The Gray Market: Why Going Into Business With James Murdoch Should Be a No-Brainer for Art Basel and the MCH Group (and Other Insights)
Our columnist tunnels past the toxic legacy of James Murdoch’s lineage and finds a nearly ideal blue-chip art-fair investor.
Every Monday morning, Artnet News brings you The Gray Market. The column decodes important stories from the previous week—and offers unparalleled insight into the inner workings of the art industry in the process.
This week, looking at the product, not the packaging…
On Friday, Art Basel’s parent company, the MCH Group, issued a statement announcing a “comprehensive set of measures” intended to stabilize the struggling company in the short term and position it for success in the long term. My colleague Eileen Kinsella hit the high points of the proposed deal. But towering over such boring-but-important minutiae as debt restructuring with the MCH Group’s Swiss cantonal shareholders is the big swing: a cash infusion of CHF 74.5 million (about $80 million) that would make James Murdoch, the younger son of News Corp founder and right-wing supervillain Rupert Murdoch, the company’s new “anchor shareholder.”
The proposed deal would be executed through Lupa Systems, the private-investment vehicle James Murdoch launched in April 2019. Lupa Systems has agreed to underwrite the issuance of enough new shares of the MCH Group, at a discounted price of about $11.28 each, to reach that sweet $80 million promised land. Depending on how many private shareholders exercise their right to acquire a tranche of the fresh shares, Lupa Systems would ultimately own a stake comprising between 30 percent and 44 percent of the MCH Group.
The investment would also entail a restructuring of the MCH Group’s board of directors. The number of seats at the table would slim down to nine, with three being filled by Murdoch and a pair of Lupa Systems associates: partner Eleni Lionaki and managing partner and general counsel Jeff Palker.
The new trio would be there for a while. The MCH Group defined Lupa Systems’s offer as a 15-year relationship agreement with a five-year lockup, meaning that Murdoch’s team would consent to hold its entire stake in the company for at least half a decade.
But will the deal actually close? The paradigm-shifting agreement still needs approval from the company’s existing shareholders. The vote is slated to take place at my favorite MCH Group staple: an Extraordinary General Meeting (will past shareholders rise from the dead? Could CEO Bernd Stadlwieser be transformed into a giraffe?) scheduled for August 3.
For anyone with an interest in shunning climate-change denial and reactionary demagogues, James Murdoch’s family name looms large and ominously over the pact—so much so that it’s not impossible to think it could scuttle the deal. I certainly heard and saw plenty of snap-take outrage from the art world when rumors of the partnership first emerged weeks ago (back when it was believed that James could be negotiating on behalf of his father).
The question is whether outrage is really warranted given what we actually know now. After spending the weekend in the official Gray Market research bunker, my answer is not what I expected it would be. Even after marshaling all my powers of skepticism, it turns out that, instead of some soul-chomping right-wing hellion, James Murdoch looks a lot more like the type of dream investor Art Basel might have wished for when it blew out the candles on its 50th anniversary cake this year.
JAMES AND THE GIANT BREACH
Let’s start with the man himself. James is the fourth of Rupert Murdoch’s six children. In a New Yorker piece last September, Jane Mayer wrote that he is “often referred to as ‘the smart one’ in the clan.” He was born on December 13, 1972 in Wimbledon, which, until 9:39 p.m. on Saturday night, was not a place it had ever occurred to me that people could be born, since my American brain envisioned it as nothing but an impossibly posh tennis complex.
After attending private school in New York, James went on to study film and history at Harvard, while also contributing cartoons to the Harvard Lampoon. However, he dropped out in 1994 to finance the formation of New York independent hip hop label Rawkus Records. Rawkus became a major nexus of what was known as “backpack” rap, a lyrically driven, socially conscious alternative to the high-gloss hybrid of hip hop and R&B that began dominating the charts in the mid ‘90s.
News Corp purchased Rawkus Records in 1996, bringing James into the family business. He was appointed to posts in the conglomerate’s digital and new-media arms, which were largely considered backwaters at the time. Yet James made a number of savvy investments in the next few years that altered his trajectory within the company.
In 2000, he notched his first major achievement with a pre-existing Murdoch property: stabilizing News Corp’s Star Television, an Asian satellite TV provider that was allegedly coughing up £100 million annually before James took its reins at age 27. His primary insight was the value of pivoting to India, and Star’s subsequent investments in the country became the turning point in its fortunes.
James continued rising through the ranks of the Murdoch family empire over the ensuing decade, filling leadership roles at UK satellite TV service British Sky Broadcasting (colloquially known as BSkyB), News Corp branch News International, and News Corp itself. But his ascension was knocked off course in 2011, when he became entangled in an expanding scandal accusing some of News Corp’s UK media outlets—most prominently, the tabloid News of the World—of hacking the voicemail of royals, celebrities, and other gossip-worthy citizens.
In February 2012, after the emergence of a damning email and testimony from a former News of the World attorney that both evinced James had been briefed on the magnitude of the hacking operation as far back as June 2008, James vacated his position as executive chairman of News Corp’s UK publishing division. Two months later, he resigned as chairman of BSkyB. He retained his title of deputy COO at News Corp, but the company announced that he would be reassigned to focus on premium TV and international business.
DOING THE SPLITS
Although the phone-hacking saga damaged James’s standing inside and outside the Murdoch empire, he bounced back. In 2013, News Corp spun off its TV and film assets into a new entity called 21st Century Fox, leaving News Corp itself as a silo for the family’s print-media properties. James was awarded a seat in both boardrooms. He was also named 21st Century Fox’s co-CEO in 2014 before assuming sole ownership of the role the following year. He proved effective enough there to reclaim the chairmanship of BSkyB in 2017, though not without resistance from a vocal faction of the company’s shareholders.
His comeback inside the Murdoch domain would be relatively short-lived. In 2018, Comcast acquired a majority stake in BSkyB, leading to James’s departure as chairman less than two years after his triumphant return. In 2019, his father sold most of 21st Century Fox’s entertainment assets to Disney for a knee-buckling $71.3 billion. More importantly, he also tapped James’s older brother, Lachlan, to lead Fox Corporation, the conglomerate consisting of the family’s few post-Disney media properties.
If you haven’t already put together why fans of HBO’s Succession, the show widely understood to be inspired by the Murdoch dynasty, relate James Murdoch to Kendall Roy, the wily, hip hop-loving son hell-bent on vanquishing his father and siblings for control of the family’s fictional media empire, now you know. I will also mention that the headline of the New Yorker piece I mentioned earlier is “No, James Murdoch Doesn’t Watch Succession.”
But did Lachlan win the succession war, or did James forfeit? A profile of James in the Hollywood Reporter last year cited anonymous “insiders” who alleged he “was never interested in joining his father and brother… at Fox Corporation.” Notably, the anchor holding in Fox Corp’s portfolio is the divisive right-wing conspiracy cauldron Fox News.
Instead, THR reported that James began angling with CEO Bob Iger for a post at Disney shortly after news of the 21st Century Fox negotiations leaked in 2017. But the talks soon halted, allegedly for a reason that now becomes urgent to the MCH Group:
Some observers say Iger balked at the notion of any involvement at Disney from anyone named “Murdoch,” given the moniker is so closely associated with Fox News, a brand that is more polarizing in Hollywood than perhaps anywhere else in the world.
Now, it would be easy to read those aforementioned insider accounts of James’s disdain for a role at Fox Corp as revisionist history from James’s inner circle. Yet his public statements and financial moves over the past few years, including while he was still leading 21st Century Fox, suggest the counter-narrative stems from something more solid than wounded pride.
In 2017, he denounced President Trump for his infamous statement that there were “some very fine people on both sides” of an alt-right rally in Charlottesville, Virginia that turned deadly. James and his wife, Kathryn Murdoch, also made a $1 million donation to the Anti-Defamation League in response to the episode.
The couple’s rebukes of the political right have intensified since then. This January, James and Kathryn issued a statement blasting News Corp’s Australian media outlets for denying the influence of climate change on the country’s horrific wildfires.
The Washington Post spoke to departed News Corp and Fox officials who confirmed that James had “chafed for years against the direction of his father’s empire,” with its dismissal of climate change as only a single problem within a larger set of fundamental disagreements. Another one: James “was long at odds” with Fox News founder Roger Ailes and “pushed to have Ailes fired after he was accused of sexually harassing and assaulting women who worked for him.”
James and Kathryn Murdoch’s center-left crusade continues on the nonprofit side, too. The couple founded the Quadrivium Foundation to funnel philanthropic money into causes that include reversing climate change, amplifying evidence-based solutions in science and health, expanding voting rights, combating online extremism and foreign interference in politics, and more. Frankly, if you have a problem with James Murdoch’s actual political stances, you’re probably wearing a Make America Great Again hat.
Most relevant of all to James’s pending partnership with MCH Group, though, is that the ideological chasm between him and the Fox News mindset bears out in his investment portfolio.
James and his siblings each received a payout of roughly $2.2 billion from 21st Century Fox’s sale to Disney. A month after the deal closed, James launched Lupa Systems—an invocation of the Roman mythological wolf-goddess that nurtured twin brothers Romulus and Remus after they were cast out of their kingdom (and, according to the Washington Post, “exactly the kind of historical reference that used to draw eye rolls from Rupert Murdoch’s executives, when they were forced to work alongside their boss’s sons”). At the time, sources close to James told the Wall Street Journal he intended to use the holding company to invest as much as $1 billion of his fortune.
Lupa Systems’s portfolio currently splits cleanly into three types of assets: media properties, advanced technology startups, and sustainability ventures. Among its first moves was a $5 million investment in Artists Writers & Artisans, a comic-book imprint headed by a Marvel veteran intent on creating its own widely franchisable universe. Lupa Systems partnered with Attention Capital to take a controlling stake in the Tribeca Film Festival in summer 2019, and it acquired a minority stake in Vice Media that October.
Its tech assets are even more diverse. According to CB Insights, the premium branch of business-intelligence platform Crunchbase, Lupa Systems has invested more than $86 million in startups specializing in everything from mixed reality technology, to data analytics powered by machine learning, to online education. Two of its known tech holdings are based in India: DailyHunt, a mobile-reading app and news-aggregation service designed to support content in English and Indian languages; and Harappa Education, an online learning platform geared toward career skills.
But the biggest chunk of Murdoch’s investing activity overall has gone into developing products geared toward planetary health. Its single largest position so far, per CB Insights, is a $102 million stake in Greenlight Biosciences, which describes its current focus as “creating RNA-based products [that] can be used to more naturally and safely solve healthcare and agricultural issues.” Lupa Systems also owns a chunk of Cove, a startup working to engineer a completely biodegradable water bottle.
Combine all of the above with James’s current board seats at electric-car giant Tesla and the Dia Foundation, as well as his previous directorship at Sotheby’s (from 2010 to 2012), and it becomes increasingly difficult for me to imagine a legitimate basis for MCH Group shareholders to reject Murdoch’s offer.
At a time when the entire world, not just the art and live-events world, is under pressure to adapt in transformative ways, he rides onto the scene with a massive amount of capital, an international focus, decades of experience in technology, an arsenal of potentially synergistic ventures, high-grade art-world credentials, and a track record of sensible political positions backed up by action.
His drawbacks boil down to a family whose most-hated positions he has been publicly condemning for years… and a phone-hacking scandal, mostly concerning British celebs, that spit him out almost a decade ago.
I’m not suggesting James Murdoch is a secular saint, or that he has all the answers to the MCH Group’s very real trials and tribulations. But if the company’s current investors turn away his offer, it would represent an expression of bile counter to both the facts on the ground and any real business sense. In a year of economic calamity, I’m betting they vote with their wallets. And honestly, they should feel comfortable doing it.
That’s all for this week. ‘Til next time, remember one of my dad’s favorite sayings: nobody’s perfect, and I’m the perfect example of that.
Follow artnet News on Facebook:
Want to stay ahead of the art world? Subscribe to our newsletter to get the breaking news, eye-opening interviews, and incisive critical takes that drive the conversation forward.