UK regulator's Sky News deal will weaken media plurality

Sky News is a respected, trusted and high quality news provider in a UK television market dominated by the BBC. The regulatory agreement by which NewsCorp can take full control of BSkyB as long as it effectively divests itself of Sky News jeopardises this valued news service. A detailed version of this argument can be read here
David Elstein
4 March 2011

News Corporation has offered to spin off Sky News into a separate company – in which it will have a 39.1% shareholding – as the price of getting regulatory approval for its bid to buy the 60.9% of BSkyB it does not already own.

Opponents of the BSkyB deal will call this a stitch-up between Rupert Murdoch and a Conservative-led coalition; but actually the green light for the deal has come from the media and competition regulators, Ofcom and the Office of Fair Trading.  Without that, Jeremy Hunt, the Culture Secretary, could not have added his approval, itself subject to a 15-day consultation period for comment on the remedy for what Ofcom had previously described as the element in the merger that might act against the public interest, in reducing media plurality.

I think that Ofcom report was deeply flawed (see here, and here), and would be highly vulnerable to judicial review.  In particular, the notion that 100% ownership of BSkyB would give Murdoch new power to hire and fire editors of Sky News – a power he has always had – was simply wrong.  

Ofcom’s metrics were muddled and spectacularly inaccurate.  The claim that a combination of News Corp’s newspapers and Sky News would give Murdoch a 24% control of UK news consumption was demonstrably false.  Astonishingly, in its advice to Hunt published today, Ofcom repeats many of the errors in its report, including calculations of market share that it simply made up.  A day in front of a senior judge, being cross-examined by a capable QC, would be a sobering experience for Ofcom.

That said, the “undertakings in lieu” agreed by Ofcom and the OFT, in place of a full investigation by the Competition Commission, are unimpressive, and illustrate the weakness of the Ofcom position.

BSkyB will be 100% owned by News Corp, but Sky News will only be 39.1% owned: no indication is given as to what the non-News Corp shareholders in BSkyB will do with their Sky News shares after they sell their BSkyB shares.  They will have little market value, as Sky News has made a loss ever since the BBC launched its publicly-funded 24-hour news channel (which also led to the closure of the ITV News Channel).

Sky News will have a majority of independent directors (but BSkyB has always had that).  The chairman will not be from News Corp (BSkyB has only once had a non-News Corp chairman), but there has never been any suggestion that a News Corp chairman of BSkyB has ever tried to influence Sky News output in the last 22 years.  There will be editorial boards and other paraphernalia, but the truth is that these have never been necessary to the process of building Sky News into a multi-awarded, highly professional Ofcom-compliant news operation.

Indeed, Sky News has a higher trust rating (84%) than BBC One news (80%), ITV news (70%) and Channel Four news (61%).  You might think that the chief executive of Channel Four, rather than waste time signing letters to Vince Cable complaining about the BSkyB deal, would be better employed trying to work out why his news service compares so unfavourably.

Likewise, Mark Thompson, BBC Director-General, might learn something from his counterpart at ITV, Adam Crozier – a novice to broadcasting – who refused to add his name to the Cable letter signed by so many media organisations, on the grounds that a provider of impartial news should not take sides in a major news story.  That the BBC Trust simply rapped Thompson’s knuckles for signing the letter, rather than firing him, explains why we need new leadership there.

Sky News viewers are now being punished for their loyalty by having their service detached from the powerful engine of BSkyB.  Sky News will still receive an annual subsidy from News Corp, and will be licensed to use the Sky name, but will it still have the courage to set agendas, as when it drove the demand for the party leaders to debate with each other in the election?

Will it still enjoy a close relationship with Sky Sports and Sky Sports News?  Will a spun-off Sky News have the finance and commercial courage to invest in the next generation of technology, as happened with Sky News HD?  Or will it stagnate in the absence of the sheer momentum which has fuelled the rise of BSkyB, from losses of £500m a year to profits of nearly £1 billion a year.

Of course, the commercial opponents of the BSkyB deal – The Guardian, the Daily Telegraph, Trinity Mirror and so forth – will continue to call for a full Competition Commission, simply to inflict delay on their chief rival.  All their arguments that the deal would harm competition in the UK were decisively rejected by the EU last year.  They have hung on to the public interest plurality review as their last hope, not caring whether this will damage, or even eliminate, Sky News.  Their hypocrisy in paying lip service to media plurality – fully exposed at a City University debate a month ago – has been breathtaking.

At least Murdoch has been locked into a 39.1% holding in the new Sky News, so that he cannot really walk away and start a new service.  But the whole process must re-inforce his view that nobody in the UK admires success, or wants to reward risk.  If Sky News continues to thrive, it will because its creator continues to believe in it and fund it: no thanks to Ofcom or the letter-writers.

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