The Murdoch debate: What next?

The EU is expected to clear NewsCorp's bid to acquire all of BSkyB this week. David Elstein gives his account of an LSE debate on Murdoch's empire and the bid, which he led alongside editor of The Guardian Alan Rusbridger.

James Murdoch, BSkyB chairmanBeing a participant in a polarized debate requires a certain amount of detachment in trying to report it. Let’s see how I do!

Polis organized a debate at the LSE on December 14th, led by Alan Rusbridger (editor of The Guardian) and myself, over whether News Corporation (hereafter NewsCorp) should be prevented from buying the 60.9% of the shares in BSkyB it does not already own. Also contributing to the discussion (which later opened out to an audience of about 80) were Chris Goodall of Enders Analysis, Professor Steve Barnett of Westminster University and Pablo Ibanez Colomo, of the LSE law faculty.

The Polis debate followed on from the exchange between Olly Huitson and me in Our Kingdom. The current issue, as described in detail in my previous post, is whether the review of the proposed transaction being conducted by Ofcom, at the request of Business Secretary Vince Cable, will result in approval, or a full reference to the Competition Commission, or a set of conditions to make the deal acceptable (ideas that have been floated include NewsCorp selling The Times and The Sunday Times, and BSkyB disposing of Sky News).

These suggested remedies all point to NewsCorp’s dominant position in national newspapers and TV news as being the core issue. And when Alan led off the debate, he emphasised the need to resist so large a concentration of media power as a combination of News International (with 37% of national newspaper readership) and BSkyB (easily the biggest commercial broadcast business).

He would find such a concentration unacceptable even in the BBC’s hands – though when he was asked from the audience how he felt about the BBC’s 39% share of the UK news audience (as revealed by Chris Goodall’s later analysis), he made no answer.

Alan also spoke about NewsCorp’s role as one of the most powerful of lobbying organisations, with regular access to Downing Street, and its habitual use of its newspapers to push its political preferences (be they issues, parties or individuals).

Alan pointed to former Murdoch editor, Andy Coulson, being the Prime Minister’s press advisor, despite being embroiled in the rolling scandal of phone hacking that prevailed at the News of the World when he was its editor. MPs openly admitted to being scared of NewsCorp reprisals if they pushed the issue. Murdoch had engaged in predatory pricing when he was pushing up the circulation of The Times, and the output of Fox News proved he could not be trusted to respect impartiality requirements if he took full control of Sky News (and might even lobby to remove the requirement for impartiality, or – indeed – to remove the regulator, Ofcom).

This last point took on further significance after a public forum on impartiality in news on December 16th, in which BBC Director-General Mark Thompson himself advocated a removal of the impartiality requirement other than for the UK’s terrestrial broadcasters. The comments of Stewart Purvis at the Polis session (see below) took on an extra resonance in that context.

Responding to Alan, I noted that The Guardian itself had indulged in predatory activity when it bought The Observer to prevent it falling into the hands of The Independent, leaving the Indie to launch its own Sunday version, since when it has been consistently loss-making (as, indeed, has The Observer, much to the detriment of Guardian Media Group).

I pointed out that Parliament had repeatedly legislated to control cross-media ownership, but as recently as 2003 had decided not to include any non-terrestrial broadcaster in the rules, other than having a special 'Murdoch' rule that prevented BSkyB buying more than 20% of ITV if NewsCorp remained a shareholder above the 20% level.

That legislation had also included a definition of 'control' of a media organisation which seemed precisely to capture NewsCorp’s position at BSkyB: whereby a holding below 50% could still constitute control if it allowed effective execution of the holder’s wishes in most circumstances.

Strictly speaking, that might be taken to mean that any increase in NewsCorp’s stake in BSkyB (including taking full ownership) would not imply any change in control, or – consequently – any reduction in media plurality. As we shall see, that issue had many dimensions.

I took the view that explicit cross-media rules entrenched in legislation dealt with overall dominance questions (this was too limited an approach, in the view of Martin Stott, of Channel 5, from the audience); and that it was the issue of news audience control which was central to why Cable had referred the matter to Ofcom.

Interestingly, the EU competition authorities, who would also need to approve a transaction of this size that had cross-border dimensions, were more concerned about possible concerted sports rights buying or airtime selling by NewsCorp’s European businesses than about news domination in the UK.

Chris Goodall had generously distributed beforehand to debate participants a copy of the Enders Analysis document sent to Cable, which detailed all the shares of news audiences – across various media – controlled by different players (see link). It sought to demonstrate that by taking over BSkyB, NewsCorp’s share would rise from 14.6% (from its four newspapers) to 22.6%, if BSkyB’s share was deemed to include not only the audience for Sky News, but that for contractual news provision to independent radio (IRN) and Channel 5 (contracts that had been captured from the previous supplier, ITN).

I was unconvinced by this approach, for two reasons. First, under any calculation, the current NewsCorp 'share' should include 39.1% of the audience for Sky News, with only the increase arising from owning the remaining 60.9% of BSkyB being treated as a true 'rise'.

Secondly, it seemed to me wrong that contractual news supply, which in legal and regulatory terms was the responsibility of the broadcaster, should be treated as under the control of the supplier, BSkyB.

In Chris’ presentation, ITV and Channel 4 were shown as having shares of the news audience – yet their news is supplied by ITN, which does not feature in his list. It is illogical to attribute IRN’s news audience (along with Channel 5’s) to Sky News, but not ITV’s and Channel 4’s to ITN.

Chris argued that the most senior people working on Channel 5 news are Sky employees: but the same situation prevailed when I was Channel 5’s CEO and ITN had the news contract – it was still Channel 5, as the broadcaster, that had final legal and regulatory responsibility.

If the news supply element is removed, and only the additional 60.9% of the Sky News channel audience is treated as the rise in share attributable to the proposed transaction, NewsCorp’s news audience share would rise from 15.38% to 16.59%: scarcely world-shaking. It was no surprise that Pablo Ibanez Colomo’s legal over-view rapidly concluded there was no substantial case for blocking the deal, as there was no significant threat to media plurality.

Chris, Alan and Steve Barnett focused on a parallel issue: the likelihood that 100% NewsCorp ownership might leave Sky News exposed to being converted into a form of Fox News, a fear articulated by American professor of journalism Todd Gitlin in a recent piece for OurKingdom.

This was perhaps the most confusing element of the debate. No-one argued that Sky News was currently comparable to Fox News, but Alan believed this might be attributable to the presence of independent directors like Lord Wilson (former head of the civil service) and publisher Gail Rebuck on the BSkyB board, willing and able to protect Sky News from the worst Murdoch might inflict.

Puzzlingly, Alan also cited the over-riding of independent directors at Times Newspapers, when Murdoch replaced Harold Evans as editor of The Times, as evidence of untrustworthiness. He also cited a number of books by former Murdoch editors that told similar stories of perfidy (I doubt there is much publisher appetite for books by ex-editors lauding Murdoch’s virtues). He seemed to take no account of the fact that the equally distinguished independent directors of NewsCorp appeared happy to countenance Fox News.

Steve Barnett reported that he had personally asked Murdoch – in the course of a Parliamentary visit to the US, when he was acting as an advisor to a House of Lords Committee – what changes he would make in Sky News, either in content or look, receiving the reply that look would come first, but that no-one at Sky News ever listened to him. Curiously, Mark Thompson told a very similar tale of an encounter with Murdoch at Thursday’s news discussion.

I have to say that I take these stories with a large pinch of salt. No doubt Murdoch says much the same to his daughter and son-in-law when they complain to him about Fox News – “that Roger Ailes, he won’t listen to me!” I can absolutely assure Steve, Mark and Alan – from personal observation – that the chances of Murdoch really wanting to do something within NewsCorp and being thwarted by an employee are nil. It suits him in business (and probably political) terms that Fox News is so outspokenly right-wing and commercially successful. It also suits him that Sky News is an award-winning, much-admired news service within the UK context – much more satisfying to be seen to beat the BBC at its own game than replicate a US success story.

And this brings me to the Stewart Purvis point. I submitted that Sky News, under current and future ownership, is subject to Ofcom rules in relation to impartiality. Chris, Steve and Alan all argued that Murdoch could either campaign to remove those rules, or subvert them by changing the news agenda on Sky News. Impartiality only went so far.

Stewart gave them some support. What Ofcom applied was “due impartiality”, whereby viewer expectation would not be undermined. This could not deal with editorial omissions and inclusions, as opposed to actual treatment of stories. He pointed out (is Mark Thompson not aware of this?) that Fox News and many other seemingly partisan news services (including straight propaganda from Iran and Russia) were already available to UK viewers, and had not been blocked by Ofcom because UK viewers would have different expectations of them as compared with news from the BBC, ITV, Channel 4 or Channel 5.

So there had been nothing for 22 years to stop Murdoch positioning Sky News as far to the right as Channel 4 News (in Stewart Purvis’ frank admission) was pitched to the left. He just hadn’t chosen to do so, and I confess I could see no reason to believe he was simply waiting for the moment when he had absolute control over Sky News as opposed to effective control to do something he could always have done.

Steve Hewlett, chairing a lively session, concluded by asking the participants if there were conditions that Ofcom could attach that would make the transaction palatable. Chris Goodall volunteered that placing Sky News in a management-controlled trust, backed by a £30 million annual budget for a lengthy period of time, would do the trick.

Steve Barnett broadly agreed, but Alan Rusbridger felt that the combination of BSkyB and the NewsCorp newspapers was simply too dangerous to be accepted.

Anyone who has experienced NewsCorp’s muscle (as I have from the Sunday Times over Death on the Rock and from BSkyB when I was on the board of Virgin Media) understands the point he was making. But that is not the issue in this proposed deal.

I don’t care which way Vince Cable’s decision goes: I have no stake in the matter. But I do care that, as the argument has grown fiercer, it had been somewhat overtaken by events. The very same independent directors at BSkyB in whom Alan placed such trust have volunteered to dispose of – or close – Sky News if that service is the main impediment to a deal which would benefit the majority of shareholders.

I find this regrettable, but not surprising. For years, ITN and Sky News have been urging that there was room for only one non-BBC national television news-gathering operation in the UK. It would be a shame if Sky News folded, but that outcome – however ironic in the context of an inquiry primarily concerned with preventing a potential reduction in media plurality – would at least meet the requirements of objectors.

What I do not accept for a moment is the 'firepower' argument – that, armed with the cash flows from BSkyB, NewsCorp’s UK newspapers would be able to overpower their competitors. The cost of acquiring 100% of those cash flows would be over £8 billion: and if you have that kind of money, BSkyB’s revenues are irrelevant. Buying the rest of BSkyB would simply be an expression of NewsCorp’s might, not a means of increasing it – or, at least, not in the short term. If that is your concern, there are no remedies that would make this deal acceptable: but the absence of a deal would make no difference to NewsCorp’s financial capacity to inflict pain on its newspaper competitors if it was minded to do so.

We will hear this week from the EU inquiry – advance indications are that they will give approval. Ofcom has till the end of the month to decide. Given the bitterness between BSkyB and Ofcom, not least over Ofcom’s imposition on Sky of lower wholesale prices for its sports channels, clearing the deal outright might stick in Ofcom’s throat. An easier decision might be to pass the parcel to the Competition Commission for a full review, taking six months rather than the bare six weeks which Ofcom has had to do its work.

Such a delay might appeal to NewsCorp’s competitors, but I doubt that it will change the politics of the situation. Although Vince Cable has the power to make his own decision, it is highly unlikely he would challenge the conclusions of either Ofcom or the Competition Commission, whatever they were. Like Iphigenia (sacrificed by her father to bring the blessing of the gods for the Greek expedition to Troy), Sky News would be a most innocent victim of a larger power struggle. But that seems increasingly likely to be the outcome.

About the author

David Elstein is Chairman of openDemocracy's Board. He is also Chairman of the Broadcasting Policy Group. He is a director of Kingsbridge Capital Advisors, and a supervisory board member of two German cable companies.