Murdoch boxed into a corner over stake in Fox

FROM DAVID USBORNE

in New York

For Rupert Murdoch the good news is that he will get to keep his US television network, Fox, which generates about a third of his worldwide broadcasting earnings. Less good is the prospect of radically restructuring his ownership of it at a potential cost of several hundred million dollars.

That is the intent of a recommendation now before the Federal Communications Commission in Washington. The proposal, prepared by the FCC's own mass media division, suggests that Mr Murdoch be obliged to reduce his equity stake in his eight Fox stations from 99 per cent to less than 25 per cent to comply with a 60-year-old foreign ownership law.

If it is approved - the FCC's five commissioners are known to be divided on the proposal - it would not amount to anything terminal for Mr Murdoch and Fox, but it would be highly inconvenient and costly. It would also stir powerful controversy among Republicans in Congress, who are already moving to repeal the regulation.

At issue are the circumstances under which Mr Murdoch acquired his original six Fox stations, with FCC approval, a decade ago. Born in Australia, Mr Murdoch took on US citizenship at the time to satisfy the foreign ownership restriction. Critics argue that he misled the FCC, however, because the bulk of the money for the purchases was put up by News Corporation, his worldwide media empire that is based in Australia.

Specifically, a petition to strip Mr Murdoch of his Fox licences was submitted to the FCC two years ago by the black civil rights organisation, the NAACP, which feels that minority companies are being unfairly squeezed out of the industry. The NAACP was joined by NBC, one of the three established networks. A few months ago, however, NBC withdrew, apparently in return for a birth for its programming on Mr Murdoch's Star TV in Asia.

The FCC proposals fall short of what the NAACP would like. But Mr Murdoch is still spitting fire. On Sunday he lashed out publicly at the FCC chairman, Reed Hundt, a Clinton appointee. Mr Hundt, he said, has "led an attack on our company acting as both prosecutor and judge and using clearly prejudicial procedures".

If the proposal is passed, Mr Murdoch would have several options. First, he could fight it in the courts. In the meantime, he would doubtless try to speed proceedings in Congress for the repeal of the relevant laws.

Things will become difficult for him, however, if he is forced to comply. Media analysts forsee two viable routes. He could simply sell his stakes in the eight stations he now owns. In addition to the eight, there are 158 Fox affiliates around the country that make up the rest of the network. It is the eight, together worth an estimated $2.5bn, that make most of the profits and finance most of the Fox programmes. Losing control over them would not be appealing.

The other avenue involves transferring the stakes in the form of a loan to one of Mr Murdoch's US-based companies. News Corporation itself would forgo the profits, but receive interest payments on the loan. That strategy, however, would open Mr Murdoch to enormous capital gains tax costs, put by some analysts at up to $500m.

Some investors in News Corporation are speaking out in support of Mr Murdoch. Gordon Crawford, who manages money for American investors with 9 per cent of News Corp, said: "To go back and penalise him retroactively seems grossly unfair. He is a US citizen living in Los Angeles."

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
Ben Little, right, is a Labour supporter while Jonathan Rogers supports the Green Party
general election 2015
News
The 91st Hakone Ekiden Qualifier at Showa Kinen Park, Tokyo, 2014
news
Life and Style
Former helicopter pilot Major Tim Peake will become the first UK astronaut in space for over 20 years
food + drinkNothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
News
Kim Wilde began gardening in the 1990s when she moved to the countryside
peopleThe singer is leading an appeal for the charity Thrive, which uses the therapy of horticulture
Sport
Alexis Sanchez celebrates scoring a second for Arsenal against Reading
football
Life and Style
health
Voices
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
News
i100
News
Japan's population is projected to fall dramatically in the next 50 years (Wikimedia)
news
Life and Style
Buyers of secondhand cars are searching out shades last seen in cop show ‘The Sweeney’
motoringFlares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own