Sky: Now Fox offers 'legal separation' of Sky News as Murdochs battle for deal

News channel’s future must be secured even with Disney waiting in the wings

James Moore
Chief Business Commentator
Tuesday 03 April 2018 10:18
Comments
The company’s future is up in the air amid a regulatory logjam
The company’s future is up in the air amid a regulatory logjam

Rupert Murdoch’s 21st Century Fox is back with some fresh proposals in an attempt to find a way through the regulatory logjam that has stymied its long held ambition to acquire the part of broadcaster Sky that it doesn’t own.

The plans, touted as further strengthening the editorial independence of Sky News, the loss-making channel that represents a tiny part of the overall business but has left the deal stuck in the mud, were accepted by Sky this morning. The plan would be for its news channel to be set up as a legally separate entity within the group with a five to seven-strong board of directors, chaired by an “independent expert” with experience of journalism. Three Sky independent directors would also serve.

Clever, because the setup looks quite similar to the deal Ofcom agreed that allowed BT to keep hold of its broadband infrastructure arm Openreach in the face of demands by rivals for it to be spun off (including, it should be noted, Sky).

An earlier offer was rejected by the Competition and Markets Authority (CMA) which said it was minded to block the deal because of the Murdoch family’s effective control over nearly a third of Britain’s “national voice” (TV, radio, newspapers, websites). But what’s good for the goose...

A further twist is that Sky News could be sold to Disney immediately after the “separation” is completed, regardless of whether Disney gets the approvals it is attempting to secure so it can buy the lion’s share of Fox (including Sky).

There are those who would argue that the latter deal makes all this an irrelevance. Disney, after all, doesn’t pose the same sort of “voice” issues that the Murdochs do, something that the CMA has acknowledged.

But the Disney deal has regulatory issues of its own, particularly across the Atlantic, so it might not happen. It gets still more complicated when you consider the stated interest of US cable TV giant Comcast in bidding for Sky.

All of this explains why the status of Sky News, an important competitor to the BBC in the provision of 24-hour news, needs to be settled.

Investors in the UK appear minded to let go of a first rate company. It would be a tragedy were a first rate news outlet to be a casualty of that.

But does the “legal separation” of Sky News protect it? That is an open question given who controls the appointment of directors.

When it comes to the latter, Mr Murdoch has always got what Mr Murdoch has wanted. For example, when it was decided that James Murdoch, the current CEO of Fox, should become Sky’s chairman he was duly installed as the head of the board.

As for flipping Sky over to Disney, a rather important question is what happens if Disney doesn’t complete its deal to buy Fox?

It all puts the CMA on the spot, and that isn’t a place UK watchdogs tend to find comfortable when it comes to takeovers and mergers, particularly when they involve questions of the national interest.

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