News Corp. and vertical integration
James Fallows's interesting, long article on Rupert Murdoch and his growing News Corp. empire appears in September's Atlantic Magazine. Among the most interesting parts is a discussion of News Corp.'s growing reliance on vertical integration, that is, supplying its own programming for its own networks.
Several striking themes recur in this saga. One is Murdoch's long-standing determination not simply to broaden News Corp's portfolio-by diversifying, for instance, into new or unrelated businesses -- but to extend his strategic control of the supply and distribution channels on which his existing businesses rely. His father had moved from print to radio with the understanding that each medium could publicize and support the other. Murdoch's companies now constitute a production system unmatched in its integration. They supply content-Fox movies (Titanic, The Full Monty, There's Something About Mary), Fox TV shows (The Simpsons, Ally McBeal, When Animals Attack), Fox-controlled sports broadcasts, plus newspapers and books. They sell the content to the public and to advertisers-in newspapers, on the broadcast network, on the cable channels. And they operate the physical distribution system through which the content reaches the customers. Murdoch's satellite systems now distribute News Corp content in Europe and Asia; if Murdoch becomes DirecTV's largest single owner, that system will serve the same function in the United States.
In his biography of Murdoch, Neil Chenoweth, who has worked for years as an investigative reporter for the Australian Financial Review, stresses that the DirecTV deal is valuable to Murdoch mainly as a way of ensuring wide distribution for his movies and his news, sports, and original TV programming. "We are going to see a landslide of Murdoch content produced for DirecTV and his global satellite network, and it will just blow everybody else away," he recently wrote in an e-mail. The next big wave of media consolidation, Chenoweth predicted, would be driven by other companies trying to match what Murdoch had put together.
Fallows also sees News Corp. as the model for the rest of the media industry. Murdoch's career has had its ups and downs, but it is gaining traction, starting to surpass its more traditional rivals, particularly Disney. The DirecTV acquisition is just one more step in News Corp.'s increasing dominant, interlinked position.
