Media: Will Murdoch out-Fox the regulators?

Ownership of the media magnate's US television network is under further scrutiny. Rupert Cornwell reports

Rupert Murdoch has some vital unfinished business with the US federal authorities that regulate the media. The question is whether Fox Television, youngest and brashest of America's broadcast networks, which he also happens to run, is foreign-owned, in breach of US law.

It has also arisen just when Newt Gingrich, fiery new speaker of the House of Representatives, has been offered a $4.5m book contract by Murdoch's HarperCollins. Is this a simple advance, or - as Democratic foes of himself and Rupert Murdoch insinuate - a crude attempt to buy influence? One thing is certain. The fuss over the Gingrich book contract is a new salient in the battle consuming American television: the efforts of the Big Three, ABC, CBS and NBC, to cut their rival down to size.

Fox is the recent success story of American TV. Its recipe may not be pretty but, in a decade, Murdoch's network has come from nowhere to achieve roughly two-thirds the audience share of each of the Big Three. He has also achieved the improbable feat of lowering the standards of television here even further. Fox offers no network news.

The nearest it gets to serious non-fiction is A Current Affair, launched in 1986 as TV's first tabloid show. A Current Affair has spawned a host of competitors, and is credited with having started a trend that now infects much of mainstream TV journalism in the US.

True, Fox has recently made a deal with Reuters to gain better access to international news. But Fox news programmes are numbingly parochial, pre-occupied with local scandal and crime. Full Disclosure, a blue-chip investigative magazine to have been hosted by Andrew Neil and which would have run directly against the CBS flagship 60 Minutes, was unceremoniously scrubbed before it had even started. This episode became the latest in what Murdoch has called "several false starts" on the news side.

The absence of a costly news division infuriates the old networks; proof, they say, how the Federal Communications Commission has let Murdoch enter the club without paying the traditional "public service" dues. More vexing still have been his two recent coups - paying $1.6 bn to wrest television rights for the National Football Conference, the stronger of the two American football leagues, from CBS, and spending $500m for New World Communications, owner of 12 stations previously affiliated to CBS, NBC and ABC.

Fortune magazine recently ranked the football agreement as its deal of the year for 1994. Deftly, Murdoch has played the rules of the American game, exploiting to the hilt the "emerging network" status accorded by the FCC, which permits Fox to avoid Commission restrictions on programme production and syndication applying to the Big Three.

Not fair, they protest, to which Fox and Murdoch retort, sour grapes. Most threatening, however, are charges from NBC and the civil rights group NAACP (National Association for the Advancement of Colored People) that Murdoch broke rules on foreign ownership when he bought his first Fox stations in 1985.

Under US law, foreign interests may not control more than 25 per cent of a domestic broadcasting outlet. Technically, Fox complies with the rules. News Corp, an Australian firm, controls only 24 per cent of Twentieth Holding, the company which owns the stations. The rest is held by a company controlled by Murdoch himself, who became an American citizen for that very purpose.

But, alleges NBC, 99 per cent of the equity in Twentieth Holding came from News Corp, on the other side of the Pacific. The fight will be rude; Murdoch has filed a counter-complaint, alleging NBC's parent General Electric has engaged in a "pattern of illegal activity" and should lose its own broadcasting licences. "If they want a brawl," he is quoted as saying, "they can have one."

On January 27, Murdoch testified under oath to the FCC. Even if the Commission does rule against him, it is unlikely to revoke any of Fox's licences. More probably, it will order a restructuring whereby Mr Murdoch will be bound to put more of his own money into Twentieth Holding.

A few years ago, the networks were being written off as media dinosaurs facing extinction in the new age of cable, satellite and interactive TV. No longer.

A booming economy has lifted advertising rates; a 30-second slot during the recent NFL Superbowl reached the $1m mark. From November, broadcast networks will be able to make their own shows and reap huge rewards selling re-run and syndication rights.

At that point, they become genuine entertainment conglomerates, which is why the film studios Warner and Paramount are launching fledgling networks of their own, with Fox the avowed model. Each has already signed up its first affiliates. Their start-up output will be two hours of prime-time a night (Fox currently offers three).

No matter that start-up losses for Paramount and Warner could be $100 million a year - the potential prize is far larger. Last year, the Big Three made combined profits of $600m; they are hot property on Wall Street.

Ted Turner's TBS, which owns Cable News Network (CNN), Time Warner, and Walt Disney have all made overtures to NBC, while Barry Quiller, once Murdoch's comrade in arms at Fox and now the owner of shopping channel QVC, came within an ace last summer of buying CBS.

Any talk of takeovers has temporarily cooled, but the betting remains that either NBC or CBS will change hands before the end of the year.

Limits on foreign ownership may possibly be lifted - they are relics from 1934, when TV and radio were infants, protectionism was rife and a world war was just five years off.

Today in America, free trade is the gospel. Murdoch is perfectly entitled to lobby for a change from which he would benefit. Long before the book deal was struck, leading Republicans in Congress were pressing for a change in ownership rules.

Nor would Murdoch be the only beneficiary of their going. NBC, CBS and the others would be more able to attract foreign capital. What could sound more reasonable? But in these momentous times for US broadcasting, sweet reason is not much in evidence.

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