Outlook: This time it's serious as media barons lock horns

Amersham buy; Branson's pickle

If there is one thing the media excels in as an industry, it is backbiting. Slagging off the competition sometimes seems as much a part of the business as selling ads or stories. Media barons tend not just to be competitors, but bitter enemies, and because they control their own TV channels and newspapers, they are able to propagate their vendettas as no others can.

However, the latest outbreak of hostilities between Vivendi Universal, Jean-Marie Messier's Franco-American media group, and Rupert Murdoch's News Corp, seems to belong to a different category of fisticuffs altogether. Hollywood itself would have strained to produce such a script, containing as it does allegations of industrial espionage, dirty tricks, cybernetic sabotage, and high level conspiracy.

What makes it such a corker of a row is that the battle ground is at the frontiers of digital and encryption technology. Whoever dominates the technology may ultimately dominate the new medium of pay TV as well, so the stakes are high and all possible weaponry, legal and regulatory as well as commercial, is being deployed in pursuit of the prize.

Vivendi's allegations against News Corp are so grave and potentially costly that its lawsuit cannot be lightly dismissed as just another piece of frivolous commercial litigation between rival media barons. It's war, and given the sclerotic tendencies of the American legal system, it promises to be a long and hard one.

Vivendi claims to have evidence that the News Corp subsidiary, NDS, deliberately sabotaged its smart card, pay-television technology by cracking the encryption codes and then publishing them on the internet, thereby ensuring a plague of counterfeit cards. The effect has been seriously to undermine subscription revenues for Canal+, Vivendi's European pay-television company.

Some collateral damage has also been inflicted on ITV Digital, which uses the Canal+ technology and has also been damaged by counterfeits. Perhaps as important, the counterfeits have enabled BSkyB and others that use the rival News Corp technology to claim that theirs is a better and more secure system. In its lawsuit yesterday Vivendi produced little if any supporting evidence for its allegations, the first elements of which are, in any case, unremarkable. It is, for instance, both understandable and very probably legal for NDS to have taken apart the Canal+ smart card in an effort to find out what technologies were being deployed and how they worked. That's what competitors do.

But then to publish the results of its research on the internet, enabling counterfeiters to run riot, would have quite clearly been an abuse. If Vivendi can prove this, and demonstrate the claimed corporate responsibility for it, then it is going to make Mr Murdoch's other myriad of run-ins with regulators and rivals in the UK and elsewhere look like a vicar's tea party by comparison.

NDS last night responded with its own barrage of counter allegations and reiterated its claim that Canal+ uses an inferior technology that is easily hacked. What's more, NDS insists, Canal+ attempted to use the allegations late last year as a negotiating ploy to gain leverage in ultimately fruitless talks aimed at merging the two companies.

Mssrs Messier and Murdoch have been sparring partners ever since a number of years ago Mr Messier had the nerve to try to take more control at BSkyB, which Mr Murdoch regards as his own. The present spat may be no more than a continuation of ancient hostilities. But from here on in, the fight promises to get very bloody indeed.

Amersham buy

The first is always the best, runs the old saying, and nowhere is it truer than in privatisation. Amersham was the first of the Thatcher government's privatisations, and in terms of share price performance, it is streets ahead of all followers. Up and up the shares have gone for more than 20 years in a pretty much uninterrupted line. If Sir William Castell, the chief executive, is to believed, there's plenty more where that came from.

Amersham's core business is still that of radio imaging, but in recent years the exciting, high-growth part of the group has been in gene sequencing machines and other equipment used to identify genetic codes. Yesterday Sir William agreed to pay $1bn for the 45 per cent of this business, Amersham Biosciences, owned by Pharmacia. Whether this is an entirely good deal for Amersham is a moot point. It is certainly a lot lower than the valuation touted for the business when Amersham was trying to float it at the height of the bio-tech boom, so on one level it looks a bargain. Another way of viewing it, however, is that it also makes the value of the whole look lower than everyone thought.

Sir William reckons that once he owns all of Biosciences, then for the first time technical and managerial competences can be shared across the whole group. There's an indisputable logic to the idea of a group that takes in everything from imaging to gene identification, but whether the markets and skills are the same remains open to question. Still, on the evidence thus far, it doesn't pay to bet against Sir William.

Branson's pickle

Virgin has survived more tight scrapes than Sir Richard Branson has dressed up in silly costumes. Six months on from 11 September, it looks like the Branson empire will also emerge largely unscathed from even from this Armageddon of the skies.

His long-haul airline, Virgin Atlantic, has experienced a severe buffeting and is almost certainly haemorrhaging cash. But, as yesterday's sale of a half stake in the Aussie budget airline Virgin Blue demonstrates, Sir Richard has a remarkable capacity to triumph out of adversity. The deal values the airline at a minimum of £220m – not bad for a business launched just 18 months ago with a mere £4m of working capital and four second-hand jets.

The sale is yet another example of the formula Branson has become adept at – mortgaging his past to finance the future. He did it with the sale of Virgin Records to EMI in the early 1990s and he did it again a decade later by persuading Singapore Airlines to buy half of Virgin Atlantic. Such is the byzantine and impenetrable nature of the Branson empire, with cross-shareholdings and offshore trusts galore, that it is impossible to gauge the underlying financial health of the group.

But the one undisputed fact is that he is very good at creating value. Virgin has emerged smelling of roses even from its poorest decision – the purchase of the Our Price chain from WH Smith. The bulk of the shops have been converted into mobile phone outlets while the rump has been swapped for a toehold in the Australian retail music market, where Virgin is now rolling out its Megastore format.

Sir Richard has proved adept through his joint ventures at using other people's money to leverage the Virgin name across whatever his latest business idea happens to be. For the time being, however, he's retrenching rather than expanding. The bulk of the Virgin Blue proceeds will be used to swell Virgin's war chest. Despite the bullish noises from the Fed and the Bank of England, the Sage of Holland Park still reckons things will get worse before they get better.

j.warner@independent.co.uk