Middle East offers Rupert Murdoch hope
As Rupert Murdoch struggles to defend his empire in the wake of the phone hacking scandal, one man has stood firm in his support for the media mogul.
Accusations that celebrities, politicians and families of the victims of the September 11 attacks in the US - and even a murdered British schoolgirl - had their voicemail messages illegally intercepted by journalists have led to widespread criticism of Mr Murdoch's News Corp.
But during the unfolding scandal, the Saudi billionaire Prince Al Waleed bin Talal, who is the second-biggest shareholder in the company, has been unwavering in support for his long-standing friend.
In a difficult period for the global media and entertainment group, Mr Murdoch has witnessed the arrest of several former staff members and suffered a physical attack in the British parliament by a protester.
This week it emerged thatClive Goodman, the former royal editor of the News of the World, had warned that illegal eavesdropping was rife at the newspaper. Mr Goodman, who was jailed in January 2007 for phone hacking, claimed in a letter sent to the human resources director at the newspaper's parent company that hacking was carried out with "the full knowledge and support" of the paper's leadership.
Mr Murdoch's son, James, who runs News Corp's operations in Europe and Asia, may be recalled by Britain's parliament to answer further questions about the affair.
Yet despite these upheavals, Prince Alwaleed, who owns 7 per cent of News Corp's voting shares, said he remained committed to the company as a "long-term investment". The prince publicly backed Rupert and James Murdoch's handling of the crisis, and said there was no need to change the dual-class share structure of the company that gives the Murdoch family disproportionate voting rights.
Given the strong relationship between Rupert Murdoch and Prince Al Waleed, media commentators say the Middle East is likely to be of special interest to News Corp as it looks to recover from the phone hacking crisis.
"I think it is an opportunity for News Corp to expand in the Middle East," says Ali Jaber, the dean of the Mohammed bin Rashid School for Communication at the American University of Dubai.
In the fall-out of the scandal, News Corp was forced to drop its proposed takeover of the British broadcaster BSkyB. But Mr Jaber believes the company will now have to look elsewhere for revenue growth.
"The Arab world is still the only area that has money in it, and the media is still thriving here," he says. "People are still investing in setting up new television channels and new newspapers, which is something that cannot be said in other markets in the western world."
In an illustration of the close ties between Prince Al Waleed and Mr Murdoch, News Corp bought a stake in the Saudi tycoon's media company Rotana. In May, Mr Murdoch boosted this stake to 14.53 per cent and has until November next year to exercise an option to increase the company's holdings to 18.2 per cent.
News Corps presence in the Gulf has been growing in the past few years. BSkyB, in which News Corp owns a 39.1 per cent stake, plans to launch an Arabic version of Sky News in Abu Dhabi next year.
"They are doing everything they can to expand in the region," says Mazen Nahawi, a media executive based in Dubai.
Mr Nahawi is the founder and president of News Group International, which specialises in media monitoring, and has an association with News Corp through an agreement to market the Dow Jones Factiva service in the Middle East and North Africa. "I've heard from multiple News Corp divisions that there's a lot of interest in the region, and they want to do more.
"I see many News Corp executives coming and going, much more frequently than ever before," says Mr Nahawi.
Still, Mr Nahawi believes News Corp's operations in the Middle East, which include the Fox and Star television networks, need more cohesion. "The crown jewels - Fox, Sky, Star, Dow Jones - they're all here," he says. "The question is, are they here with passion? And I think that's probably the missing link.
"News Corporation needs a CEO for the Middle East. And it needs someone who can bring together those disparate assets and coordinate them among the varying partners," adds Mr Nahawi, pointing out that the biggest opportunities for News Corp in the region revolve around television.
That is a key concern of Prince Al Waleed's Rotana. The company is one of the biggest broadcasters in the region, and runs Rotana Cinema, the second-most lucrative channel by advertising revenues.
Yet Rotana faces competition from the Saudi-owned network MBC, which is reported to rake in more than half of the region's TV advertising revenues, which total more than US$1 billion (Dh3.67bn) a year.
But Rotana's share of the sector is growing. In the first half of the year, Prince Al Waleed's group grabbed almost 14 per cent of the total pan-Arab advertising market. This is the kind of presence that News Corp would love to have in the region.
Looking ahead, Mr Nahawi does not believe the phone hacking scandal will prove a major headache for the Murdoch empire in the Middle East.
"While this has been a very painful and humiliating episode for News Corp … ultimately it will bring in the kind of corporate governance that will help improve it as a company for the long run," he says. "I'm sure that's where Prince Al Waleed is coming from as well."
Published: August 18, 2011 04:00 AM