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Lachlan Murdoch Discusses Fox News, Sky Takeover and ‘Avatar’ Sequels at Variety’s Dealmakers Breakfast

For the leadership of 21st Century Fox, the decisions to fire Fox News chief Roger Ailes and star anchor Bill O’Reilly after sexual harassment allegations erupted around both men were not hard calls to make, despite the importance of the division to the corporate bottom line.

So said Lachlan Murdoch, executive chairman of 21st Century Fox, in his keynote conversation on Thursday morning at Variety‘s inaugural Dealmakers breakfast gathering in New York. Murdoch addressed a range of topics, from the changing nature of the pay-TV market to emerging premium VOD windows for theatrical releases to the new competitive threats posed by Google, Facebook, Apple, and Amazon. He also expressed confidence that the company’s acquisition of Sky would be completed by the middle of next year.

Murdoch emphasized the importance of maintaining healthy workplace culture throughout the organization — a responsibility that falls to its leaders.

“Culture is something that has to inform leadership decisions every day,” Murdoch said. “When you unearth things that don’t fit the culture you are trying to have or want to have, you have to address it ruthlessly and, unfortunately, in many cases very publicly.”

Fox News, Murdoch, went on to note, remains strong despite the loss of Ailes and O’Reilly.

“Ratings wise, it’s doing very well,” Murdoch told Cynthia Littleton, Variety‘s managing editor of television, during the Q&A held at Bryant Park Grill.

Murdoch, who is also co-chairman of News Corp., acknowledged the myriad challenges facing traditional media conglomerates such as 21st Century Fox. Rivals like Time Warner are getting snapped up by telecom giants such as AT&T, while Silicon Valley players, including Google, Facebook, and Apple — that boast massive balance sheets — are gobbling up content. Still Murdoch said he wasn’t worried about the AT&T’s looming deal for Time Warner, nor was he concerned about digital giants planting a flag in Hollywood.

Facebook, Murdoch noted, at present is advertising-supported, while Fox has the added benefit of subscription revenue generated through its cable channels. At the same time, he pitched direct-to-consumer businesses as an inevitable evolution for media giants.

“We have a deep relationship with our customers that’s a paying relationship. In the future, everyone will be direct to consumer” to some degree, he said.

Murdoch also said he was comfortable with the size of Fox, vis a vis new and old media rivals, and was “confident” that the company’s $15 billion agreement to take over Sky will close despite intense regulatory review by the U.K. government.

“We’ve grown very well already compared to any of our competitors,” Murdoch said. “I’ll stack our suite of assets against anyone’s.”

Fox, like other major content owners, are experimenting with new ways to package TV programs and channel offerings. He pointed to the FX Plus on-demand service that has just launched in partnership with Comcast and Cox Cable. The service offers almost the entire vault of FX programming without advertising for $6 a month.

Fox channels are also in the forefront of the digital MVPD services launched by YouTube, Hulu, DirecTV, and others in recent months. The financial returns on these services are better for content providers than its deals with traditional MVPDs. In addition to commanding higher subscriber fees, they also yield extremely valuable audience data that Fox can sell to advertisers for massive premiums.

The move is part of a broader Hollywood embrace of big data — something that the Facebooks and Googles of the worlds have leveraged into massive businesses.

“We’re in the beginning of an incredible transformation … we’re in the first months of something that will have a multi-decade life and future,” Murdoch said. “Businesses that have large data sets and robust data sets will be the companies that win in the future.”

Just as the television industry is experimenting with new ways of distributing its content, so too must the film business become more innovative, Murdoch argued. Fox’s film studio has been talking with theater owners for months about a deal that would enable them to release films on-demand within weeks of their debut. Currently, customers cannot buy or rent films for some 90 days after they bow in theaters. Fox and others want to change that, and offer films for between $30 to $50 a rental much earlier than they are currently available. He predicted a new model could be in place within six to twelve months.

“The industry has to change,” Murdoch said. “The premise of this is putting the consumer first.”

Murdoch noted that most films are off screens 45 days after they debut theatrically, but customers can’t access them for an additional 45 days.

“The way the system works today is very inefficient and invites piracy,”  Murdoch said. He stressed that “we have no intention or desire to destroy the theatrical experience.”

Fox will need a robust theatrical landscape starting in 2020, when the first of four planned “Avatar” sequels opens. With a collective budget expected to surpass $1 billion, Murdoch said “these will be the most expensive movies of all time.”

Director and writer James Cameron has taken Murdoch through scripts and storyboards and some other rough renderings, and the Fox mogul said he’s excited for the filmmaker’s return to Pandora, the mystical alien world where the first film unspooled.

“This is a tremendous intellectual property for us,” Murdoch said.

The Variety New York Dealmakers Breakfast was presented by ProSight Specialty Insurance. 

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