News Corp knocks at Continent's closed door

Rupert Murdoch wants to conquer Europe, but is he shooting himself in the foot with an autocratic management style?
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The Independent Online

OPPORTUNITY AND ambition continue to attract and drive Rupert Murdoch to extend his global media business into continental Europe.

OPPORTUNITY AND ambition continue to attract and drive Rupert Murdoch to extend his global media business into continental Europe.

Yet, other than Britain, which Mr Murdoch cracked three decades ago, first in print and then in satellite television, Europe has proven largely impenetrable. Most recently, the media magnet has targeted Germany and Italy as the key European territories, most likely to provide prime expansion opportunities.

The failure to use a dominant position in Britain as a springboard to the Continent is a tacit rejection of Mr Murdoch's highly centralised business style, media industry watchers say, as well as a reflection of the cultural and ethnic dividing lines that separate Europe's mostly national media players.

"I think it's a Murdoch issue," says Mathew Horsman, analyst with Investec Henderson Crosthwaite, commenting on the media mogul's failure to establish critical mass across the Channel. "Everybody is scared of letting him in. And he's not prepared to share control."

That latter characteristic is shared by Leo Kirch, the 72-year-old founder and leader of Kirch Gruppe, Germany's second-largest media company. Weekend reports revived speculation, which last arose a year ago, that News Corp is in talks over taking a minority stake in Premiÿre, Mr Kirch's heavily loss-making digital television company.

Linking with Mr Kirch could eventually enable News Corp to unlock Europe's biggest media market.

Mr Kirch's interests range from a 40 per cent stake in Axel Springer Verlag, the country's biggest newspaper publisher, to Europe's biggest film library and television interests, such as SAT1. And last week, in a bid to strengthen the balance sheet, the television interests of Mr Kirch's son Thomas, who owns a majority stake in television company ProSieben Media, were rolled into his father's broader group.

The latest talks between Mr Kirch and News Corp closely follow the former's failed £600m junk-bond issue a fortnight ago. Last year, Mr Murdoch walked away from talks about taking a stake when Mr Kirch valued his privately held media empire at £4.5bn, despite more than £1bn worth of start-up digital television losses.

No doubt that experience reminded Mr Murdoch of his own brush with financial ruin in the early 1990s amid sky-rocketing losses in Britain's nascent satellite television market.

Like Mr Kirch, who has structured his company to deflectscrutiny, Mr Murdoch, 67, revels in holding News Corp's strategic cards close to his chest. If such behaviour makes for an interesting spectacle, it makes alliances near impossible. It also works against recruiting or, in numerous cases, keeping top lieutenants who might, in the long-term, help News Corp realise a meaningful European presence.

Consider the experience of Letizia Moratti, the supremely well-connected Italian media executive who resigned last month after just 10 months as chairman and chief executive of News Corp Europe. Last November, Mr Murdoch presented Mrs Moratti, a former chairman of RAI Television, the Italian state-owned national broadcasting channel, to the world's media at a hastily convened press conference at the Savoy hotel in London.

At that time, Mrs Moratti appeared enthusiastic about News Corp making up lost ground, not only in her native Italy, but also in France and, most importantly of all, Germany. For his part, Mr Murdoch appeared committed to giving his new Italian executive the freedom to develop a European business model.

Within seven months, Mrs Moratti had begun to deliver. She helped to broker a deal that saw News Corp acquire 35 per cent of digital pay-TV provider Stream from Telecom Italia, which at the same time sold a further 30 per cent interest to other investors, among them four Italian football clubs. Although Stream had endured heavy losses in its early expansion into digital, the partners joining News Corp served to triple the platform's customer count to more than 300,000.

Not surprisingly, if perhaps naively, Mrs Moratti expected to run News Corp Europe with something approaching free reign. Yet that contradicted Mr Murdoch's ingrained style. In a telling interview last summer, Mr Murdoch made it clear that he considered Mrs Moratti more of a door-opener and a lobbyist than a hands-on manager.

Mrs Moratti's job, he said, was "to find openings for us and to guide us a lot and lead us through the political maze"."She's a very distinguished citizen, a popular one, and known throughout the broadcasting establishment in Europe."

Several weeks later Mrs Moratti walked out. "A common vision on strategic choices, on investments and alliances, was lacking," she said, commenting on her relationship with News Corp. "When I speak of a different approach, I'm talking about a different way of doing business in a delicate and sensitive area like television, where one needs to have long-term vision."

Indeed, the European "hole" at the heart of News Corp is made even more conspicuous by the company's web-like presence in all other major media markets. Those interests extend from a satellite television joint venture in Japan to the Star satellite broadcast platform that covers Asia, the Middle East and the south Pacific. In the Western hemisphere, News Corp has South American pay-TV joint ventures with Liberty Media, while in the US Mr Murdoch has powered into the broadcast establishment with Fox, which also operates the eponymous, highly profitable, film studio.