British media join forces against Murdoch buyout

Date: 10/12/2010

By RAPHAEL G. SATTER, Associated Press Writer Raphael G. Satter, Associated Press Writer – Tue Oct 12, 6:42 pm ET

LONDON – He's dominated Britain's media landscape for decades, shaking Fleet Street to its foundations and dueling with the venerable BBC.

But Rupert Murdoch's latest move, an attempt to consolidate his family's sway over the British Sky Broadcasting Group PLC, may be a step too far. An unprecedented media coalition of newspapers and broadcasters has appealed directly to the government to take a close look at the buyout – which they say could have serious consequences for the way Britons get their news.

Rivals want Murdoch's effort to win a 100 percent stake in BSkyB to be vetted by Ofcom, Britain's media regulator, which can advise officials on the merits of the deal and whether it would jeopardize the integrity of Britain's media industry.

The 79–year–old's British holdings are already extensive – and controversial. His stable of national newspapers reportedly account for 37 percent of the Britain's national press by circulation. The Sun, Britain's biggest daily, boasts of being able to swing elections and The News of The World, The Sun's Sunday sister paper, has been accused of running a massive illegal eavesdropping operation, with reporters spying on politicians, sports stars, celebrities – and even members of the royal family.

His papers' power comes with a big political payoff. The News of The World's former editor, Andy Coulson, is now Prime Minister David Cameron's chief media aide, despite accusations that he knew about the phone hacking – charges he flatly denies.

But with Murdoch now aiming to completely take over BSkyB, in which his News Corp. already owns a 39.1 percent stake, rivals across the industry are mobilizing, seeking legal advice from top London law firm Slaughter and May and lobbying the government to intervene. News Corp. has called their opponents' motives into question and noted that the proposed deal has yet to be finalized.

The Guardian, one of those behind the push, has also taken the fight to its readers, asking: "Is Rupert Murdoch on course to becoming Britain's Berlusconi?" Italian Premier Silvio Berlusconi is a media magnate–cum–politician accused by the opposition of strangling Italy's democracy.

Damian Tambini, a media industry expert at the London School of Economics, said the Berlusconi comparison was "pushing it a bit," noting that the Italian leader runs a private media empire and exercises strong influence on the country's public broadcaster.

But he said that the political concerns raised by the buyout were legitimate, explaining that Murdoch and his son James, BSkyB's chairman, were carving out a position which could eventually become unassailable.

"When media groups are allowed to consolidate their position it can be irreversible," he said.

Full control over BSkyB would be a big boost to Murdoch's international media empire, whose holdings include Fox Filmed Entertainment, which brought out James Cameron's "Avatar," the Fox News Channel and The Wall Street Journal, acquired nearly three years ago.

BSkyB accounts for two–thirds of pay television subscribers in the Britain, has a huge chunk of all commercial television advertising and has "an uncontested position of dominance in the provision of televised sports in the U.K.," according to a recent report prepared by media research firm Enders Analysis.

The bundling of Internet access with movies and sports has helped make Sky's broadband offering a popular draw, and its massive budget means it can consistently outbid rivals such as the BBC and Channel 4 for hit U.S. shows such as "Lost" and "House."

Rivals fear that Murdoch might extend its practice of bundling media services to his print empire by tying his newspaper titles to popular entertainment or Internet products. For example, Sky broadband customers might get an online subscription to the Times of London along with their Internet access.

Cross–promotion is a worry too; even a tiny fraction of the marketing budget which a fully Murdoch–owned BSkyB would command would dwarf what most beleaguered rivals could afford.

That's made competitors of all political complexions wary. On Monday, nearly all of Britain's major media outlets outside the Murdoch umbrella sent a letter to Business Secretary Vince Cable expressing concerns over the proposed deal and asking him to refer it to Ofcom.

The letter, shown to The Associated Press on condition that its exact wording not be disclosed, was signed by executives from the BBC, BT Group PLC, and the Guardian Media Group. News Corp. noted in an e–mail statement that "these are commercial rivals," adding that it trusted that Cable would eventually "make his decision based on the merits."

There are ideological rivalries at work too. The BBC has been openly attacked by James Murdoch as creating a climate of stodgy, state–funded journalism, while the left–leaning Guardian makes no secret of its objections to the editorial line taken by Murdoch's titles.

The Australian–born mogul "has a track record across three continents in working to align political power with his own business interests," the paper said in an unsigned editorial Tuesday.

Murdoch's moves have raised hackles before. In the 1980s he revolutionized Fleet Street, the home of British newspapers, by smashing the printing unions and modernizing newspaper production. Sky News, once an upstart challenger to the BBC, has now emerged as one of the nation's most powerful news organizations. It was instrumental in pressuring British politicians to participate in their first–ever live televised debates earlier this year.

Some observers – including veteran journalism commentator Roy Greenslade – have been more relaxed than others. Writing in the Evening Standard last month under the title "this is not a Berlusconi moment," he noted that Murdoch had invested heavily in Sky at a time when few thought it would succeed and did not deserve to be penalized for capitalizing on his success.

But Greenslade has since noted that Murdoch could use the increased revenue to fund a damaging price war with his poorer rivals – backing "some form of inquiry" into the buyout.

Murdoch's role in British politics is often debated, deplored, or defended, but this latest controversy is different in that it has united nearly all of Britain's major non–News Corp. media outlets – including executives from the Telegraph Media Group Ltd., Britain's biggest–selling quality daily, and the Daily Mail, sometimes called the voice of middle England.

Both share Murdoch's conservative tilt, if not his business interests.

"It is extremely unusual for the Telegraph – and the Mail in particular – to weigh in to a debate like this," said Tambini, the media analyst.

It now falls to Cable to decide whether to refer the BSkyB deal to regulators. Cable's office confirmed that it had received the letter, but gave little away beyond describing the matter as "very sensitive."

So will Cable, a 67–year–old who cultivates a reputation as an elder statesman, be willing to throw a spanner in the Murdoch machine? Tambini said he didn't want to make any predictions.

"We're yet to see whether he's prepared to show his mettle on this one," he said.

BSkyB declined comment, noting that "we are not the ones making the acquisition – we would be the ones acquired."


Associated Press Writer Gillian Smith contributed to this report.


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