Media mogul Rupert Murdoch wants to buy Time Warner partly to make inroads in China. Photo: Reuters

Rupert Murdoch’s plan to buy Time Warner would help the 21st Century Fox chairman make larger inroads in China, a fast-growing market that media moguls are finding hard to crack.

Time Warner’s board rejected Murdoch’s $80 billion (R851bn) offer, but he is expected to continue the chase.

A deal would create a giant with more than $37bn a year in revenues in the US and Canada. It would also nearly double the revenues Fox generates from the emerging media markets in Latin America and Asia-Pacific.

“He sees 3 billion new consumers coming into the market and a rising middle class in China and India, and mobile devices and strong demand for content,” said Mario Gabelli, the chief executive of Gamco Investors, which owns shares of Fox and Time Warner.

Last year Fox generated 42 percent of its revenue outside the US and Canada. The company’s Asian revenues, including those in Japan and China, grew by 40 percent, to $2.1bn, over two years.

Time Warner’s collection of cable channels would complement Fox’s programming in key territories.

In Latin America, where Fox faces off against large local players, Time Warner’s Turner unit operates Chilevision, a large broadcaster in Chile, and also shows its TNT entertainment channel, Cartoon Network and locally tailored regional channels such as the children’s channel Tooncast.

Turner offers three well-regarded channels in India – Pogo, Cartoonito and Toonami – that could help Murdoch’s Indian programming behemoth Star India, which broadcasts 44 channels in seven languages.

HBO would probably be Fox’s big draw in foreign markets. The pay channel, with a history of hit programmes such as The Sopranos, has around 84 million subscribers outside the US, beaming its shows into more than 70 countries, and sells programming from HBO and Cinemax into 150 countries.

In China, with Time Warner in the fold, Murdoch could focus more on profiting from what movies and television shows the government allows.

In January Fox sold its 47 percent stake in Star China TV, which owns three 24-hour Mandarin channels and, in October last year, Fox sold its remaining stake in Chinese firm Phoenix Satellite Television. These moves come in the face of restrictions on foreign ownership of China media assets.

“Murdoch is not unique. The Chinese government says, ‘We cannot let these people control our media’,” said William Yu, an economist at UCLA’s Anderson School of Management.

A Fox spokesman had no comment. In recent earnings calls and conferences, Fox president Chase Carey has stressed the company’s strategy of selling off assets it could not own. “Long term, you ultimately want to own and operate or monetise,” he said in December.

Doug Young, a professor at Fudan University Journalism School, cautioned against overestimating China’s potential. “Taking two studios and combining, you’ll get a company with twice as many growth prospects in China, but… it’s just a market for licensing and selling.”

Consulting and audit firm EY estimates revenue from China’s media and entertainment industry will reach $138bn by 2015, from $59bn in 2010. The country has already embraced streaming video and EY sees advertising revenue jumping.

China’s mobile web users, the most numerous in the world, are expected to hit 750 million by 2017, according to data from China-based consultancy iResearch.

China limits the total number of movies foreign companies can import to 34 a year. China’s box office grew 27 percent to $3.6bn last year, second only to the $10.9bn US market.

“China is a great market and we’ve all wanted to be there for years,” said former Viacom president Frank Biondi, one of the first US media executives to visit the country. “For all the upside, there’s a downside that the government controls everything – what gets into movie theatres, what’s on television.” – Reuters