At best Sky News will stumble along in its current mode…
Raymond Snoddy says Jeremy Hunt has chosen to take the “courageous” route and must hope that it does not come back to bite him. Ultimately Sky News could be brought to its knees within a decade if the Murdoch dynasty tire of paying to keep the loss-maker afloat…
It’s difficult to know whether to laugh or cry at the news that crafty old Rupert Murdoch looks as if he is going to get his way again in a painless and cost-effective way.
Somewhere in New York or Los Angeles he is definitely smiling. Fans of Sky News might not find the cumbersome arrangements now proposed quite so amusing.
First we are going to have the new board full of independent directors and an independent non-executive chairman. Then there’s the corporate governance and editorial committee.
Alongside that there will be the 10 year carriage agreement and the seven year – renewable – brands licensing agreement designed to encourage Murdoch to re-commit.
On top of that there will be the services Sky will provide for the newly-independent channel for a fee.
But it’s the issue of shareholdings and the corporate structure that will raise most eyebrows.
Obviously News Corporation will continue to hold its present 39.1% stake. The real question is what happens to the rest?
Other shareholders, who will presumably sell off their stakes in BSkyB if the price is right, will be left holding near worthless, publicly-quoted Sky News shares.
What conceivable interest will they have in small stakes in a company that will only be brought to breakeven by News Corp paying Danegeld for 10 years?
There is a slight chance of course that Sky News with its independent board might find a magical way of turning a profit but it would be truly remarkable if such a thing happened. It never has in more than 22 years as part of an integrated Sky operation.
So what will the institutions do with this once in a lifetime opportunity? Will they just forget about the shares – leaving Murdoch in potentially just as strong a position as he is now? They could try to sell their stakes but who on earth would buy.
News Corp will be unable to increase its stake for the next 10 years without the permission of the culture secretary.
At best Sky News will stumble along in its current mode but with greatly increased bureaucracy.
And what about the ambitious plans to launch Sky Arabia – an important project but one that will cost a fortune for years. Will Murdoch continue to fund not just the existing channel but new developments too?
Ultimately Sky News could be brought to its knees within a decade if the Murdoch dynasty tire of paying to keep the loss-maker afloat.
What terrible abuse of power has this potentially shambolic edifice been set up to curb?
Alas it’s all window dressing. The evidence is strong both on screen and behind the scenes that Murdoch has never interfered with Sky News but instead has cherished it at considerable cost over the years.
It would be difficult to see why he would start interfering now even if he owned all of BSkyB. It would be bad business to try to turn it into a British version of Fox News and anyway Ofcom’s impartiality rules would prevent that happening.
The elaborate manoeuvre over Sky News serves to disguise the fact that what rival publishers see as the main issue – Murdoch’s access to a growing stream of revenue from BSkyB – has not been addressed at all.
This could yet lead to action in the courts despite culture secretary Jeremy Hunt performing cartwheels to try to avoid a judicial review.
The takeover of BSkyB will not come cheap for Murdoch. The initial bid of 700p has long been overtaken by events and now 850p looks like the absolute minimum and 900p a share a distinct possibility.
This is not a bargain basement deal but Murdoch’s entire corporate history shows a willingness to pay sums for what he really, really wants that others see as over-payment. The Wall Street Journal is the most recent example.
It has, however, never been clear what real difference 100% ownership of BSkyB – apart from the cash which has an opportunity cost – would make.
Murdoch could do a joint subscription deal between Sky and his newspaper titles but he could have done that at any time subject to competition regulations.
Given the scale of the deal and the size of the potential row generated by Murdoch rivals, Hunt would have been wise to go with his initial instincts and simply refer the matter to the Competition Commission for a proper independent inquiry.
Undertakings in lieu of a referral are all very well but in the context of the entire deal have a very limited reach.
The culture secretary has chosen to take the “courageous” route and must hope that it does not come back to bite him.
But there is more than a little irony in the fact that those who were pushing for action against Murdoch on the grounds of protecting plurality of voice may in the longer term achieve the exact opposite.
The ultimate disaster would be if BBC News was left as the only UK 24-hour television news channel.
And as Ofcom pointed out in its research for Hunt, it is the BBC that is by far the biggest player in the UK in terms of news consumption with 44% of total minutes.
The proposed deal would merely consolidate News Corp’s second place – up from 14% to 24%.