James Murdoch Tells Investors the Value in Pay-TV is Increasingly ‘Upstream’
Increased competition among traditional multichannel video programming distributors (MVPDs) and over-the-top providers is forcing those companies to pay more for content rights, said James Murdoch, deputy chief operating officer of News Corp. That means more value is accruing to the businesses who are “upstream” of pay-TV distributors, namely cable networks and TV studios, Murdoch told an investor conference in San Francisco Monday. “It’s a very competitive downstream environment and it’s forcing those distributors … to really think about what is the content that’s going to move the dial,” he said. “I think you're seeing value move up stream a bit and I think that’s going to continue."
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Distributors are increasingly thinking about where they can get the most benefit out of incremental programming investments, Murdoch said. That could lead consumer-facing distributors to increasingly develop original programming, he said. “But a lot of it is going to their partners who are providing channels that really move the dial,” he said.
Relationships between programmers and large, traditional MVPDs will be a feature of the pay-TV business for years to come, Murdoch said. New “TV Everywhere” deals with traditional distributors are helping to strengthen those relationships and provide News Corp. a good environment in which to invest in programming, he said. But working with traditional distributors won’t come at the exclusion of newer companies such as Netflix, he said.
Asked to discuss how Comcast’s recent agreement (CD Feb 14 p13) to more quickly buy General Electric’s minority stake in NBCUniversal affects News Corp.’s business, Murdoch said, “I wasn’t surprised, and I will continue not to be surprised that distributors and MVPDs want to invest in upstream assets.” “I think it’s going to be a very important part of their portfolio,” he said.
On sports programming costs, Murdoch said the company won’t buy rights just to have them: “Our appetite for sports investment is one driven by economic sense, not simply by worrying about differentiating against other things.” When prices get too high, News Corp. isn’t afraid to walk away from a deal, as it did with the Los Angeles Dodgers’ regional sports rights, he said. The longer-term a deal News Corp. can work out with a league or team, the easier it is to forecast how it will profit from the deal, he said. “Shorter term sports agreements are frankly much harder,” he said.