Media Rupert Murdoch Sky

Sky bid is a test of Theresa May's government and Rupert Murdoch's influence over it

December 10, 2016 | 11 min read

More than his father's son: As James Murdoch returns to Sky, will a renewed Murdoch takeover bid follow?' I ran the headline over column for The Drum back in January on the day Murdoch junior was re-appointed Sky chairman.


21st Century Fox bids for Sky

I went on to predict that a renewed offer would follow - this time using the Murdoch's US-based 21st Century Fox entertainment conglomerate - in a year or so. Well, the fact that it came a few weeks sooner can be put down to a combination of the post-Brexit political and economic climate, the fall in the pound that made the deal particularly attractive and the rapidly-changing media landscape that makes expansion rather than consolidation crucial to the Murdoch dynasty's ambitions in the challenging age of Netflix, Amazon, et al.

Back in January I also predicted that the Murdochs would succeed in their long-cherished target of acquiring the 61% of Sky they don't already own but only after another tough encounter with serious political opposition and renewed challenges by media rivals citing plurality and concentration of ownership issues. Well, what a difference a few months can make in these turbulent times in the world of both politics and media.

OK, some of the usual suspects, in the shape of Vince Cable, Ed Miliband, Tom Watson and Hacked Off, were quick to take to the airwaves or social media to condemn the £18.5bn agreed takeover.

Cable, the Lib-Dem business secretary at the time of the Murdochs' 2010 bid, took to the BBC's Newsnight to insist that the the new offer still posed a 'genuine threat' to media plurality in the UK and argued: "Nothing seems to have materially changed and if this takeover was to go ahead then there would be similar concerns raised about media plurality in the UK. The way Theresa May's government deals with this is a test of their independence from the influence of large proprietors".

Sitting from where I was, Vince Cable resembled a man singing an old tune who wasn't well tuned-in to the new media mood music of Netflix, Amazon and the competitive pressures that forced Sky to pitch up with £4.2bn to secure its share of Premier League football broadcasting rights.

It was significant, too, that the general news coverage by both the BBC and ITN, as well as most US and European channels, appeared to concede that the 21st Century Fox deal for Sky would go through and that the Murdochs pere et fils would fulfill the ambition that was thwarted five years ago by the fallout from the News of the World phone hacking scandal.

Stock market confidence in that outcome was reflected by the recently-depressed Sky share price rocketing from 256p to 1047p on the news. The agreed-in-principle deal between 21st Century Fox and the Sky board carries an offer price of 1075p per share.

Reuters reported that the timing of Fox's planned move was triggered by the fact that the UK's vote to quit the EU had seen the pound crash by 14% against the US dollar and had also sent Sky's share price tumble. And the Reuters analysis was also surely right to reason, "Now was the perfect moment. With the weak pound (and lower stock price) Sky has become 40% cheaper and the government is supportive of almost any investment in Britain".

While I don't doubt there will be something of a political backlash and protests from interested parties such as Hacked Off and its phone-hacking victims and the Hillsborough families, I get the sense that it will not only be far more muted than five years ago but also much less than I forecast in that January column.

For example, the Daily Mail was almost alone in projecting it as 'Rupert Mudoch sparking a major political row' and, interestingly, the Mail online and in print gave the most space to critics of the deal, including Labour's ex-leader Ed Miiband and current deputy leader Tom Watson, both normally the butt of the paper's derision.

But, for me, it was even more significant that Watson, a leading light in the original political fight around the phone-hacking scandal, stopped short of calling for it to be blocked. "If the independent committee set up by the board of Sky agrees to accept the offer from 21st Century Fox it will be incumbent on the regulatory authorities, including Ofcom. to ensure that media plurality is upheld and that competition concerns are addressed. Finally, given the likely concentration of further media power in the hands of a single company, it is right that the fit and proper test should be applied by Ofcom if the deal is approved by Sky shareholders," said Tom Watson.

Reading between the lines, I'd interpret that as an indication that Labour, beset by its own internal problems and the prospect of plunging into an electoral abyss, isn't particularly up for another dogfight with the Murdochs and doesn't see it as much of a priority, set against the problems of plunging poll ratings and how to play the Brexit issue. When he instantly waded in with call for Theresa May to refer the deal to Ofcom and the CMA (the Competition and Markets Authority), Ed Miliband may well have been speaking more for himself than the current Labour leadership, at least in terms of how high it sits on the party agenda.

Ed Miliband also sought to question whether "the British people want Mr Murdoch to have control of more of the media landscape". Much to the chagrin of Miliband and, no doubt Hacked Off, I'd suggest that the 'British people' are much less taxed by that prospect than they were five years ago at the height of the Millie Dowler case and that, apart from the inevitable 'Twitterstorm' among Murdoch-haters, there won't be serious public opinion pressure on the government to block the deal.

Although some Labour backbenchers were among those taking to social media to criticise the deal, the impression you got that they are more or less resigned to it going through. No doubt some will seek to question Theresa May in the House over whether the likelihood of a bid was raised with her when she briefly met Rupert Murdoch in private during her trip to New York shortly after she became prime minister.

Another interesting question surrounds whether the alliance of rival media interests, including most of the other national newspaper groups, the BBC and ITV, who opposed the NewsCorp bid half a decade ago will revive their opposition. Almost certainly caught on the hop by Friday afternoon's Stock Exchange announcement, I don't doubt that hasty discussions are already starting, but the whispers I hear, and the impression I get from their coverage of the bid story, is that any fresh challenge - if it happens at all - certainly won't involve the investment, conviction or cautious optimism that it did back then. With the Guardian this week announcing an editorial tie-up with Vice News (in which, ironically, the Murdochs were early investors) there is a realpolitik equivalent acceptance that the media landscape of late 2016 is a very different world indeed.

And, although the key decision on whether to refer the bid to the regulatory authorities officially falls to the new and somewhat untried culture, media and sports secretary Karen Bradley, no one seriously doubts that Theresa May won't be heavily involved and will ultimately call the shots. It does represent a tricky question for the prime minister insofar as the fact that the deal has been agreed by Sky's independent directors and that the bidders this time are 21st Century Fox, untainted by the phone-hacking scandal and now legally uncoupled from the vastly less profitable Murdoch newspaper companies, would suggest that there is no obligation on the government to make a referral.

That said, the prime minister may feel tactically tempted to back a referral, confident in the likelihood that neither Ofcom nor the CMA would be likely to scupper it this time around. It's worth remembering that Ofcom's 2012 investigation concluded that Sky remained a 'fit and proper' owner of a broadcast licence despite the phone-hacking scandal, although they delivered a scathing criticism of James Murdoch. But I'd wager that James Murdoch's subsequently impressive performance as chief of 21st Century Fox--including considerable success in winning over dissident US shareholder group--and the respect he holds among many Sky News journalists as an 'innovative, instinctive, visionary TV chairman' will rule out a repeat of that Ofcom savaging.

The governance of Sky News may again emerge as an issue, but my sources suggest that the Murdochs would, if required, again offer to 'ringfence' it to guarantee its editorial independence. But I've always argued that Sky News's reputation for fairness and balance and impartiality--not least among Labour politicians, as it happens--shows that neither Rupert nor James Murdoch would seek to turn it into Fox News, even if they weren't bound by UK impartiality rules. And a sale would only undermine broadcast news plurality in the UK, as I couldn't see any prospective purchaser matching the hefty editorial investment levels the Murdochs have sanctioned over the years. A thought that all those politicians eager to pop up regularly on Sky News should bear in mind before any rash rush to the regulatory barricades.

Whether journalists and politicians like it or not, news counts as relatively small fry in the fiscal reasoning behind the Fox deal. James and Rupert Murdoch are acutely aware that, against the backdrop of the massive challenge being mounted by the likes of Netflix and Amazon and with AT&T buying Time Warner for $85bn, 21st Century Fox and Sky MUST grow to stay in the big league of global media.

Interestingly, given Brexitmania in the UK, Sky's £7bn, 2014 acquisition of its sister operations in Italy and Germany created a pan-European operation that was cleared without much difficulty by European regulators. Given that, it must surely sharply reduce the possibility of UK regulators blocking the Fox/Sky deal. Not least because UK regulators couldn't fail to be alive to the importance of major corporate investment in a post-Brexit Britain.

Predictably Hacked Off have emerged at the forefront of those still clamouring for a fight, with its executive director Dr Evan Harris, the former LibDem MP, issuing a tough statement.

But the reality has to be that not even Hacked Off can truly believe that, whether or not the government decide on a referral for appearances sake, the deal isn't destined to go through and probably by mid-2017 at the latest. Some are hoping that the new High Court civil cases against The Sun for alleged phone-hacking could yet sabotage the Sky deal. But, although the courtroom emergence of a 2011 email from Kelvin MacKenzie quitting as a Sun columnist and accusing News International boss Rebekah Brooks of concealing the scale of phone-hacking from him, is doubtless an embarrassment, it's hardly the stuff of derailing a deal divorced from the newspaper division and strictly the preserve of the separate 21st Century Fox entertainment giant .The prospect of Kelvin being potentially subpoenaed by the plaintiffs' lawyers will be of far more interest to media-watchers than broadcast and competition regulators.

All of which won't just represent a final victory for the that wily old fox The Sun King himself, but even more so for the Sun King's son. Those who wrote off James Murdoch as his father's heir after the phone-hacking scandal (and I wasn't among those who had him out for the count) will have to eat their words, even with a bitter taste in their mouths. The wily young fox is all set for the biggest coup of all.

Paul Connew is a media commentator, broadcaster and former editor of the Sunday Mirror and deputy editor of the Daily Mirror. He has also worked as an executive both for and against the Murdoch empire on both sides of the Atlantic.

Media Rupert Murdoch Sky

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