Fair Play: Rupert Murdoch Could Get Sky Like He Wants, Sort Of

Rupert Murdoch Blog

The U.K. media industry and Rupert Murdoch have a long history. Murdoch bought British tabloid newspapers News of the World and The Sun in 1969 and founded the British satellite TV network Sky Television in 1989, which merged with British Satellite Television a year later.

He helped turned the flailing Sun and Sky PLC, of which he owns 39 percent, into successes. He’s a major figure in British media.

So it was no surprise that last week, Culture Secretary Matt Hancock went before the British Parliament to announce the decision to allow Murdoch’s 21st Century Fox to buy the remaining part of Sky. The way he said it – “I can confirm today that I will not be issuing an intervention notice” – hinted at the tortured road the deal has taken.

The transaction has been scrutinized intensely by the U.K.’s competition authority and its communications regulator since late 2016 over an array of questions regarding consolidation and editorial choices. The deal hit more snags late last year when reports of sexual harassment at Fox News were unveiled, causing the competition authority to question how Sky employees would be treated.

But in the end, it came down to control over the news. The U.K. says Murdoch, who already owns News Corp., can’t have another news entity. The regulators say the deal can only go through if the merged Fox-Sky entity sells the 24-hour news channel Sky News, now part of Sky PLC. If the Sky News sale doesn’t happen, the only other option the government has would be blocking the merger.

The U.K. communications regulator said the Murdoch Family Trust already controls a fair amount of British media. The Murdochs also own London newspapers The Times, and The Sun on Sunday, and The Sunday Times.

If Sky News were to fall under the Murdoch umbrella, the regulator said, the threat to media is two-fold. First, the shared ownership could result in “a reduction in the diversity of viewpoints consumed by the public.” Second, that reduction in diverse viewpoints could increase the Murdochs’ ability to “influence public opinion and the political agenda.”

The question about what happens to the diversity and the availability of content is a central part of media merger inquiries in both the U.S. and the U.K.  Unlike non-media mergers, where questions about consolidation tend to revolve around price effects or the number of competitors, regulators reviewing media deals consider actual content – particularly if it is news – to be of value in and of itself. Without access to it, consumers suffer. And without diversity in viewpoints, the thinking goes, democracy suffers.

The U.K. competition authority delved deeply into the question of what would happen to editorial content in the wake of a Fox-Sky deal, asking how people consumed news, and through what sources. It noted that media diets are changing with online news platforms and intermediaries like Facebook and Twitter that aggregate the news.

But when it came down to it, the U.K. regulators concluded that the risk of losing diversity in content was too great. A combined Sky-News Corp. entity would reach 31 percent of British readers, third behind the BBC and Independent Television news.

The Murdochs have agreed to sell Sky News to get Sky PLC, but they aren’t out of the woods yet on the deal. They are fighting Comcast Corp., which is expected to make a competing bid for Sky this week. Hancock has already said the U.K. government won’t intervene in that deal if it goes forward.

What’s Happening

On Monday, the Senate is expected to begin debate on a defense bill that includes an expansion of the authority of the Committee on Foreign Investment in the U.S., or CFIUS.

On Tuesday, U.S. District Court for the District of Columbia Judge Richard Leon is expected to deliver his decision on whether the merger between AT&T Inc. and Time Warner Inc. can go forward.

Also on Tuesday, Justice Department antitrust chief Makan Delrahim is will give remarks at an Open Markets Institute event on antitrust issues in the media. Sen. Amy Klobuchar (D-Minn.) and Rep. David Cicciline (D-R.I.), both active on antitrust issues, will also speak at the all-day conference.

On Wednesday, Delrahim will give remarks at the National Association of Music Publisher’s annual meeting in New York.

Quote of the Week

“We’re determined to ensure that this misconduct through the financial services sector isn’t repeated. We will ensure that those who have done the wrong thing are held to account through the legal system.”

--Australian Prime Minister Malcolm Turnbull on criminal cartel charges against six former bankers at Citigroup Inc. and Deutsche Bank AG in Australia.

Want to be alerted to the next post? Contact Fawn Johnson at fjohnson@bloomberglaw and you’ll be added to the list.