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Let battle commence! Matt Hancock approves both bidders for Sky

Sky shareholders look set for a bonanza summer – but what do the latest twists and turns in the Sky saga mean for news viewers?

Image: David Jones/PA Images, all rights reserved.

Culture Secretary Matt Hancock announced on Tuesday June 5th that he would not intervene in the bid by US cable giant Comcast to buy Sky – and also that he had approved a proposal from 21st Century Fox to sell Sky News to Disney if it was allowed to buy the rest of Sky.

The scene in the House of Commons on Tuesday for the ministerial statement was novel in one sense. Tom Watson was still leading for Labour, but was a “shadow” of his former self: 6 stone lighter than the old heavyweight version. And Matt Hancock, previously number 2 to Karen Bradley at the Department for Digital, Culture, Media and Sport (DCMS), was now ensconced in a cabinet seat, his predecessor having transferred to Northern Ireland as a side-product of one of Theresa May’s regular resignation crises.

Hancock confirmed what media analysts had already worked out: that he had no good reason to block Comcast’s attempt to buy Sky, and that one of the many remedies Fox and Sky had proposed as a way round objections to their merger from the Competition and Markets Authority had found favour with the CMA.

It is 16 months since Fox started this saga, with a £10-75 per share offer for Sky, and four months since Comcast topped that, with its £12-50 a share bid. Fox, already in possession of 39% of the shares, looks to have a head start: but Comcast has stated that it would be content with 50%+1 of the equity, allowing independent owners of Sky’s shares to bypass the Fox position if they wanted the higher amount. Assuming Fox completes its paperwork with the DCMS on the Disney disposal, and the outcome survives a final 15-day public consultation, by the beginning of July, battle will commence.

Why should any of us care?

There have been two key issues in this story. The first has been the determination of those who hate or distrust the Murdochs to prevent them buying Sky at all (their past behaviour having been too reprehensible) – a campaign led by Avaaz, Hacked Off and the three musketeers (Labour’s Ed Miliband, Vince Cable of the LibDems and Tory veteran Ken Clarke). They have failed to stop the overall transaction (though Avaaz has one last throw of the judicial review system to go), but the doubts they have raised have turned control of Sky News into a battlefield of its own.

Sky News has a very small share of the UK news consumption market (around 5%). Although companies controlled by the Murdochs have, over the 30 years of the existence of Sky News (during which time they have pumped some £500 million into running the service), owned variously 100% of Sky, 50% and 39%, no-one can produce a single instance of their having interfered in its editorial processes.

Nonetheless, both Ofcom (in its initial report on the Fox bid) and the CMA in its own reports have cited a theoretical possibility that Murdoch newspapers (owned 100% by NewsCorp, itself 39% controlled by the Murdochs) and Sky News (under 100% Fox ownership, again 39% controlled by the Murdochs) might “take a similar approach on specific topics or issues, push certain stories, or downplay others”. Neither regulator explained how this could be done, when any expression of views by Sky News would be a breach of its licence; nor whether, if the seeming co-ordination was a matter of matching up news agendas, such behaviour would be contrary to the Broadcasting Code (in which case it could be sanctioned) or not (in which case, what was the problem?).

Blood under the bridge

All this is blood under the bridge. Ofcom and the CMA have concluded that 100% Fox ownership of Sky News was too problematic to be allowed to happen without powerful remedies.

Fox offered three: a firewall for Sky News inside Sky; a ring-fenced stand-alone entity called Sky News within the Sky business, legally, financially, physically and operationally separate; or a divestment of that entity to a third party – specifically, Disney (which has agreed to buy much of the Fox business, including Sky, in a separate deal).

It is highly likely that Sky News (as we know to be true of Sky itself) would have preferred to keep the news channel inside the mother-ship, contenting itself with long-term financial guarantees and a robust set of protections for its editorial independence. The further it was separated from the main business, the higher the risk over time that the news operation would be marginalised.

The CMA operates to a different logic. What it calls “behavioural remedies” require continuing monitoring and involvement: which is why it favours “structural remedies”, capable of “fixing” a problem instantly. As it happens, even a disposal of Sky News to Disney after a Fox takeover of Sky would take at least 3 months, and the 411-page CMA report published on Tuesday (available on the CMA website) concludes with a complicated graphic trying to capture all the moving parts in even this favoured remedy.

Fade away?

And then, of course, there is Comcast. Although it has also given undertakings to the DCMS about the future of Sky News (matching some of those from Fox), it is hard to see how these could be legally enforceable if there has been no intervention in its bid for Sky. Indeed, what might suit Comcast would be for Fox to win the battle for Sky, and sell on the loss-making Sky News to Disney, whilst Comcast then outbids Disney for the larger Fox deal (including the rest of Sky). It might then suit both Disney and Comcast quietly to let Sky News fade away (each already owns a major US news broadcaster: ABC in the Disney stable, NBC in Comcast’s).

Essentially, what the CMA, Ofcom, Matt Hancock, Tom Watson, Avaaz, Hacked Off and the three musketeers have succeeded in doing is to consign Sky News to remote US ownership: either to Disney or Comcast, neither having any real interest in a loss-making minor player in the UK media scene. How that is a better outcome than trusting the Murdochs – who launched Sky News in 1988 in the face of a wall of hostility, sustained it after the launch of BBC News 24 had made it permanently unprofitable, and continuously re-invested in it both in terms of infrastructure and personnel even when the majority of Sky shareholders were offering to close the service in order to engineer a merger transaction – well, that somewhat bemuses me.

But that’s politics! When Tom Watson name-checked Adam Boulton and Kay Burley (Kay Burley!) as exemplars of the excellence of Sky News, it was impossible to tell how far into his now-slim cheeks his tongue had been pushed. (Kay Burley’s pugnacious presenting style once made her a bogey figure for Labour voters.)

Sky shareholders look as if they will have a bonanza summer, on the assumption that Fox will have to bid at least 10% above the Comcast offer to get back into the game – perhaps more, if it wants to deter Comcast from coming back with another, higher, bid. As for Sky News, its medium-term future looks assured. But long term? That’s another story.

About the author

David Elstein is Chairman of openDemocracy's Board. He is also Chairman of the Broadcasting Policy Group. 


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