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Rupert's Main Man: Q&A With News Corp.'s Chase Carey

Battling technology's impact, a failing broadcast model and the White House, Chase Carey is back at News Corp. just in time to take on whatever gets thrown at him next 10/24/2009 02:00:00 AM Eastern

RELATED: Complete OnScreen Media Coverage

Chase Carey replaced Peter Chernin as Rupert Murdoch's right-hand man at one of the most challenging and fascinating times in the history of the content delivery business. From technology's rewriting of the rules to the M&A marketplace looking primed to pick up, Carey's return to News Corp. will bring with it the need to make decisions that will dictate where the massive media empire turns next at this crucial juncture.

B&C executive editor Melissa Grego talks with Warner Bros. Studio CEO Barry Meyer.In his first public speaking engagement since leaving DirecTV for his return to News Corp., Carey sat down with B&C Editor-in-Chief Ben Grossman for a keynote Q&A in front of a packed house at the 2009 B&C/Multichannel News OnScreen Media Summit at New York's Edison Ballroom. Following is an edited transcript of that conversation.

One of the top stories in the news obviously is the talks—or whatever's reportedly going on—between Comcast and General Electric. A lot of these reports say News Corp. has been mentioned in one way or the other, so I'm going to ask you flat out: Is News Corp. interested in being part of any deal to acquire NBC Universal?

Anytime you have something of this size and scale going on, you're not doing your job if you're not thinking about it. [But] I don't think it is something we are actively engaged in.

So do you think the Comcast-GE deal gets done?

Neither one's denying much right now. I think there's a decent chance it will come to fruition. This is a deal that makes sense for GE today, and there seem to be reasons for both sides.

So is this a good deal for Comcast?

I think [NBC Universal has] great assets, a unique set of assets. The cable channels are obviously the heart of it. They are run really nicely. A group of channels like that doesn't come along very often. It is a truly unique set of businesses, and something that clearly caught the interest of Comcast.

John Malone said that he expects massive restructuring and consolidation in the media. Do you agree?

I don't know that I believe if this deal happens you would get a whole bunch of copycat deals. [But] over the next couple of years, you probably will have more activity than you had in the past.

Are you in an acquisition mode, and what would you be shopping for?

Most of our success has been building businesses, not buying businesses. But I think where we can acquire businesses, you certainly want to acquire a business that you can buy at an early stage, get into and transform. If there is something that makes sense, we would look at it, but I would rather be building it than buying it.

Are the cable networks a good buy—maybe something like the Travel Channel? Just throwing that out there. Is that a good buy right now?

I think cable networks are a great business; they have a lot of room to grow. The areas that would be at the top of the list would be international, which is a place to which we bring a unique set of strengths. In some ways, the international market is uniquely appealing. You always want to be an opportunist with the content businesses. There are ways to really expand that content portfolio. If I look at our cable group, it's not where I'd like it to be today. I look at Discovery, it's a road map of where I'd like to be.

Your boss says that the broadcast business simply can no longer be supported by ad dollars. So what happens next?

It's not rocket science. It starts with making it a dual revenue business. It doesn't make sense that broadcast is only ad supported. It competes against other channels that are dual revenue businesses that are getting 1, 2, 4 dollars [per sub], while a network like Fox, it sits there with truly the best programming in sports and entertainment, so we need to move that business to a place where we are getting fair value.

Les Moonves has been talking about retrans for a while, and now it seems News Corp. is ready to assume that leadership position.

We are focused on being a leader, and getting fair value for Fox. There has to be a logic behind this. If you believe right is on your side, you have to have conviction to stand behind what is right, and have conviction to get there. The broadcast biz has unique strengths it has to protect. But it's not going to be easy.

With NBC's Jay Leno move scaling back its costs, is that where network models are headed? Can broadcast networks continue to produce 22, or 15, hours of original content every week?

I don't think you can cost-cut your way to success. In many ways, what makes a broadcast network like Fox unique are events. There is no sure-fire way to say, let's just go and create hits. You can't cost-cut your way out of it; for us it is just saying, we have to get the best content out there, and you've gotta get fair value for content. We all say we don't want to trade analog dollars for digital pennies, and then we all go and do that.

Fox has cut its sports properties on the broadcast side. Networks in general tend to lose money on these contracts, that's no secret. Can broadcast TV continue to pay these big rights fees? How does that fit into the model that we've just been talking about?

I think that against today's model of an ad-supported-only broadcast network, those sports-rates costs are a real challenge. I think sports are a critical part of our story and I think they're going to continue to be, and that's why all this ties together. We're going to be a leader in content, create great content including around sports, and create a business model that lets us continue to grow and expand. Sports rights, where they are today against the broadcast model that has existed the last couple of years, clearly has some challenges.

Fortunately, we're OK with where we are with the franchises we have; the NFL is up in ratings. It's more valuable than ever. It's DVR-proof. But you need to move to a place where you have a business that [makes sense].

One way to do that could be to create a national single-feed sports network of your own. Is that in the works now? Is that something you would consider, creating a new single network to be able to then move some of those properties over to the cable side?

I guess if I were looking at our cable and broadcast businesses, that would not probably be where I'd be going today.

There is one gigantic sports property with a big crossover appeal that is available right now, and that's the next round of the Olympics. Yes or no, are you guys a player in this round?

Like the comment about NBC Universal, I think we should be a player in things that potentially fit. It's too early to say where the price will be, but when a franchise like the Olympics is up, is that something that we should be thinking about? We aren't doing our job if we are not evaluating big franchises like that.

Is there any reason not to think, as I do, that Disney is going to land the Olympics? Their bids on other properties like the BCS are so above where other people, including yourselves, have come in.

Yeah, I guess. Maybe they're just buying everything. They're supposed to be in [bidding for] March Madness and the NFL coming up, the Olympics, and maybe you just keep buying it all. At some point, do they decide that they've done enough? ESPN, that franchise clearly has built a great, great [business]. But it's not my place to determine how much they want to keep doubling down and what are the consequences dealing with the [uncertainty] in the marketplace.

On the digital front, there's a lot of talk right now about charging for content, something that has up to this point been given away for free. So let's talk in general first. You guys have come out and said you are going to put up pay walls all over the place. Is that the right move? Do you think that the pendulum will swing back? Can you retrain the consumer?

Actually, I think you can. It doesn't mean just throw pay walls up everywhere. I think there will certainly be a part of the content experience that is always free. So I don't think it means we just put on blinders and hide behind a pay wall. But on the flip side, I think certainly when you've got the ultimate fragmentation and customers jumping around the way that they do, I think the free model is very difficult.

I actually think consumers will pay for value. And yes, you are going to have to fight; we won't deny at all that we are going to have to deal with the fact that to varying degrees customers have gotten accustomed to it being free.

Today it's easy to make it free because it's not really cannibalizing that much; the cannibalization is pretty small. But it's gonna grow. And if you don't get in front of it as it does start to cannibalize, the key business starts [getting cannibalized] down the road.

Another question on that. With something like Hulu, have you been training the consumer to go ahead and cannibalize your core product by presenting that free? Should Hulu start charging tomorrow?

Hulu clearly needs to evolve to have meaningful subscription models as part of its business. We have partners, so [we all have to decide] where those lines are in terms of windows, content, etc. You can't just put everything at Hulu behind a pay wall right up front, but I think you need to have a subscription model that really in many ways becomes increasingly the heart of the growth inside a business like Hulu.

But I think we have to be realistic about where we are. And I think the guys at Hulu deserve great credit for creating a good consumer experience. What they did was create a brand and a franchise and a presence in the market that they could build off of.

There's this great publicity around Fox News' fight with the White House. It's been a lot of fun to watch, but does that present any problems for News Corp.'s other dealings with the administration?

In all honestly, it's probably PR and marketing we couldn't have bought. I don't think the administration actually will conduct itself in a vindictive way. They're running a government for the people.

I do think Fox is quite comfortable where it is, and I think we try to present an honest and insightful evaluation and presentation of the issues from both sides. Clearly, it struck a raw nerve in some places, but I think we are comfortable with it. We're not trying to pick a fight, [just] present an honest and, in Roger [Ailes'] terms, fair and balanced view of the issues. But we're comfortable where we are.

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