ICT and Regulation: The News Corp - Essay Example

Case Study Essay on ICT and Regulation News Corp's buyout of BSkyB The News Corp offered to buy remaining 61 percent of BSkyB. News Corporation is owned by media mogul Keith Rupert Murdoch who already owns almost 39 percent of the equity in BSkyB. European Union’s antitrust competition regulator came into action to investigate the matter on the grounds of competition. The European Commission The European Commission giving its report in the third week of December, 2010 concluded that the transaction to control BSkyB by News Corp is not going to hinder the competition in the European Economic Area (EEA). Its findings discussed about the competition aspects only and UK regulatory body will decide about media plurality aspect protecting legitimate interest of British nationals. It should be noted that media plurality assessment and competition assessment are two different areas of concerns. The Competition assessment focuses on the matter related to the pricing structures or any forced offerings. Against this, the issues related to the media plurality pertains to the role played by media in relation to influence the democratic fabric of the various institutions in their own interests, which in the long run could pose a threat to the health of country. The findings given by European Union’s antitrust commission are listed as per the following. 1. The commission is of the view that Existing share of the BSkyB in the supply of basic pay-TV channels is not likely to improve remarkably. 2. News Corp and BSkyB are in competition with each other to a limited extent as they are active in different markets in the UK and the Ireland. 3. The combined market share in TV advertising is not big enough to influence the market in large extent. 4. The commission reached to the conclusion that the transaction is not likely to increase News Corp’s clout in acquiring the advertisements in their favour in broadcasting and print media due to lack of enough marketing power. On investigating about the concerns that News Corp would be able to stop their competitors accessing the premium movie content, the commission viewed that News Corp does not have sufficient market power in garnering the majority broadcasting rights for premium segment movies because its competitors have enough avenues to have them with other premium content. 5. The Commission investigated about the possibility of offering combined bundles for subscription to their versions of online and prints along with satellite pay channels. The commission concluded that majority of newspapers' on line editions are currently free of charge and that situation is not going to change for quite a long time. Thus, the commission sees no competition concerns in the publishing sector due to this transaction. 6. There is a concern that this buyout would eliminate the competitors of News Corp from getting BSkyB's pay-TV offering in the licensing of TV programme and premium movie stuff; however, the commission believes that this portion forms a small part of Sky's bouquet and BSkyB would always prefer to obtain content from News Corp's competitors as its prime objective will be to get the most attractive retail offering. (Mergers: Commission 2010) EU has already ruled in favour of News Corp; it is worth watching what stand is taken by the regulatory authority of UK on plurality aspects. Murdoch and Media Ownership in UK Media ownership leading to monopoly has always been an issue in U.K. Anyone through his companies covering a large portion of print and broadcasting media becomes an issue for the public and politicians. Such a person taking a deep interest in nation’s politics and tries to influence the elections becomes a point of great debate and controversy. It should not be forgotten that 30 years ago, Murdoch took over ‘The Times’ and ‘Sunday Times’ newspapers during Margaret Thatcher’s government without the matter at that time being referred to the Monopolies and Mergers Commission (MMC) even though he did own during the time the other print publications such as ‘The News of the World’ and ‘The Sun.’ Then, the Secretary of State for Trade, John Biffen had taken the stand that said news papers were about to down the shutters and if the matter had been referred to the MMC, in all probability those papers could have closed the shutters permanently because of the likely delay in taking the decision in such matters. In 1990, the things repeated, when Sky TV got merged with the British Satellite Broadcasting without being referred to MMC. The reason forwarded was the same that if merger were not permitted, both the entities would have closed down the operations. It should be kept in mind that BSB got the license in the past from an Independent Broadcasting Authority and even then a merger was officially permitted without any formal investigation. It would be pertinent to look at some of the developments that took place in the recent past. On the advice of Office of Fair Trading, the Department of Trade and Industry conducted a full competition enquiry when BSkyB offered to purchase a 17.9 percent stake in ITV. On its finding the competition commission directed BSkyB to reduce the shareholding. Virgin and BT filed complaints against BSkyB for their dominant position in the pay TV market stating that it is harming former's interest and on that Investigations were ordered by the authority. Political analysts are puzzled about the interest of Murdock in acquiring 100 percent stake in BSkyB as he is already holding a position of chairman in BSkyB with 39 percent stake in the entity that has already given him the full control on the company. Pay TV is growing at a faster pace and BSkyB controls the market with more than 10 million subscribers in the Ireland and U.K. garnering revenues of £5.9 billion against £3.6bn of BBC and £1.9bn of ITV. The competition such as BBC, Daily Telegraph, BT have asked Vince Cable, Business Secretary, to initiate investigation as this buyout proposal could bring grave consequences disturbing media plurality. Later on, the matter in this regard was then handed over to the Culture and Media Secretary, Jeremy Hunt, who in turn was supposed to be advised by Ofcom. (Douglas, Torin) And then, it was the 3rd March, 2011 when the news flashed that News Corporation had been given a green signal for complete takeover of BSkyB without considering any need of referring the case to Competition Commission. The quick reactions that happened can be described as per the following. 1. Culture Secretary, Jeremy Hunt, mentioned that there is no need of referring the matter to Competition Commission; however, Ofcom did suggest for investigating the matter by the commission. Hunt argued, “Ofcom assured me that News Corp's undertaking addressed its concerns about media plurality." (Rupert Murdoch BSkyB…) 2. European Union has already come out with their report that there is no reason to oppose the buyout on competition grounds. 3. Changing their earlier stance, News Corp have taken steps to separate out Sky News in a separate channel to inform that it will have less control in a new outfit. 4. Labour party has doubted that Sky News will be truly independent entity. (Rupert Murdoch to dispose…) News Corporations’ Fresh Proposals News Corp has made some new proposals to pacify those who have concerns. A. Sky News after separating off will depute an independent non-executive chairman and directors. B. News Corp has proposed the shares in Sky News be offered to existing shareholders limiting their own holding to 39 percent. C. News Corp will not increase its own shareholding until 10 years without the permission of the government. The important question is that whether News Corp will be able to influence from outside though it commits to establish BSkyB as an independent unit. The print companies such as Guardian Media Group, Associated Newspapers, BT and Telegraph Media have written to all MPs that the government decision for not referring the takeover matter to Competition Commission is not justified. They have argued that News Corporations will always have increased control over Sky News as it does not have capacity to generate funds, which is essential for remaining truly independent. (UK gov't…) Conclusion The proposed buyout can lead to serious implications in the future. It is a fact that print and broadcasting media have the capacity to influence the political outcomes. Media is considered one of the important pillars to safeguard the democratic institutions. Murdoch, known as media magnet, can twist the political outcome in his favour at the most critical juncture and disturb the democratic setup of the nation. It should not be forgotten that News Corp has many other interests in other countries too such as 20th century Fox film studios, Fox broadcast, Wall Street Journal, Cable networks, Pay channels in Asia. Competition Commission is an independent regulatory body and it can investigate the matter through its expertise to arrive at the conclusion and satisfy all those who have concerns from this take over. Moreover, the credibility of the government gets established if the final decisions in such matters are taken by regulatory body like Competition Commission. This always helps fortify the democratic setup of the nation and justify the very purpose of creating such institutions for country’s healthy growth and development. Regulatory bodies are formed precisely for this reason to regulate the market and safeguard the interests of nation and its citizens. References: 1. (Mergers: Commission 2010) [Online] Available at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/10/1767 [Accessed 30 April 2011] 2. Douglas, Torin. Analysis: Murdoch and media ownership in UK. [Online] Available at http://www.bbc.co.uk/news/uk-12062176 [Accessed 30 April 2011] 3. Rupert Murdoch to dispose of Sky News for bid approval [Online] Available at http://www.bbc.co.uk/news/business-12627703 [Accessed 30 April 2011] 4. Rupert Murdoch BSkyB takeover gets government go-ahead [Online] Available at http://www.bbc.co.uk/news/business-12631875 [Accessed 30 April 2011] 5. UK gov't criticised over News Corp-BSkyB deal [Online] Available at http://uk.finance.yahoo.com/news/UK-gov-criticised-News-Corp-targetukfocus-337795300.html?x=0&.v=1 [Accessed 30 April 2011] Read More