"When you look at the competitive set in the all-media marketplace, when you know you have monolithic brands like Google, Apple... Telefonica, Deutsche Telecom, Verizon... there are much, much bigger beasts than a News Corp or a Time Warner."
And he has a point. In US TV, the big three broadcasters used to dominate, then the cable guys took over and now you're finding vast vertically integrated entities like Comcast and TimeWarner. But they pale in size next (especially in market cap) next to some of the largest tech and telco companies:
America Movil $201.38bn
One of the interesting aspects of most of these businesses is that they throw off massive free cashflow. That means they have to do one of three things:
- use it to grow organically or by acquisition
- issue dividends
- but back their shares
Unfortunately many of the management teams of traditional telcos have found using their cash in this way tougher than the likes of Comcast or NewsCorp, who with the odd exception (don't mention MySpace) have done a sterling job in using their shareholders' cash (and let's not mention TimeWarner at all in the same breath...).
Also, the margins on content exploitatio are (at present) increasing, whilst those for telco services are at best static per head (although if the content companies don't start to take piracy really seriously very soon, they're in for a shock...).
So, Mr Murdoch can be bullish. His family own a large part of one of the greatest content empires the world has ever seen, and, as a consultant recently told me, "It's easier to farm than to hunt". Telefonica and Vodafone have come a cropper in the past with content strategies (Endemol and Vizzavi), but Sky is going great guns with its broadband rollout.
Out of all this it's clear that two things are likely to happen: NewsCorp will increasingly become involved in the mobile as well as fixed telco market, and they will seek to further integrate and expand their Sky brand.
Something else James Murdoch needs to do is to sort out the international damage that Fox News in the US is doing to its national and international reputation.
But none of this will take on Google and Apple without more major plays in the content field - what price Netflix and Spotify ?
However, the really major play would be a hardware one - a market where NewsCorp still has a toehold via set top box company NDS.
Given the odds, I'll put a fiver on David over Goliath for this one....