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BSkyB keeps its distance for now - but will Murdoch still bag the main prize in the end?


By Noel Young | Correspondent

May 3, 2012 | 5 min read

The fallout from the Commons Select Commiteee's fierce condemnation of Rupert Murdoch continued yesterday with British Sky Broadcasting distancing itself from its largest shareholder, Murdoch’s News Corporation.

The Sky prize is still out there

The New York Times said that was a sign of the difficulties Mr. Murdoch faced in Britain following the scathing parliamentary report that declared him not fit to run a global media empire.

“I would emphasise that it’s important to remember that Sky and News Corporation are separate companies,” Jeremy Darroch, BSkyB’s chief executive, told reporters.

“We believe that Sky’s track record as a broadcaster is the most important factor in determining our fitness to hold a license.”

The report was released on Tuesday by the House of Commons’s Select Committee on Culture, Media and Sport.

Its message was diluted by partisan discord, said the NYT. The minority Conservatives refused to endorse the portrayal of Mr. Murdoch as not fit. Its Labour members and a lone Liberal Democrat voted to include the language.

Despite all that, the report " nonetheless provided a searing indictment of News Corporation that added to the raft of legal and corporate troubles the company faces in Britain."

In New York News Corporation’s board of directors expressed its “full confidence in Rupert Murdoch’s fitness and support for his continuing to lead News Corporation.” They praised his “vision and leadership in building News Corporation” and his performance as chairman and chief executive.

But in Britain, the company’s problems were far from over, said the NYT. "A judicial investigation into media practices, the Leveson Inquiry, has unearthed endless examples of dubious and unethical behavior from Britain’s tabloid newspapers, especially The News of the World, the now-defunct Murdoch-owned paper at the center of the scandal.

"The panel is continuing to amass evidence and is expected to make its initial report in the autumn."

The BSkyB investigation is worrying for a different reason, said the Times. The British broadcasting regulator, Ofcom, is assessing whether News Corporation should be allowed to continue to hold its stake in BSkyB.

If it is declared not “fit and proper,” News Corporation could be forced to sell its 39.1 percent stake in BSkyB.

In a statement, BSkyB said: “The company is engaging with Ofcom in the process and continues to believe that it remains a fit and proper license holder, as demonstrated by its positive contribution to U.K. audiences, employment and the broader economy, as well as its strong record of regulatory compliance and high standards of governance.”

Last year, a $12 billion deal would have allowed Murdoch to take over all of BSkyB. The effort was abandoned in the midst of the phone hacking furore.

Despite all this, said the American paper , some analysts in Britain said they thought that it was, on balance, unlikely that Ofcom would rescind News Corporation’s license.

The previous day's report was an emotional personal attack, on Mr. Murdoch, in the view of Adrian Monck, a journalism professor at City University London.

“It doesn’t go to the top of governance of the company. They haven’t connected the board and Rupert Murdoch with criminal misconduct; he is not going to face criminal proceedings, and nor are any of his current directors. I don’t think there’s enough here for Ofcom to come against them.”

Meanwhile, circulation at The Sun on Sunday, a new tabloid meant to replace The News of the World, has fallen since its launch in February and, said the NYT, "the Murdoch brand has been possibly irreparably tarnished here."

If News Corporation tries to again to buy the rest of BSkyB, as many analysts believe it will, it would most likely be pressed to spin off the British newspaper business to overcome regulations against concentration in media ownership.

“Investors see the British newspapers as anachronistic and troublesome,” Lorna Tilbian, head of media research at Numis Securities told the NYT.

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