One and very possibly the only thing that I have in common with Rupert Murdoch is the feeling that we may have been the leaders of mischief at our schools. Watching how his media emulators pile in with imitative bids for British football clubs in the wake of his cheeky bid for Manchester United, I’m reminded of the mild contempt I felt for my peers when, having broken into the tuck shop or summoned up the bottle to enter a pub and ask for a beer, they followed and claimed they had been planning to do so all along.
Murdoch knows, as I did as a schoolboy, that you get more of what you want by making the first move. You also get the kudos. Early birds and worms come to mind. But the aphorism doesn’t always hold true for doing business in the British regulatory environment, where a more appropriate dictum might be: while the early bird gets the worm, the second mouse gets the cheese.
Those who make takeover bids that are referred to the Office of Fair Trading and the Monopolies & Mergers Commission suffer lawyers’ costs and inflated purchase prices as a result of the delay, while those who follow know that they might be waved through on the precedent. Those who follow may also be able to cut their cloth, the better to make the regulatory fit.
I touched, in passing, last week on the weird antipathy that the British have for vertical integration. In some sort of sub-Marxist way, it is deemed inherently wrong for distributors to own the means of production, which is what any serious complaint about Murdoch’s Manchester United bid is about.
In the week when domestic customers (among them, those in Manchester) were, for the first time, able to choose between suppliers of electricity, it seems faintly amusing that there should be a populist outcry against Murdoch, the distributor, seeking to own a sports “generator” such as Man Utd, the more effectively to distribute its product.
Old Labour was always rather fond of vertical integration, in its defence of nationalised industries, and it really only became the greatest enemy known to competition under Margaret Thatcher’s Tories, so it will be interesting to see what New Labour makes of it. Trade Secretary Peter Mandelson is reported by friends to be mildly embarrassed by his “I’m a great fan of football and those who broadcast it” line. But it does leave a door ajar (and I don’t mean in the Oval Office sense) for vertical integration in this industry.
I think it’s vital that this should be the case for the British football industry to compete effectively on an international basis. Last month, I wrote with some prescience, as it turned out, that “BSkyB, in rude health partly as a result of its broadcast deal with the Premiership, can be expected to throw good money after good”. As accountant Deloittes & Touche puts it, in a report that it had just published into the finances of the Premiership: ‘The money seems to go down without touching the sides.’
The effect, according to Deloittes, was a widening abyss financially between the Premiership and the rest of British football. One effect of the relative prosperity of the Premiership is its ability to attract top performers from around the world. As I said previously, there is a limit to how long this situation would be allowed to go on by other continental clubs which would inevitably get wise to the commercial model on which the Premiership had developed.
Negotiations between Barcelona and Sony, between Real Madrid and Telefonica, between Anderlecht and DirecTV and between Dynamo Kiev and Microsoft, to name but a few, would appear to suggest that this process is well underway. I might add that were Granada to go for Liverpool and Carlton for Arsenal – or were Granada and Carlton to go for both clubs jointly through their common interest in BSkyB competitor ONdigital – then the trend towards vertical integration in regional utilities industries would simply be developing from water and electricity, through cable and telecoms and into broadcasting.
As the development of these cross-border utilities of telecoms and broadcasting gathers pace, it is incumbent on those who supply the software in the form of entertainment – the likes of Man Utd and Arsenal – to remain competitive. I trust this internationalist factor will be taken fully into account by Mandelson and his colleagues, at least as much as any pressure from the Luddites to get tough with Murdoch.
Should anyone consider global justification for vertical integration in the British football industry to be just so much sophistry, I invite them to look at some significant names that are beginning to appear on the team lists in this game. Not the least of these is American investment bank Salomon Smith Barney, which has contacted Man Utd with at least one potential contesting bidder for the business. For its part, the club is advised by one of the largest investment banks in the world, HSBC.
I note also that Umbro, the American sportswear conglomerate that makes the Man Utd and England football strips, has appointed Salomon to find a buyer.
When the likes of HSBC and Salomon are involved, any little local concerns about vertical integration are likely to be swept aside in the interests of global business.