Rupert Murdoch's plan to buy Time Warner would help the Twenty-First Century Fox chairman make larger inroads in China, a fast-growing market that media moguls are finding hard to crack.
Time Warner's board rejected Murdoch's $80 billion offer, but the Fox chairman is expected to continue the chase.
A deal would create a giant with more than $37 billion a year in revenues in the US and Canada. It would also nearly double the revenues Fox generates from the emerging media markets in Latin America and Asia/Pacific.
“He sees 3 billion new consumers coming into the market and a rising middle class in China and India, and mobile devices and strong demand for content,” said Mario Gabelli, the CEO of GAMCO Investors, in an interview with Reuters Insider, “He's going to be able to create Netflixes of his own.”
Gabelli owns shares of both Fox and Time Warner.
Last year, Fox generated 42% of its revenue outside the US and Canada. The company's Asian revenues, including those in Japan and China, grew by 40%, to $2.1 billion, over two years.
Time Warner's collection of cable channels would compliment Fox's programming in key territories.
In Latin America, where Fox faces off against large local players, Time Warner's Turner unit operates Chilevision, a large broadcaster in Chile, and also shows its TNT entertainment channel, Cartoon Network and locally tailored regional channels such as the kids channel Tooncast.
Turner offers three well-regarded channels in India, POGO, Cartoonito and Toonami, which could help Murdoch's Indian programming behemoth Star India, which broadcasts 44 channels in seven languages.
HBO would likely be Fox's big draw in foreign markets. The pay channel, with a history of hit programmes such as “The Sopranos”, has around 84 million subscribers outside the United States, beaming its shows into more than 70 countries, and sells programming from HBO and Cinemax into 150 countries.
In China, with Time Warner in the fold, Murdoch would be able to focus more squarely on profiting from what movies and TV shows the government allows.
In January, he sold Fox's 47% stake in Star China TV, which owns three 24-hour Mandarin channels, and in October sold off Fox's remaining stake in Chinese TV company Phoenix Satellite Television. These move come in the face of restrictions on foreign ownership of China media assets.
“Murdoch is not unique. The Chinese government says, 'We cannot let these people control our media,'” said William Yu, an economist at UCLA's Anderson