Fox’s Sky deal: What on earth is going on?

The competition regulator is playing with fire with its latest findings, writes Raymond Snoddy

The Competition and Markets Authority has come up with a rather special curate’s egg in the curious case of Rupert Murdoch’s aim to own all of Sky – at least for the rest of the year.

First, regulator Ofcom recommended to the then Culture Secretary Karen Bradley that the deal be referred to the CMA, for media plurality reasons.

Now in it’s preliminary finding the CMA has suggested that the £11.7 billion deal could be cleared – or then again not.

The options allowed distinct and justifiably different interpretations of the verdict depending on where you were coming from.

For the Murdoch-owned Times the line was “Watchdog lights way to Sky takeover”, an approach backed up by City instincts that drove the Sky share price up by more than 2 per cent.

For the Evening Standard it was a case of: “Murdoch Humbled: Sky deal blocked again”, while the Daily Mail believed that regulators could block the deal – which indeed they could.

What on earth is going on here?

Murdoch has at least cleared one important hurdle and one that was erected by Bradley.
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It found that 21st Century Fox, which currently owns 39 per cent of the Sky group, had shown “a genuine commitment to broadcasting standards in the UK.”

The sexual harassment scandals and reporting irregularities at Fox News – the Fox news that was pulled in the UK after getting peak viewing figures of around 2,000 – was quite correctly judged not to taint Sky News in any way.

But what then is to be made of the statement by Anne Lambert, who led the CMA investigation, who said that the takeover “would result in the Murdoch family having too much control over the media – and the “political agenda.”

In recent years Murdoch’s “control of the media” in the UK has actually declined in real and relative terms through the closure of the scandal-ridden News of the World and the rise of the powerful social media and online search giants.

Murdoch founded Sky News nearly 30 years ago as one of the four original Sky channels and has nurtured it across decades of losses and has always effectively controlled it. The other shares in what was then BSkyB were spread widely across financial institutions which had little interest in the news channel as long as the shares performed and the cost of Murdoch’s fascination with news was prevented from going through the roof.

The only logic in the CMA’s findings, though using the word is quite generous, is that full control by the Murdoch family Trust would somehow change the nature of the political stance of Sky News.

There is little evidence that such a thing would happen. Under effective Murdoch family control only the most rabid, paranoid Murdoch haters would allege political bias.

It has been a bit edgy at times with occasional complaints about taste but nothing outside the rough-and tumble of a live 24-hours a day news channel.

As the CMA conceded, Fox had shown a genuine commitment to broadcasting standards in the UK.

Why on earth would that change? It would be bad for business and ratings, and anyway, Ofcom is still there to enforce legally binding standards should there be any backsliding on impartiality standards.

The CMA, as is often the case with UK competition regulators, are myopic, or are forced to be, and take little notice of the unintended consequences of their decisions or the impact of huge and overwhelming international competition already before our eyes.

The supposedly all powerful Murdoch is feeling so outgunned by the likes of Netflix, now worth $100 billion with 117 million subscribers and rising, that he felt the need to sell his main entertainment assets to Disney. And that’s before you get to Facebook, Google, Amazon and Twitter.

The unintended consequences, which cannot be ruled out, is that the jiggering of the CMA could end up killing off loss-making Sky News.

What a triumph of competition regulation that would be – in the interests of preserving the purity of Sky News from a largely theoretical danger of greater Murdoch family interference you hand a 24-hour television news monopoly to the BBC.

It cannot be emphasised enough that Rupert Murdoch, for all his many faults, has underwritten nearly three decades of losses at Sky News. Others might not be so generous.

In the meantime probably it’s best to give the CMA the sort of unnecessary fig leaf they want to justify their curate’s egg of a decision. By all means have strong independent boards with their independence underwritten by Ofcom if that is legally possible.

But the CMA is clearly playing with fire. If Murdoch were to walk away it is far from clear there would be another sugar daddy in town willing to pick up the pieces and the inevitable losses.

Then of course there is the Disney situation. Would the Disney of Mickey Mouse be willing to fund continuing losses on news in a far off country?

Perhaps they would because there is also the Disney of ABC Television and ABC News but we should not automatically presume.

Disney will need a steady hand to continue pushing ahead with the Sky deal in the face of British regulatory mayhem even though naturally the CMA acknowledges that its objections to the Murdoch-Sky deal would fall away if Disney were the owners.

The CMA is due to take its decision by May after the usual round of further consultations and might just be wise enough to realise that they are a long way along a branch and are busy sawing hard at the moment.

The final decision will then go to the new Culture Secretary Matt Hancock, a decision he will probably have to take before the summer recess.

If the Competition and Markets Authority continue to block the £11.7 billion deal on fears that the Murdoch family would have too much influence on Sky News, then Culture Secretary Hancock, who at least knows about the scale of online digital threats, should have the courage to overturn the decision.

Then everybody can get on with the more serious issue – protecting the future of Sky News within the Walt Disney Company.

Correction:

This article was updated on Friday 26 January at 11:50am. The original incorrectly stated in its opening lines that Ofcom had cleared deal. This was note true. Ofcom’s role in law was specifically (and only) to advise the Culture Secretary on whether or not the deal should be referred for further scrutiny by the CMA (whose role allowed it to advise clearance, blocking or remedies).

In the event, Ofcom did recommend to Karen Bradley that the deal be referred to the CMA, for media plurality reasons. In its report, it said: “the transaction raises public interest concerns, as a result of the risk of increased influence by members of the Murdoch Family Trust over the UK news agenda and the political process”.

Those findings were closely echoed by the CMA this week.