12 Jul 2011

(by Shaun Hargreaves Heap) News Corporation’s withdrawal of the undertakings, that would have allowed its acquisition of BSkyB before the hackings crisis, looks like a masterstroke. By triggering a referral to the Competition Commission, it takes the heat out of the current ‘fit and proper’ debate and it gives News Corporation a re-match in the dispute over pluralism. Arguably, the outcome on this issue can be no worse than before, and so the only drawback is the delay. Rupert Murdoch’s decision to take full ownership of BSkyB had nothing to do with short term expediency, he is one of the great strategists in the industry. The current media and political frenzy is missing the key question. Why is Murdoch so determined to gain 100% control of BShyB?

A relaxation in the impartiality requirements placed on broadcasters (as part of a more general deregulation) is widely anticipated in the next Communications Act. This was, in effect, the operating assumption in the earlier OFCOM report on the acquisition of BSkyB which required the separation of Sky News as a condition for approval. Even the for it. The worry is that people rely on television, not newspapers or the internet, for their news. It is trusted to an extraordinary degree (in marked contrast to newspapers) and, as even the most cursory cross country comparison suggests, this vaunted position owes much to the public service broadcasting regulations. Their removal will, as a result, likely prove much more damaging in the long run for the quality of news in the UK than anything that the mere acquisition of BSkyB by the News Corporation might do by itself.

It is partly the prospect of positioning News Corporation for this new world, so as to be ready to create a Fox News in the UK, that makes the full acquisition of BSkyB seem attractive to Rupert Murdoch. But it is not the only strategic reason. There is the broader precedent of deregulation in the US: he launched and grew the very profitable Fox Network that now rivals the old ones and he sees no reason why he should not do the same again in the UK as we embark on similar, general deregulation Think for a moment about the basic facts. BSkyB already has the biggest budget of any broadcaster in the UK on the basis of a very small audience share. Imagine what a bit of growth in market share, along the lines of the Fox Network, could do for the bottom line.

This is the long game and so a delay while the Competition Commission appraises the acquisition does not matter much for News Corporation. Unless, of course, deregulation itself comes into question. This is unlikely but we might just benefit from the inquiry if it were to notice, as it should, that news provision is different and that this is an area where regulation has served us well. Unfortunately, the constraints imposed by the Enterprise Act make it unlikely that the Competition Commission will do more than the media regulator to highlight what really threatens pluralism in the news.