SYDNEY — Twelve years ago, Lachlan Murdoch — the eldest son of Australian media magnate Rupert Murdoch — tried to emulate his father’s success in reverse. The younger Murdoch moved back to Australia, hoping to build a media empire as smashingly successful as the one his father made after immigrating to the United States.
It didn’t work out.
Ten Network Holdings, the television network Murdoch became chairman of in 2012, was placed in receivership, the corporate equivalent of bankruptcy, on June 30. Now speculation is rampant that Rupert Murdoch will buy his son’s company and try to turn the failure into a victory for the family-run business.
The now-45-year-old Murdoch bought 9 percent of Ten Network Holdings in 2010 from James Packer, a friend and fellow son of a media tycoon. With the support of several wealthy business allies, Murdoch became acting chief executive in 2011 and chairman the following year.
Ten was and remains Australia’s perennially third-ranked television network. Murdoch’s strategy to change that was to develop popular reality series, invest in morning television and buy reliable youth-oriented shows like “The Simpsons,” reversing a previous strategy to reach slightly older and more wealthy viewers.
At first, it seemed like it might work. In 2011, Ten’s operating profit was roughly $159 million U.S. dollars, according to a stockbroking analyst who asked not to be named for fear of retribution. “Ten’s turnaround strategy is well underway,” said Murdoch to shareholders in 2012, when he asked them to invest $207 million in the company.
Running a TV network made Murdoch an even more glamorous figure in Australia’s clubby media world. Mixing with the business and political elite, Murdoch and his wife Sarah, a former top model, lived in a former French diplomatic residence in the expensive Sydney suburb of Bellevue Hill.
But Ten’s profits dropped to $85 million in 2012 — and kept on falling. Murdoch churned through chief executives, plunging the network into turmoil, and spent heavily on programs made by 21st Century Fox, the studio controlled by his family — and where Murdoch himself later became co-executive chairman with his father.
By 2014, according to the analyst, Ten was turning a $71 million loss. Murdoch, Packer and billionaire Bruce Gordon became the primary creditors for the network. As the company desperately tried to restructure itself with help from consulting firm McKinsey & Company, Murdoch, Packer and Gordon finally lost patience and withdrew their financial support last month, pushing Ten into bankruptcy. With their shares worthless, Murdoch and his co-investors lost about $375 million at current exchange rates, according to regulatory filings.
Stockbroking analysts think Rupert Murdoch may now to try to salvage some of his son’s investment by buying Ten and merging it with his Foxtel cable-television operation — and that the bankruptcy may have been a planned maneuver to allow him or his son to buy Ten on the cheap.
According to a report in the Australian Financial Review, executives at Ten, who were trying to reduce programming costs before they ran out of money, were suddenly unable to contact a crucial 21st Century Fox executive dealing with the shows his company produced for Ten.
“Ten executives tried to contact the executive several times an hour over the weekend but couldn’t reach him,” the paper reported. Sources alleged to the Financial Review in another story that the network had secured other cost-cutting deals and could have stayed afloat if not for 21st Century Fox.
When it comes to his children, Rupert Murdoch has a history of combining blood and business. In 1996, Murdoch’s News Corp. — before it was separated from 21st Century Fox — purchased most of the start-up music label run by son James. And in 2014, he bought his daughter Elisabeth’s company, Endemol Shine Group, which also makes several of Ten’s TV shows.
But 21st Century Fox disputes it went slowly on talks to ramp up the financial pressure on Ten. A timeline provided by a Murdoch spokesman says that Fox offered to cut the cost of Ten’s programs by $150 million over five years before the company went bust. The only outstanding question was the length of the contract, according to the timeline.
“The idea that Lachlan and Bruce [Gordon] have been trying to buy Ten on the cheap is bulls—,” the spokesman said in an interview.
While it’s not clear how a takeover might work, one scenario could have Lachlan and his partners buy the bankrupt network, take it private and sell it in turn to 21st Century Fox. Lachlan has indeed asked Australian regulators for permission to buy the now-bankrupt Ten with Gordon. But doing so would require Australia’s center-right government to water down a media-diversity law designed to specifically limit the power of the Murdochs, who already control more than half of the country’s newspapers by circulation and its biggest cable network.
The push to change the law has the enthusiastic backing of Murdoch’s politically influential newspapers, although the opposition Labor Party, fearful of giving the Murdochs even more power, is fighting the change in the Senate. But Prime Minister Malcolm Turnbull wants the law changed; if it is, Ten could soon be just another part of the Murdoch media empire.