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The Saturday Paper

Inside Lachlan Murdoch’s play to save Fox

By Paddy Manning in The Saturday Paper

With his move back to Sydney, Rupert Murdoch’s successor has sparked intrigue. But his plans are far more ambitious than the rumours suggest.

CREDIT: Getty Images

For weeks, speculation has swirled around Lachlan Murdoch’s return to Australia. Plans to launch Fox News here have been breathlessly reported, linked to the local launch of a news streaming service.

Other stories have considered whether the Fox co-chair and chief executive, and son of founder Rupert, may have ceded effective control of the company to in-house counsel Viet Dinh, a former assistant attorney-general in the Bush administration and godfather to Lachlan’s eldest son, Kalan.

Neither story is true. A spokesman flatly denies Dinh is taking charge, and there is little case to establish a local Fox when the network already appears on Foxtel and Sky News offers a similar service.

Still, Lachlan’s arrival in Sydney last month stunned observers. The move, driven partly by the pandemic, is said to be long-term — it will be for years, not months. Sydney is home for Murdoch’s wife, Sarah, and their three children have enrolled in local schools. Lachlan has turned nocturnal, running Fox from the other side of the world, and will commute to the United States as necessary, which he has done before.

But there is another, significant shift afoot. The move by Fox Corporation to trademark “Fox Bet” in Australia is important, and sheds light on Murdoch’s bigger-picture plans. Fox News generates about 75 per cent of the earnings for Fox Corporation, but faces a structural challenge from subscription-driven streamers such as Netflix and Amazon, which are killing off linear television.

Fox’s answer to that challenge, as Lachlan Murdoch outlined while delivering the company’s most recent quarterly earnings results, is partly pinned to hopes for advertising-driven streaming service Tubi, which is enjoying rapid growth in subscriptions and revenue, and partly pinned to gambling revenue.

Fox’s strategy is to tap the explosive growth in online live sports betting — a new digital business that could underpin Fox’s legacy cable TV operation as it battles headwinds.

In early 2019, Fox paid $US236 million for a 5 per cent stake in Canadian online gambling company Stars Group, and launched its Fox Bet platform in the US. Last year, Stars Group merged with British-based Flutter, owner of brands including Sportsbet and Paddy Power, creating a global leader in wagering.

Fox Bet is increasing its US market share every month and has the potential to become a global live sports wagering brand, with a ready-made audience of millions already glued to Fox Sports.

Fox, which retains a minority stake in Flutter, acquired an option to buy a near 19 per cent stake in its US affiliate, FanDuel, which is booming and is valued by US brokers MoffettNathanson at more than $US11 billion — half that of Fox Corp itself.

Fox and Flutter are in court over the exercise price of that stake, and US analysts hope the valuation dispute will be settled soon. If it is resolved, MoffettNathanson reckon, FanDuel could be worth another $US4 to Fox Corp’s shares, currently trading about $US37. This week the broker whacked a $US50 price target on the stock.

Fox Bet, meanwhile, is increasing its US market share every month and has the potential to become a global live sports wagering brand, with a ready-made audience of millions already glued to Fox Sports.

While online sports betting is a mature market in Australia and Britain, it is only just opening up in the US after the state of New Jersey successfully challenged the federal Professional and Amateur Sports Protection Act — which made online betting illegal — arguing that it infringed state rights. After a US Supreme Court ruling, the act was repealed in 2018, and deregulation has proceeded state by state. An illegal online betting market worth hundreds of billions is now turning legal and it is up for grabs.

Currently, just over a third of American households can place live sports bets, but that proportion is set to double in the next two years — particularly as the biggest states of New York, California and Texas open up.

Fox, which has a dominant position in sports programming, with a firm grip on prime-time assets such as Major League Baseball on Friday nights and American football on Sundays, is in the box seat. In a recent note Bank of America analyst Jessica Reif Ehrlich wrote that Fox was “the best-positioned media company to benefit from sports betting”.

The legal online sports betting market in America is potentially worth $US30 billion to $40 billion a year. Fox Bet, another analyst says, has the potential to become a global-dominant operator. “There is an absolute greenfield opportunity in the US, and Fox has a massive brand. Irrespective of political opinion, Fox is a household name.”

Murdoch’s aim is to pull off a repeat of the success he had with a modest $10 million investment in, later REA Group, in 2002, when the online property listing business was struggling. Now majority-owned by News Corp, REA Group is a $21 billion business that underpins the viability of the company’s legacy newsprint operations around the world, including storied mastheads such as the New York Post, London’s The Times and The Australian.

News Corp has had a hit-and-miss track record with previous online betting ventures, including the failed Sun Bets in Britain, but since late last year there has been mounting speculation that Murdoch may launch a bid for part or all of Tabcorp, which is in the middle of a strategic review, including a potential sale of its wagering and media division.

Rumours have surrounded a potential partnership between Murdoch and pioneer Matthew Tripp, who built Sportsbet into the market leader before selling it to Paddy Power, now part of Flutter, for a fortune. Tripp would be the operator, the speculation goes, but The Saturday Paper understands the prospect of such a joint bid has cooled.

Unlike his father, who splashed out to buy assets such as MySpace or The Wall Street Journal, Lachlan refuses to overpay. Meanwhile Tabcorp recently knocked back a $3 billion offer for its betting arm from British-based Entain, owner of Ladbrokes, and its review continues. Kingmaker Peter V’landys, the Racing NSW chief who would have a veto over any Tabcorp sale, declined to comment.

Murdoch’s spokesman, John Connolly, also would not comment on any bid for Tabcorp but said Fox had been very successful with online gaming in the US and “if they could repeat that here, they’d have a good look”.

Morningstar media analyst Brian Han agrees that digital betting is “growing like weed around the world” and could provide an upside for either Fox or News Corp, which was considered a “badco” when the two companies demerged in 2013 following the British phone-hacking scandal.

That perception has shifted, Han says, as Dow Jones has proved its value online and more recently as the Australian government’s mandatory bargaining code has generated extra revenue from Google and Facebook, each paying an estimated $50 million-plus a year.

Han is somewhat sceptical about a Murdoch bid for Tabcorp’s wagering and media division, which would include the online operation as well as the offline, bricks-and-mortar retail TABs around the country. “The way I see it,” Han says, “they are going to be buying another legacy-laden business, if they take over Tabcorp.”

Nonetheless, he is convinced that the Murdochs are serious about digital-centric businesses to diversify away from their legacy print and cable TV operations. “That’s exactly the reason why they’re canvassing all these opportunities,” he says. “They agree internally: they need to put a growth halo over the company.”

As he works through the cool autumn nights at his Bellevue Hill mansion, Lachlan Murdoch continues to actively search for other sports betting opportunities. At Fox Bet, the odds are shortening.

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Originally published at on April 24, 2021.



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