News Corp. exec’s new rallying cry: Pay up
In Chase Carey’s first stint at Rupert Murdoch’s News Corp., he was instrumental in reinventing Fox and turning it into a credible contender against the big three networks.
For his encore, he wants to reinvent the media business.
Since leaving satellite broadcaster DirecTV almost 22 months ago to succeed Peter Chernin as the No. 2 at News Corp. under Murdoch, Carey has moved quickly to wrangle new sources of revenue for the media giant that owns broadcast and cable networks, newspapers, a movie studio and MySpace.
At the same time, Carey has pulled News Corp. back from placing big, costly bets on the digital future. Instead, he has adopted a cautious approach in weighing how to get the company’s news, movies and TV shows in front of new audiences — and ensuring the company is paid for it.
Carey — most likely to succeed Murdoch as chief executive should the octogenarian mogul step back before his heirs are ready to take the reins — is signaling a new, pragmatic, show-me-the-money mantra as he exerts his influence at a company matched in the public’s mind with Fox News and episodes of “Glee.” As president and chief operating officer with a 2010 pay package valued at $26 million, Carey is responsible for overseeing $33 billion in revenue.
If Carey’s efforts have a common theme, it’s Everyone Pays. As digital delivery wreaks havoc on News Corp.'s advertising business, the company must try to derive more of its revenue from subscription payments, whether at the wholesale level from cable TV operators or local TV stations, or at the retail level from individuals paying for iPad newspaper subscriptions.
In one provocative instance, he strong-armed local cable system operators, including Time Warner Cable, into paying cash to carry Fox-owned television stations. Previously, broadcast networks such as Fox were content to forgo cash payments in exchange for channel space to launch new cable channels, an arrangement that saved cable operators money.
Carey, who sports a handlebar mustache and favors sack suits, excelled at rugby during college and isn’t afraid to play rough to get what he wants. In October, following an impasse in negotiations, he ordered Fox to pull its programming from Cablevision’s New York-area cable TV systems — smack during the World Series — until the operator said “uncle” and acceded to the network’s payment demands.
Now the network is reaching into the pockets of the local TV stations that carry Fox programming. Fox has told its affiliates to hand over a chunk of the revenue they earn from cable operators — or the network will abandon them and find another outlet.
To be sure, the other broadcast networks are taking a similar approach with both cable operators and affiliates, but Fox has been the most strident.
“Chase is willing to break a little furniture if necessary to get people’s attention,” observed John Hane, a communications lawyer with Pillsbury Winthrop Shaw Pittman whose clients include Fox affiliates. “Nobody else has moved the needle as much as he has,” Hane said, adding that he questioned whether “there weren’t more constructive ways to do it.”
Although Carey, 57, declined to be interviewed, he has evangelized on News Corp.'s need to extract more money out of the media ecosystem.
“It is really important that we get fair value for our content,” Carey explained in December at the UBS media conference. “I think that is ultimately one of the real challenges that we need to make sure we tackle.”
Carey’s sleeves-rolled-up style began during his days at Columbia Pictures, where he landed after graduating from Harvard Business School. It was a time when the movie studios were forging deals with the cable industry, which wanted Hollywood’s movies to lure consumers into paying for something they had long been used to getting free from a roof antenna.
At Columbia, Carey thrived under Jonathan Dolgen, a studio executive known for a boot camp management style.
“It was tough training,” said WME Entertainment agent Rick Rosen, who worked with Carey at the time. “Jon had Chase dealing with really complex transactions,” said Rosen, including groundbreaking agreements with HBO and the formation of the TriStar movie studio. “He was in the inner sanctum.”
Carey’s idea of the perfect night is a six-pack and a Yankee game, associates said. Unlike Chernin, who enjoyed the glitz of the entertainment industry, Carey, a native New Yorker, ducks the limelight and seldom pops up on the fundraiser and award show circuit.
“His favorite beverage is Budweiser,” said David Hill, the chairman of Fox Sports. “I’ve said, ‘It’s embarrassing. Have a red wine, we’re in a good restaurant, people will think we’re civilized.’”
His just-one-of-the-guys persona, according to colleagues, also helps Carey navigate the outsized egos of those who ascend to high-profile posts at News Corp., whether they are executives who attract controversy, on-screen talent with nearly messianic followers, or Murdoch family members with a sense of entitlement.
While Carey has been aggressive in engineering change at Fox Television, he has been more measured in embracing technology. He is willing to cut losses on some of News Corp.'s gambles, including social network Myspace, once a hot property but now a struggling laggard behind Facebook.
Carey said last month that News Corp. was evaluating “strategic alternatives” for Myspace, which has been shedding users and advertising. Most analysts accept that statement as code for finding a buyer.
Detractors have cited such actions as evidence that Carey’s operational strengths mask a deficit of the “visionary thing” required in Internet-era media executives. But people who work with the executive contend he is seeking to balance consumer demands for “anytime, anywhere” access to TV shows and movies via the Internet against undermining News Corp.'s traditional businesses.
“Chase is relentlessly, consistently focused on how that landscape looks, and who gets the content, when and on what terms,” said Jonathan Miller, News Corp.'s chief digital officer.
Hulu provides a case study into Carey’s thinking, said people close to the executive, and perhaps the most vivid illustration in how he departs from Chernin, who was one of Hulu’s biggest champions. It also parallels Carey’s push to get multiple streams of revenue for News Corp.'s content.
The popular video site was launched in 2008 to combat Internet piracy by providing a legitimate way for people to watch TV shows online. Hulu succeeded, in part, because it has been given free use of network programming, including Fox’s.
But the something-for-nothing strategy hasn’t sat well with Carey, who pressed for a launch in November of a subscription tier of service that would glean more revenue from Fox’s shows that appeared on the site. He is now preparing to leave Hulu’s board, a move that observers said portends other big changes at the video site.
Carey went right to the heart of Hollywood to explain his beef with the Hulus of the world.
While Hulu has made it possible to watch TV shows and movies without being tethered to the TV, it has simultaneously led users to cut their ties to cable TV, which has been the financial underpinning for Hollywood’s TV and movie factories. The tradeoff is not worth it, Carey told a roomful of entertainment industry professionals at a Beverly Hills luncheon last fall.
“You can’t let piracy overwhelm you to a place where your goal is to beat piracy even if you have a lousy business model,” Carey warned. “Then you’re just fighting for the best of a bad solution.”
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