MURDOCH: Video content and storytelling are so powerful for customers and today we see so many ways to consume them thanks to the mobility of the programming and the number of screens available to customers. For example, look at the smartphone proliferation in India really driving new distribution platforms for our video programming. Everywhere around the world you are seeing this kind of flexibility and these new products emerge. There is no question that television and film consumption, at least in the home or around individuals, is moving more and more to a streaming environment as broadband networks get better and connectivity becomes more ubiquitous. That creates some challenges from a business perspective, but most of all it creates real opportunities to innovate in terms of how we tell our stories, how we monetize them, how we sell advertising, how we bring different brands to customers in new ways, how we make the experience of accessing the programming really great, working with either third-party distributors, like traditional MVPDs that are launching new services, or be it Amazon or Netflix or Hulu Plus, that we are very involved with, or the Sky Go businesses around Europe, which are probably the most developed TV Everywhere and multiscreen pay-television experiences in the world, and which customers love. So there is no question that more and more the percentage of viewing will be on streaming platforms. We think that is pretty exciting.

In terms of the overall filmed-entertainment business, clearly we are seeing a lot of experimentation with windowing and windows starting to compress because customers would rather have more control. In many cases they will pay a premium for those compressed windows. We think that is an interesting opportunity. The fundamental root of the business is that television and film programming is more popular than ever. We are able to work with storytellers who are bringing incredible things to the screen, big and small. That is something we have a great belief in. If we work with outstanding individuals and create an environment that allows them to make their best work and enables them to take risks, then we think the platforms and the business then follows on from the quality of the programming. That is why we are so committed to investing so much upstream.

WS: As distribution platforms consolidate—Comcast and Time Warner Cable, Liberty Global and Virgin Media—what are the repercussions for channel groups and broadcasters? Will you still be able to get fair value for your channels?
MURDOCH: I think it’s a question of what the programming is. For our content, when we look at the evolution of the business in the U.S. over the last two years, we have taken a number of more niche channels and reimagined them as mass-market and meaningful entertainment brands, be it The Speed Network becoming Fox Sports One, or Fox Soccer Channel becoming FXX and really complementing the FX suite of channels. We have invested in programming against those channels and that puts us in a very good position to be able to continue to get a fair price. The question is, Can we keep the quality of what we do at a high enough level and can it matter to customers? If it can, then we still are in a very good place. I do think that as you have larger channel groups investing more in programming, and you have larger distribution platforms, including some of our own—the Sky services coming together as one platform as we announced a little while ago—the bigger scale players probably do succeed. The middle ground—channels that are maybe not as differentiated as they could be, don’t have really distinctive brands that really matter to customers, or are under-investing for customers on the screen—that will be a problem in this new environment.

WS: Can consolidation in distribution have an impact on studios? Do the content producers also need to get bigger in order to offset the size of the distribution businesses?
MURDOCH: We look at the production business and the channels business as two sides of the same coin; we see them as very much being together. There is already an enormous amount of competition to be as creatively excellent as you can be. That has always been the case, but I think it’s going to be more acute now than ever. I’m not sure it’s a question of bigger. It’s not a question of volume. It’s a question of quality and making sure that the product is really excellent.

WS: What was the strategy behind the sale of Sky Deutschland and Sky Italia to BSkyB?
MURDOCH: We’ve always been very clear that we think the Sky businesses can be very strong together. We tried to acquire the balance of BSkyB a couple years ago and the recent deal was driven by the same rationale. We are very excited about the enlarged and combined Sky. It’s going be a very competitive business and a rapid innovator as each of the Skies has been.

We remain an almost 40-percent shareholder in the business and we’re very committed to seeing it grow. This is structurally the right way to reorganize these businesses, to create the most efficient balance sheet, to pull them together in a way that is effective and to create a new company that is really exciting. The Sky business in the U.K. is a multiservice business with a lot of scale in its home market. The Sky Deutschland business, which we created from scratch almost seven years ago, in the last four years has become a rapidly growing 21^st century digital television business. Sky Italia has been a really consistent performer, creatively and financially, even in a marketplace like Italy, which has obviously had its struggles over the last few years. We’re very excited about them coming together and think there is significant potential to unlock. It’s a way to reorganize the businesses to create a larger scale player with new headroom for growth in underpenetrated markets.

Customers around the world really respond to quality. They respond to services that are tailored to them and services that innovate for them. The Sky [platforms] represent great value for customers.

WS: Have you seen the same dynamics at work in the pay-TV business in the Indian market, and how has STAR India been performing?
MURDOCH: The business in India is really wonderful. We’ve definitely seen the same dynamic in terms of demand for choice and an exciting and thriving cable and satellite pay-television business over the last 15 years. When I was in Asia running STAR TV, I remember we were at 30 million cable and satellite households in India, and we were investing heavily in Hindi programming. Today it’s around 150 million households and a rapidly growing digital base with the introduction of direct-to-home satellite services. We see an enormous amount of growth in the overall distribution and penetration of pay television, and within that universe, the penetration of digital services that are very exciting for customers. Our STAR business has had a very good run and we feel very confident about the future. We’ve produced a ton of programming. We own most of the IP associated with it, so we are able to distribute on multiple platforms. We’re seeing a lot of innovation in the Indian marketplace today creatively and technologically in terms of how people consume television. On the distribution side, the direct-to-home satellite business has really transformed the marketplace with the penetration of digital. Tata Sky, of which we own some 30 percent and we started a number of years ago with our partners, has been the fastest-growing digital television platform in the market for some years now, and it’s continuing to grow. We see a very positive outlook for the Indian television business. We’re very committed to it and are confident about the future.

WS: Are there certain business sectors or geographic regions where you are seeing particular potential for growth?
MURDOCH: At 21st Century Fox we’re very focused on investment in programming and copyright, and on differentiated programming: sports, scripted entertainment and strongly branded factual entertainment, like National Geographic. We are investing a lot in growing the sports businesses. In addition to the acquisitions I’ve already mentioned we’ve invested in EMM [Eredivisie Media and Marketing], our Dutch sports venture. We see the channels and content business growing well and we are also very confident about the film business. We think there is a lot of growth to the filmed entertainment business because there is a lot of innovation in terms of how people are consuming that product. We’re very excited about our slate and the creators and storytellers that we’re working with currently and will be over the next couple of years; it looks really promising. Overall, as long we continue to invest on screen for customers and we get that right, we’re in a good position to grow the assets that we have. So over the next three to five years, we have a very clear plan and we are excited about it.