The Sporting Life

Rupert Murdoch is a sports fanatic. No, you won't find the media tycoon hanging over the rail at a horsetrack, rolled program in hand, or screaming with the lager louts at a football match. (He was reportedly last seen inside a British football stadium in the 1970s.) Murdoch's love for sports is purely financial. Two years ago he said that sports programming would be the "battering ram" by which his News Corp. would bust open the doors to the global pay-TV market. He has been true to his word, paying princely sums for sports teams and sports-broadcasting rights around the world. Last week he made his boldest move yet. The Murdoch-controlled BSkyB satellite-TV company--he owns a 40 percent stake--offered 623 million [pounds] to buy Manchester United, the most prominent, and profitable, football club in Britain. United's fans, and Murdoch's enemies, were outraged by the incursion of heartless capitalism into the "people's sport," even though the club is a publicly traded company. The Mirror, a British tabloid, published a front-page picture of Murdoch with horns on his head under the headline RED DEVIL. But most United directors did not perceive any Faustian bargain. They accepted BSkyB's offer--the largest ever for a sports club.

Manchester United is no ordinary team. It's one of the royal names in a sport with massive global appeal. The Reds have tens of millions of supporters scattered from Sheffield to Shanghai, including 200 fan clubs in 24 countries. In Thailand alone, a United fanzine sells more than 20,000 copies an issue. A key-rings-to-whisky merchandising business brought in 29 million [pounds] last year. This devotion is precisely what Murdoch is buying. His growing TV empire needs high-wattage content to entice people to pay for programming. Along with Hollywood movies, big sporting events are the only shows with enough magic to pry open consumer wallets. "Murdoch is turning sports supporters into [pay TV] subscribers," says David Brooks, an analyst with Nomura in London. Adds George Winslow, the editor of World Screen News, a New York-based magazine that follows the international television industry: "The Manchester deal makes eminent sense. It fits in with Murdoch's strategy of being the major TV provider in every market. He's been gobbling up sports franchises everywhere and using them to promote his TV holdings." And where Murdoch leads, others follow. By the weekend Carlton Communications, another U.K. media group, was holding takeover talks with Arsenal, the current English Premier League champion.

Murdoch long ago learned the importance of sports as a business. In 1992 BSkyB was a failing satellite pay service in Britain. Then it snatched the exclusive TV rights to broadcast live football games from the Premier League. The BBC and independent ITV network were appalled by the price tag: 304 million [pounds] for four years. Fans groused--then hurried out to buy their satellite dishes. Revenues skyrocketed, and BSkyB was saved. With nearly 7 million subscribers, BSkyB has a virtual monopoly on pay television in the United Kingdom, controlling most live football and rugby matches.

Murdoch's formula is simple: buy into a top sporting club or league, then use its fan base to attract subscribers to pay-TV services on which the club's sporting contests are shown. The more subscribers, the more advertisers and sponsors are willing to pay to associate themselves with major events. Every major U.S. network now uses sports to promote the rest of its programming lineup. Murdoch did not pioneer this strategy--Ted Turner did. In the 1970s the American cable mogul bought the Atlanta Braves (a baseball team) and Hawks (a basketball team) to use as consumer nectar for his TBS superstation.

But it's Murdoch who's gone global with the idea. In Asia, where he operates Star TV, he has invested heavily in local sports and formed a joint venture with ESPN, the U.S. sports network owned by Disney. He also owns half of Australia's National Rugby League.

In the United States, where the ownership of sports franchises by media companies is commonplace, Murdoch has been especially aggressive. Fox Sports, a subsidiary of News Corp., recently bought the Los Angeles Dodgers baseball team, America's third most valuable sports club. Fox Sports also owns a stake in New York's basketball and hockey teams, the Knicks and the Rangers. Broadcast tie-ins abound: Fox holds the local TV rights to Dodger games--as well as stakes in 22 regional sports networks in the United States, covering 65 million viewers. "Sports generate a consistent audience of men between the ages of 20 and 50," says Mark Janis, the president of Sportscorp., a Chicago-based consultancy. "That's the hardest mass audience to reach, and advertisers pay a premium for it."

British regulators have vowed to closely scrutinize the United sale. The deal could still be referred to antitrust authorities. Murdoch's enemies have stirred rumors that BSkyB might soon jack up ticket prices and shift the starting times for United matches. If the deal is approved, BSkyB will have a seat on both sides of the negotiating table--as both team owner and broadcaster--when the Premier League TV contract next comes up for renewal. The same situation exists in Los Angeles. Fox Sports spokesman Vince Wladika asserts that cross-ownership of sports teams and their broadcasters should not arouse suspicions. "The Dodgers are not going to give away their local broadcast rights to [a sister company] for nothing. They are a business just like other Fox divisions." He says the Fox broadcast unit will have to bid for the Dodger TV rights just like everybody else--and pay fair-market value. "People are always looking for a smoking gun," says Wladika. "It isn't there."

Maybe not, but some corporate sports owners wish to wrest power over their "brands" away from governing bodies. Unhindered, they can create new TV extravaganzas. Some leading clubs are keen to organize a new pan-European football league featuring the elite teams. Sports traditionalists deplore such crass commercialism. A group of United shareholders has formed to fight the takeover. "Murdoch knows the price of everything and the value of nothing," says Andy Walsh, head of an independent Manchester United supporters' club. "We will stop this deal at all costs."

That may be wishful thinking. Murdoch is very well connected, politically, in Britain. Beyond that, BSkyB's money has helped spur a revival in English football. Old stadiums have been refurbished; attendance has climbed; big-name foreign stars now add glamour to the game. And despite the sepia-toned sentimentality of fans, sports has been the playground of big business for years. Italian media magnate Silvio Berlusconi controls AC Milan. Canal Plus, the French pay-TV company, owns Paris St. Germain. Fair or not, the richest teams can sign the best players. "If Murdoch was going to buy a club, I'd rather it was us than someone else," said one Reds fan last week. In sports, what matters in the end is whether your side wins, not who's paying the bills.

THE SCORE KEEPS RISING

Murdoch's strategy is to buy premier sports clubs and turn their avid fans into subscribers to his global pay-TV services. In the process, he has helped boost the value of major franchises.


                                                        SALE PRICE


News Corp.'s sports holdings       LEAGUE     SHARE     IN MILLIONS





Manchester United                  Premier    100%*     U.S.$1,030


L.A. Dodgers                       MLB        100              325


Nat'l Rugby League (Australia)     NRL         50              n/a


N.Y. Knicks, N.Y. Rangers          NBA, NHL    20           425[t]


and Madison Square Garden


Staples Center Arena (L.A.)          -         20     less than 50





                                                        SALE PRICE


Other major sales                  LEAGUE     YEAR     IN MILLIONS





Cleveland Browns                   NFL        1998        U.S.$530


Toronto Raptors**                  NBA        1997             350


Minnesota Vikings                  NFL        1998             327


Texas Rangers**                    MLB        1998             250


New York Islanders                 NHL        1997             195





                                                 ESTIMATED SALE


Potential sales                   LEAGUE        PRICE IN MILLIONS





Washington Redskins               NFL             U.S.$400-$600


Arsenal (U.K.)                    Premier                   460





*PENDING PURCHASE BY BRITISH SKY BROADCASTING, WHICH IS 


40 PERCENT OWNED BY NEWS CORP.


[t]INCLUDES OPTION TO BUY 40 PERCENT OF L.A. KINGS AND 


ABOUT 10 PERCENT OF L.A. LAKERS


**PRICE INCLUDES FACILITY.


SOURCES: THE SPORTS BUSINESS DAILY, NEWS CORP.