Rupert Murdoch Gets Lucky

Timing of scandal protecting News Corp. in U.S.

The News Corp. hacking scandal hasn’t yet hit the big time in the U.S. But if it does, Rupert Murdoch and his global empire will have a real advantage: Timing. Both in Washington, where Congress might otherwise jump to investigate, and in the world of television advertising, News Corp. finds itself in a relatively safe position, thanks to pure dumb luck.

In D.C., the ongoing debt ceiling debate may be the best thing to happen to News Corp. this year. With Congress under the gun to try and resolve the nation's potential financial quagmire, the idea of going after big, bad News Corp. is taking a backseat, for now.

Only a small group of Democratic members of Congress have spoken out on the scandal. Just two, Sen. Dick Durbin, D-Ill., and Rep. Anna Eshoo, D-Calif., have called for Congress itself to investigate. The rest, including the sole Republican to jump on the issue, Rep. Peter King, R-N.Y., asked the Department of Justice or the Securities and Exchange Commission to look in to the matter, rather than Congress. 

Now that the FBI has opened an inquiry, there seems to be little motivation for Democrats to call for more investigation when they could be criticized by the GOP for taking their eye off what is arguably the nation's most pressing problem. Sen. Jim DeMint, R-S.C., previewed that message in an appearance on Meet the Press this weekend, saying, "We need to let law enforcement work here. Congress has had—has got a big issue in front of us. We need to handle our own business for a change.”

From a business perspective, too, News Corp. has gotten lucky. The upfront at which its Fox network sold its advertising inventory for the end of this year and most of next ended in June, before the scandal exploded. Without a phone hacking cloud hanging over its head, Fox sold $2.2 billion in advertising commitments for 2011-12, or about 80 percent of its available prime-time inventory.

Now it’s too late for the companies who bought that time to pull out. They’ve missed the deadline to cancel their buys for now through September, which they bought at last year’s upfront, and are not allowed to cancel any portion of their buy for the fourth quarter of this year. The earliest they could move to cancel anything is Oct. 1, when they could pull advertising from Fox’s first-quarter schedule, and even then they could only dump 25 percent of what they bought for that quarter.

It helps that, for now, most TV buyers still see the problems at News Corp. as a localized outbreak, one that’s failed to spread beyond the company’s newspaper unit, much less to the U.S.

“None of our clients have even brought up the issue, beyond the general chitchat you’re hearing everywhere else in New York,” said one national TV buyer. “There’s no telling what revelations will bubble up, but right now it’s a question of whether we think clients are going to pull out of The X Factor and risk losing all those [viewers] because something that a lot of people still haven’t engaged with completely happened in an English tabloid. And the answer to that would be an unqualified ‘no.'”

Fox News Channel isn’t at particular risk for advertiser pullout either. For one thing, the clients who advertise on prime-time shows such as The O’Reilly Factor and Hannity would be hard-pressed to find the kinds of audiences those shows draw anywhere else. Last week, O’Reilly averaged 2.95 million viewers in its 8 p.m. EDT slot, four-and-a-half times what CNN was able to get with its now-canceled In the Arena.

“News has very particular targets: the viewers are older, they’re very dependent on things like pharma and direct marketing,” the buyer said. “You can make that up by doing a whole bunch of local buys, but unless you’ve got a compelling reason to walk away from those ratings, why would you?”

Naturally, if the FBI can dig up sufficient evidence linking News Corp. to phone hacking here, especially if that involves attempts to tap the voicemails or call records of the victims of the Sept. 11, 2011, attacks, all bets are off. 

“Any tie to 9/11 is going to be devastating, because that’s sacrosanct,” said a senior media buyer. “[But] we’ll see what happens. Any inquiry is likely to be drawn-out for years, and the Murdochs could just as easily be long gone before any final conclusions are made.

“In the short term, I don’t see this having a big impact on their TV business.”