Will Fox’s Yuge Downsizing Lead to an Even Bigger Deal?

Company could just be getting its house in order — or preparing for an acquisition

There is downsizing and then there’s downsizing. Which one 21st Century Fox is engaged in — the kind made for its own sake or the kind made before a big move — remains to be seen.

The one certainty is that, following a period of executive transition, Fox is ready to prune its overhead. The company on Monday initiated a voluntary buyout program aimed at U.S. TV and film employees. Though a Fox staffer told TheWrap that there is “not a headcount number” for employees to shed, the company wants to cut $250 million in payroll.

That number, $250 million, isn’t huge for a company the size of Fox, which reported annual revenue of $29.99 billion for 2015. But it represents a lot of jobs. So Fox either has a lot of fat to trim or it’s gearing up for a major move.

“Fox seems to be folding things into each other, and certainly, that’s why it would seem logical that there would be streamlining,” Bill Carroll, vice president and director of programming for Katz Media Group, told TheWrap. “There ends up with a lot of duplication.”

Most of Fox’s staff resources are dedicated to the television side, run by Fox Networks Group CEO Peter Rice, so that’s where most of the buyouts will likely come.

And it’s the television group’s centerpiece, Fox Broadcasting, that has experienced the most recent and most significant change. In 2014, after watching the network slip from its perpetual perch atop the ratings, Rice showed broadcast boss Kevin Reilly the door and put the network under the purview of longtime 20th Century Fox studio chiefs Gary Newman and Dana Walden.

The move was meant to create synergies at a time when ownership of content — the studio side of the TV business — has been growing in importance and broadcast networks have seen their power as a platform eroded by cable and streaming challengers.

But synergies create redundancies.

“The pieces of the puzzle come together, and there are more soldiers than they need,” Carroll said.

That said, $250 million is a lot of streamlining — more than common sense says could be accounted for by consolidating some sales or back-office functions.

Fox has not been shy about its growth ambitions. In 2014, then-CEO Rupert Murdoch aggressively pursued a takeover of Time Warner worth $80 billion, which the latter rejected. Murdoch last year installed his sons James and Lachlan as CEO and co-chairman, respectively, but retains control of its board. The family isn’t likely to put a for-sale sign out in front of Fox after the elder Murdoch went to the trouble of setting his sons up as the company’s next leaders.

But that doesn’t mean that an acquisition isn’t in the future. When Time Warner rejected Murdoch’s $85-a-share offer in 2014, Time Warner stock traded at $71. Monday it closed at $72. A second run by Murdoch at Time Warner has been the subject of speculation ever since his first effort was rebuffed. And The New York Post reported last month that Time Warner CEO Jeff Bewkes is against a push by activist investors to spin off or sell HBO but is now open to a sale of the whole company.

When Time Warner went through its own staffing cutbacks, laying off 10 percent of cable-TV division Turner’s workforce in 2014, some saw the move as one meant to attract suitors. Since then, nothing has changed regarding Turner or Time Warner’s ownership. But it could.

“Which comes first, the chicken or the egg?” Carroll said. “You’re always looking to make the operation as streamlined as possible, which then makes it more attractive if someone were looking to acquire — or if the reverse were true.”