Murdoch will have to work to get his way in the UK

November 4, 2010

During the UK election campaign, Rupert Murdoch’s newspapers attacked the Liberal Democrats with headlines like “Lib-Dumb exclusive.” It shouldn’t therefore come as a complete surprise that Vince Cable, the Lib Dem who is now UK business secretary, has ordered a probe into whether the 12.3 billion pound bid by the media mogul’s News Corporation to take full control of British Sky Broadcasting is against the public interest.

Yet while politics may have influenced his decision, Cable has other reasons to probe the deal. Rival UK media groups vociferously oppose it: they fear that, in an online world, the combination of News Corp and BSkyB might kill off other UK newspapers—for example, by bundling Murdoch’s newspaper websites with Sky subscriptions.

The referral to Ofcom, the media regulator, may just be the beginning of a long regulatory probe. Once he has received Ofcom’s report, which is due by Dec. 31, Cable could delay the deal further if he decided to refer the matter to Britain’s own Competition Commission. The Commission could then mount its own full inquiry on whether this deal threatens the diversity of media voices, which could take several months.

The Commission could impose conditions on the deal. Nevertheless, an outright block looks unlikely. News Corp is widely deemed to control BSkyB already—a view shared by regulators. When BSkyB bought a stake in commercial TV rival ITV in 2006, the Commission later determined that News Corp’s current 39.1 percent stake gave it effective control of the satellite broadcaster. The Commission concluded that the ITV purchase was anti-competitive, but did not raise public interest concerns concerning the plurality of news providers. And while rival newspapers are right to be worried about Murdoch’s commercial power, the market for online newspaper subscriptions is currently tiny and far from proven.

Even so, a protracted regulatory process could make BSkyB’s independent directors—who have rejected News Corp’s offer of 700 pence per share and indicated that they will not accept less than 800 pence per share—even more determined to demand a high price for a deal. Murdoch may get his way in the end. But those scathing headlines could prove costly.

Comments

Finally, someone throws a monkey wrench in his plan !

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