Think plurality and competition law will stop news corp in its tracks?

Look closely at the deal and the handwringers will see there are no good reasons to turn down News Corp’s bid for Sky

SkyB’s recent astonishing results – 10 million subscribers, 26% profit growth – is a timely reminder that the media industry is waiting on the biggest decision to affect it in recent times. Next month will be crunch time over whether culture secretary Jeremy Hunt will refer News Corp’s bid for the 61% of BSkyB it doesn’t already own to the competition authoritities or choose to waive the deal through.

Despite the angst of many liberal journalists and some self-interested media owners, the deal looks set to go ahead. There are only two grounds to block the deal at this stage – either concerns about competition or concerns about media plurality – and the bid for Sky will pass the test on both.

Indeed, on competition, the EU has already cleared the deal, so there would seem to be no case to answer in the UK. And that’s probably right. Spot advertising on television (not a big part of Sky’s income, in any case, given its reliance on subscribers) and newspaper advertising are deemed to be separate markets. While some newspaper proprietors would like a redefinition to include all paid-for media spots, regulators and legislators do not yet see the market that way. Less than a year ago, competition reviews on Project Kangaroo (now YouView) identified web TV as a different market from linear TV, so don’t expect straight competition law to block this particular deal.

Even the risk that News Corp might bundle services together and cross-subsidise its loss-making newspaper arm News International is hardly different in principle from, for example, Guardian Media Group investing in AutoTrader to support its Guardian newspaper. Only if Sky’s burgeoning profits were used to subsidise sustained price-cutting of its newspapers that could put its competitors out of business would the competition regulators be roused, and that’s something for the future, if the deal goes through.

For consumers, as opposed to advertisers, the deal looks like a good thing. No doubt News Corp would bundle even more attractive packages together (see, speak, surf, read) to ensure that viewers and readers are well served.

Which brings us to the thornier question of media plurality. This is a difficult concept to grasp. The thinking runs that different owners of media titles or channels are more likely to deliver a breadth of services than monopoly providers. Of course, you might argue that the reverse is true – that a concentration of ownership might produce a variety of offers from the same supplier to cover more parts of the market. But, the political orthodoxy is that plurality of ownership is the best way to secure diversity of output.

On these grounds, the News Corp/Sky tie-up faces trickier questions – as suggested by Ofcom’s interim report outlining that there may be grounds to refer the deal to the Office of Fair Trading. As you would expect, News Corp’s defence has been robust. Self-evidently, there is a reduction in plurality of one if the two companies combine. But News Corp argues that the TV, radio and newspaper sectors remain well served – with major players like ITV, Channel 4, Five, Global Radio, Trinity Mirror, Daily Mail & General Trust, Telegraph Group and Guardian Media Group (let alone the state-funded BBC) ensuring there is plurality of provision and diversity of output for viewers and readers.

More likely, then, is that the decision will hinge on broadcast news provision, where the number of providers – primarily Sky, ITN and the BBC – is much more concentrated. On this issue, News Corp will argue that there are other global news providers in the UK (just look at Al Jezeera’s English coverage of the unrest in Egypt) such as CNN, Reuters, Bloomberg and CNBC. Nevertheless, it is the narrow span of UK-based news suppliers that is likely to interest politicians the most.

Look closely at the deal and the handwringers will see there are no good reasons to turn down News Corp’s bid for Sky

Here though, News Corp will argue that there is actually no reduction in plurality – so no case to answer. Moreover, the UK’s strong TV broadcasting code rules safeguard the impartiality of news broadcasts (unlike, for example, with Fox News in the US) meaning ownership is genuinely held separate from editorial integrity.

Given that, what is likely is a ’remedy’ to reassure the politicians and enable the deal to go through. That could be an offer to sell Sky News (although few buyers will want to pick up the losses of a 24-hour news operation) or, more likely, some sort of trust or editorial board to ensure independence from its owners. The conspiracy theorists won’t like it, but as long as regulation demands news impartiality in the UK, regardless of ownership, there are no grounds to block the deal.