Media rivals cry foul as Murdoch wins battle for full control of BSkyB

Ian Burrell,Media Editor
Friday 04 March 2011 01:00 GMT

Rupert Murdoch's News Corporation empire was yesterday given Government approval to take full control of BSkyB, a decision that was derided as a "whitewash" by media rivals and "cavalier" by political opponents.

Culture Secretary Jeremy Hunt had previously said he was minded to refer the proposed £8bn deal to the competition authorities, but changed his mind after News Corp offered to spin off Sky News into an independent company to appease concerns over a lack of media plurality. Mr Hunt claimed the spin-off, which will see the news channel being given its own independent chairman and board to guarantee its editorial integrity, was a "welcome step forward".

He told MPs: "Throughout this process I have been very aware of the potential controversy surrounding this merger. Nothing is more precious to me than the free and independent press for which this country is famous the world over."

But this cut little ice with Mr Murdoch's commercial rivals, who claimed that the Sky News arrangement was "pure window dressing". An alliance of companies that includes the publishers of The Daily Telegraph, Daily Mail, Daily Mirror and The Guardian said: "It has been well-documented by former Murdoch editors that arrangements of this kind, including those put in place to protect the independence of The Sunday Times and The Times, have proved wholly ineffective."

Ivan Lewis, the Shadow Culture Secretary, linked the approval of the deal to the recent choice of the former Conservative Party chairman Lord Patten as the next chairman of the BBC, BSkyB's broadcasting rival. "This process has exposed an arrogant government, cavalier about its responsibility to be impartial and contemptuous of the importance of transparency in circumstances where there is a high level of public mistrust," he said.

Mr Hunt was put in charge of the decision after Vince Cable, the Business Secretary, had to withdraw from the process when he was recorded telling undercover reporters that he had "declared war on Rupert Murdoch".

Mr Hunt had previously said he did not see a problem with the takeover. Ofcom, the media regulator, had voiced concerns that the deal threatened media plurality in the UK, but supported News Corp's Sky News proposal after the company agreed to the idea of an independent chairman.

The failure to refer the deal raised "disturbing questions," said Steven Barnett, Professor of Communications at the University of Westminster. "This deal will create a hugely powerful newspaper, television, online and ISP media conglomerate which will dwarf every other media organisation in the UK, and would not be permissible in most other democracies," he said.

"It is unacceptable that such unaccountable power in the hands of one corporation – and ultimately one man – should be waved through by a Government minister without thorough and independent scrutiny by an independent body." Professor Barnett noted that Mr Murdoch had set up independent boards when buying The Times and The Wall Street Journal but they had "proved virtually worthless in protecting editorial independence".

The spin-off ensures that News Corp provides funding to Sky News for 10 years, as well as retaining a 39 per cent stake which matches its current share in BSkyB.

Lord Fowler, a former Conservative minister and former columnist for The Times, expressed concerns about News Corp's guarantees. "What needs to be established in these inquiries is that it [Sky News] is totally independent. And I'm not utterly convinced that in this case that has been demonstrated," he said. "I think the fact is that you've got a 40 per cent shareholder sitting there. Under the new system that's proposed as well as under the last. And so obviously he's going to have, kind of, a great deal of influence."

Saying that he would have preferred the decision to be referred to the Competition Commission, Lord Fowler added: "The process in this case has been absolutely shambolic. We've had one secretary of state who's had to be replaced, we've had civil servants transferred from one department to another and actually we've had the decision trailed in the media very extensively before it was announced on the stock exchange."

Andrew Neil, the founding chairman of Sky and a former editor of The Sunday Times, said the deal was "worth billions" to Mr Murdoch in return for underwriting Sky News for the next decade. "It means that he's getting billions in return for a rent of £20-30m. It's a no brainer for him," he told ITV News.

Mr Neil said that rival publishers feared they would no longer be able to compete with News Corp. "They're terrified that Mr Murdoch now gets a handle on a billion pounds of free cash a year by owning all of BSkyB. And he uses some of that money, it wouldn't have to be much, into a newspaper war, a price-cutting war, that drives the other papers out of business."

In their statement, the alliance of media rivals said they would be "vigorously contesting" the decision during the 15-day public consultation process. "The undertaking does nothing to address the profound concerns that the takeover would give News Corporation greater power to restrict or distort competition through cross-promotion, bundling, banning rivals' advertisements and distorting the advertising market with cross- platform deals," it said.

The former editor of The Sun and Murdoch loyalist Kelvin MacKenzie had very different worries, claiming that an independent Sky News would be weakened by being distanced from News Corp. "In 20 years there's not one single example of Rupert or News Corporation executives trying to influence the agenda there. Why did they need to do this? It's going to end up with some clapped-out independent CEO who wouldn't normally be able to run a sweet shop," he said.

What the media experts think

Sir Harold Evans, former editor of The Sunday Times

"In my experience paper guarantees [of independence] aren't worth the paper that they're written on. Any reduction of plurality in the press is not a good thing. I wouldn't like to see a single news source whether it's Sky News or The Independent."

David Elstein, former BSkyB head of programming

"This is a perverse outcome prompted by an Ofcom report on news plurality that will serve to embarrass the regulator for years to come. This solution might actually weaken Sky News and does a real disservice to plurality. Cast off from the mothership, who will finance the next generation of technological change? Will it keep its links with Sky Sports? Will it lose the dynamism that's characterised Sky News?"

Greg Dyke, former BBC director-general

"This means Sky News can be Sky News without that fear that it could be turned into Fox News. The agreement now raises the possibility of a merger between Sky News and ITN, There used to be one big news supplier called the BBC and one called ITN, and this opens the way to going back to that situation. I was never that concerned about the BSkyB takeover. It seemed to me that Murdoch controlled Sky for as long as I can remember. The BSkyB shareholders will now be demanding a much higher price for the takeover. Will News Corp still want to buy it?"

Kelvin MacKenzie, columnist and former editor of The Sun

"I cannot understand this decision. Why was Sky News powering ahead? Where do you think they got their investment for HD and to expand their reporter coverage? Why was it News Channel of the Year? It was because of News Corporation. I feel sorry for those people because previously they had certainty. It's going to end up with some clapped-out independent CEO who wouldn't normally be able to run a sweet shop. It will lose Rupert Murdoch's personal dynamism and News Corporation's executive dynamism."

Q&A: The deal – and its consequences

Q What has been agreed?

Culture Secretary Jeremy Hunt yesterday gave a green light to the takeover by Rupert Murdoch's News Corp of the 61 per cent of satellite broadcaster BSkyB that he does not already own. The proposed £8bn deal is controversial due to the degree of control Mr Murdoch would exert over the British media. He already has 37 per cent of the British national newspaper market through his ownership of The Sun, the News of the World, The Times and the The Sunday Times. Many rival media organisations are fiercely opposed to News Corp's takeover.

Q What are the concessions?

In a report to Mr Hunt, the media regulator Ofcom had raised concerns over the threat to the plurality of news provision in the UK, given that one company would control so many key outlets. It would have left News Corp as the only news provider on all four media platforms (press, TV, radio and online). The compromise that News Corp has come up with involves Sky News being "spun off" as a publicly-traded company, currently being referred to as "Newco".

Q How would this independent company be run?

The shareholders in BSkyB would take an equivalent stake in Sky News. They would then vote for a board of directors who would, in turn, elect a chairman. Sky News will also have a corporate governance and editorial committee. The majority of the board must be independent members, but there will also be representatives from News Corp. Mr Murdoch's company will retain its 39 per cent stake in the operation and be the sole funder of the network through a new 10-year carriage agreement, licensing the Sky News brand to the new company for seven years.

Q Why has this satisfied Jeremy Hunt?

The Culture Secretary said yesterday he was "very aware of the potential controversy surrounding this merger". But spinning off the prestigious Sky News brand is a "structural" remedy to plurality concerns, rather than a weaker "behavioural" pledge. A critical factor in winning over Mr Hunt and Ofcom was News Corp's reluctant acceptance that Sky News should have an independent chairman. The remedy shows how anxious Mr Murdoch is to get the deal done without the six-month delay of a Competition Commission inquiry, during which time the price for BSkyB would continue to rise.

Q Are there any precedents?

Mr Murdoch is a veteran of such negotiations. When he acquired The Times in 1981 and The Wall Street Journal in 2007, he established similar "independent" boards to guarantee their editorial independence. One media professor yesterday described those guarantees as having been "virtually worthless".

Q Is there anything opponents of the takeover can do?

Public protests were organised yesterday by Avaaz, an organisation which has gathered a 60,000-signature petition opposing the deal, and by the National Union of Journalists. An alliance of media organisations which has campaigned against the merger is unhappy with the remedy. There will now be a 15 day public consultation period before the deal is approved.

Q So it's a victory for Rupert Murdoch?

It appears the wily old media mogul, who is 80 next Friday, has won again. But the paperwork is not yet completed, including the price.

Murdoch's British media empire

10 million Sky subscribers; now in 36% of households in UK and Ireland

3,001,822 Daily circulation of The Sun. 3.3 million unique monthly visitors to its website

2,789,560 Circulation of News of the World. 627,000 unique visitors – content behind paywall since October 2010

1,029,371 Circulation of The Sunday Times. 1.6 million unique monthly visitors to its paywall website

457,250 Circulation of The Times. 1.6 million unique monthly visitors to its paywall site

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