Andrew Heathcote Rich Lists editor

Andrew is BRW's Rich lists editor and is responsible for the Rich 200 and Young Rich flagship issues. He also reports on matters relating to wealth and investment for BRW and The Australian Financial Review.

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10 threats to keep Rupert Murdoch awake at night

Published 07 February 2013 01:16, Updated 07 February 2013 02:23

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10 threats to keep Rupert Murdoch awake at night

The most humble day of his life ... Rupert Murdoch’s wife Wendi Deng looks on as James (left) and Rupert Murdoch appear before Britain’s Leveson inquiry. Photo: Reuters

Numerous risks face Murdoch and the company he has spent a lifetime building. These include:

1) Advertising and circulation: For a long time, News Corp critics have claimed that cash from The Fox Group has propped up its newspapers. Come the split, it won’t have this luxury. Poor economic conditions have led to reduced advertising spending. Circulation for print products has also fallen as readers log on to a digital future. It’s unlikely digital advertising will ever replace old sources so News needs new solutions and quickly.

2) Sports and anti-siphoning: News has few guarantees that its lucrative broadcast deals with global sporting associations will be renewed. The role of traditional broadcasters long term is also in dispute. Relaxing rules of anti-siphoning would be good news for Foxtel, but reform has been slow.

3) Failure of new businesses: New Corp’s failures in its digital markets have been embarrassing. In February 2011, News Corp launched its first big iPad newspaper, The Daily. It was shut less than two years later. Its education division has been a drain since its launch two years ago. Last year, it was renamed Amplify and grand plans were made to tap into a supposed education revolution, but success appears years away.

4) Ongoing criminal investigations: The phone-hacking scandal won’t go away. Regulators are still on the case and News has admitted liability in civil cases. It has been embarrassing for Murdoch and his family but the biggest cost may ultimately prove to be reputation damage for News.

5) Intangible asset valuations: The forced impairment of its intangible assets is a concern for News, given the big values attached to its global mastheads. Thirty-five per cent of assets in the 2012 annual report are either booked as intangible assets or goodwill. Transition from print to digital may require rewriting the carrying values of many non-current assets.

6) Piracy: Protecting against piracy is a constant battle and democratisation of technology doesn’t make it any easier. Ultimately, it’s up to police to protect against the illegal use and distribution of News movies and other content, which makes its own efforts imperfect..

7) Foreign currency risk and the global economy: Trading in foreign currencies can be as much as a risk as an opportunity but low growth in the global economy is almost always bad. Discretionary spending is often the first to go and News could use an uplift in the US, Europe and elsewhere.

8) Tax implications of the break-up: News has sought assurance from the US Internal Revenue Service that the necessary distribution of stock won’t attract a tax liability and has raised concerns about how the Australian Taxation Office may interpret it. In truth, tax law is unlikely to be an deal-breaker, but it may place limits on further ownership changes.

9) Management and conflicts of interest: The calls for more independent directors on the News Corp board have been growing louder. Australian super funds have been among those to question Murdoch’s commitment to corporate governance.

News Corp may be publicly listed but in the eyes of some, Murdoch still considers it his private company. Murdoch’s standard message to governance agitators is blunt: take your profits and go.

10) Age, health and the next generation: Murdoch’s biggest problem may have more to do with his birth certificate than changes to the media landscape. He’s 81 and staying fit and healthy in your 80s is hard enough, let alone when you’re in charge of a global media empire.

The question as to which family member will take control of the Murdoch shareholding is unresolved.

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