Do you think Rupert Murdoch is having second thoughts about his outburst against the Government’s cross-media ownership proposals? He certainly ought to be, in the
light of the campaign by his TV rivals for the Office of Fair Trading to investigate BSkyB’s new contracts with the two largest cable TV companies, Nynex Cablecomms and Telewest.
For the new row demonstrates how lightly he got off in the Government’s media policy document. Far from condemning Stephen Dorrell, should he not have been thanking him for leaving his empire unscathed?
I have to confess that when I first read News International’s statement criticising the Government’s plans, I took it with a pinch of salt. Instead of the anger that apparently prompted it, I perceived irony – plus a few well-worn jibes at competitors.
The jokes in it, I thought, were good: “The message is: stop investing in expansion and increase prices to hold back circulations.” And: “We hope for a constructive dialogue with this supposedly free-enterprise, pro- competition Government.”
The jibes were less well chosen. Lumping together Associated Newspapers, Pearson and Carlton Communications as “the old vested and often unsuccessful interests”, prompted the reasonable response from Michael Green that Carlton was none of these things.
As for the threat to “consider its position with regard to loss-making newspapers”, the idea that NI was seriously about to discard Today and The Times made little sense, as became clear within 48 hours when it announced its intention of investing yet more millions in Today.
The key sentence in the NI statement, ignored by most of the media, was the first: “We do not expect that any of the proposals will have any immediate effect on the company’s business.”
So why was Murdoch – as later became apparent – so agitated? Had his UK executives – those who remained in their jobs – not prepared him for the Government’s proposals? Did he really believe that with more than 30 per cent of national newspaper circulation, 40 per cent of the nation’s only pay-TV company, BSkyB, and control of the technological “gateway” to pay-TV, he was going to be allowed to buy an ITV company too?
Only weeks before, many people had been appalled to learn he was already entitled to 20 per cent of Channel 5, or any ITV company – investing either through BSkyB or NI. How could he have expected the rules to be relaxed for him still further?
Undeniably, NI was one of the two “losers” in the Government’s proposals. But there was never any prospect of it being one of the winners – and things could have been far, far worse for it.
To start with, the Government has accepted the principle of media “usage” or consumption as a way to measure media ownership. And which group was the first to put forward publicly this suggestion? Why, NI, in a paper it commissioned from Arthur Andersen Consulting, published in August last year.
It is true that under the methodology used in that paper, NI ranked only fifth in the list of media power holders, equal with Capital Radio, which goes to show that the principle is flawed. Yet the Government accepts the idea, as NI suggested.
The downside for the company is that because it has more than 20 per cent of national newspaper sales, it cannot take over any ITV companies, as most of its rivals will be able to, assuming the legislation passes.
Even if the Government had set the threshold at 25 per cent or 30 per cent, NI would still not have qualified. Had the level been set that high, Murdoch genuinely could have felt singled out – but, as it is, Mirror Group (with no stake in BSkyB and a much smaller share of newspaper sales) is also excluded.
Even if Murdoch sold Today or The Times, he would still be nowhere near the qualifying level, which is why his comment about “considering the position” of the loss-making papers seemed just sabre-rattling. According to the British Media Industry Group’s submission, which so influenced the Government, Today had about 3.4 per cent of national sales and The Times 2.7 per cent. Selling both of them would still leave NI with about 30 per cent of the market.
But why should he want to reduce his share, anyway? To have the chance to buy Yorkshire Tyne-Tees, or HTV? Why not just stick with the vastly more profitable BSkyB?
For the good news for Murdoch is that the Government is applying the same “usage” principle to TV. Under these calculations, BSkyB has just four per cent of the market, which means it can expand its audience virtually without limit.
Imagine how Murdoch would have reacted if the Government – as some people were urging – had decided to measure media ownership in terms of revenue. BSkyB’s income from 4 million homes is now running at about 800m a year, compared with 1.3bn for the whole of ITV.
Combined with his TV interests in other parts of the world, it means Murdoch can purchase the rights to virtually any programming he likes – sport, films, or other such important events. This power is not acknowledged in the Government’s immediate proposals at all – and scarcely in its longer term suggestions either.
As for the Murdoch empire’s control of the pay-TV smartcard technology, that too was hardly mentioned. Rival broadcasters claim that because NI controls the BSkyB channels and the gateway through which other broadcasters can operate satellite subscription services, it will be able to discourage rival channels from becoming too successful.
The Government paper suggests such matters will be closely watched by the competition regulators, in the UK and Europe, such as the OFT and the European Commission.
Yet, as was pointed out last month by David Glencross, the chief executive of the Independent Television Commission, such bodies can act only after the event. This means after complaints from dissatisfied companies, many of which may be unwilling to challenge publicly such a powerful operator.
Had Dorrell suggested that Murdoch give up control of his satellite TV stations or his subscription technology – or indeed one of his newspapers – the blast from Wapping would surely have been heard in Hong Kong, Australia, New York and every other part of the empire where the Sun never sets.
As it is, Murdoch should be thankful for small mercies.
Torin Douglas is BBC Radio’s correspondent.