News Corp's Buyout of BSkyB - Essay Example

News Corps Buyout of BSkyB News Corps offer for 100 % Buyout of BSkyB Introduction In November the News Corp offered to buy remaining 61 percent of BSkyB so as to have full ownership in BSkyB. At the time of this acquisition offer, the News Corp owned by media magnet Rupert Murdock already owned 39 percent of the equity in BSkyB. It will be pertinent to delve into the operations of News Corp and its group companies in Britain to understand whether the intervention of a regulatory body is at all necessary in this acquisition and what are the issues involved in this takeover that may affect the nation and its citizens. Murdoch Group’s Media Ownership in UK During ‘80s Murdochs Sky television was making noticeable losses. That made it necessary to merge with British Satellite Broadcasting and that is how a new entity came into existence called BSkyB. Currently, BSkyB is the most dominating company in the British pay-TV market. By owning 100 percent of BSkyB, Rupert Murdock is likely to have a dominant role in the British print and electronic media that subsequently may play a critical role in influencing major government economic and political policy issues. Rogers (2003) sees the mass media channels such as TV, newspapers, radio in a different perspective as mass media have the capacity to reach a large audience quickly, spread information and alter weakly held attitudes. Thus, too much concentration of media power in one hand or group of people could be detrimental as it may even affect the plural fabric of the society. It is a fact that some 30 years ago the newspapers such as ‘The Times’ and ‘Sunday Times’ were allowed to have a control by Rupert Murdock even though at that time he owned other print publications such as ‘The News of the World’ and ‘The Sun’. The reasons were given that it was necessary in view of the likely closure of these two print media if matter were referred to the MMC. In 1990, Sky TV and the British Satellite Broadcasting (BSB) were merged for the reasons that both were making losses and that was the only alternative to save both of them (Douglas, 2010). In a current scenario, pay TVs continue to expand in size and BSkyB with around10 million subscribers in its fold and revenues that is 2-3 times larger than its nearest rivals BBC and ITV has a dominant position in the market. That means that complete buyout of BSkyB will place Rupert in an enviable position to exert considerable influence in the national media (Douglas, 2010). Reactions from Competition On this acquisition efforts, competition such as BBC, Daily Telegraph, Daily Mail and BT wrote to Vince Cable urging him to initiate necessary investigation as according to them this buyout could pose grave threats to the issues such as media plurality. Recently, Virgin and BT Infinity who shares major broadband market in Britain also made complaints against the BSkyB for their clout in the pay TV market harming their business interests (Douglas, 2010). Vince Cable, business secretary, asked communications regulator to investigate whether News Corps buyout would result into too much of the media under Murdoch. It is important to note that after owning The Times and The Sun print media, News Corp exerts considerable influence in Britain with nearly one-third of the newspaper market in its fold. That is why Ofcom was asked to examine the matter on the media plurality issue that may surface after this acquisition (Douglas, 2010). Not only Ofcom but also European Union’s antitrust competition regulator initiated the investigation in the matter on the grounds of competition (Prodhan 2010). Regulatory Issues Raised News Corp’s past operational history and reactions from certain quarters in Britain as outlined above raises following issues which are at stake if News Corp is allowed to have 100 percent stake on BSkyB. 1. Pluralism and diversity in media sector 2. Competition Aspects Media Pluralism and Diversity as Key Issues Time and again, the government in UK has stressed on plurality that needs to be maintained in the print and broadcasting media. The Broadcasting Act of 1996 had the public interest in sight while providing for commercial broadcasting licenses to media corporations already controlling one or more newspapers. The act aimed at maintaining plurality of ownership in the newspaper industries and broadcasting and it also stressed on the diversity in the sources of information available to the public and in the opinions made out on newspapers, television media. Hitchens (2006) argues that regulation of broadcasting sector must have focus on pluralism and diversity as the core issues and that should be achieved by the application of competition, and content measures. He describe it as having greatest number of newspapers, magazines and broadcasting channels that speak out the widest of opinions within the society. Plurality is viewed as having choices to listeners and viewers as diversified as possible. There is a strong link between diversity of content and plurality of ownership. The plurality is in fact a multidimensional issue and not limited to plurality of ownership or diversity of content. UNESCO’s public information bureau speaks about pluralism as a mission for the free flow of information at all levels. In its report, it states that Media pluralism facilitates the cultures, languages and the expression of diverse opinions in any given society. Moreover, a vibrant democracy thrives on an independent and pluralistic media, which is not inspired by any political or economic controls. Diversified media provides ample opportunities for smooth and free flow of information. Therefore a pluralistic media environment is one where greatest number of periodicals, newspapers, radio and TV broadcasting channels are in operations reflecting widest possible range of opinions at different levels within the society (UNESCO 2006). Hitchens (2006) stresses that “broadcasting does not operate like other markets” [p. 251] and “there are still particular characteristics of broadcasting which make it vulnerable to market failure” [p. 48]. The author also argues that general competition laws are not sufficient for the protection of pluralism in media; however, he argues that Increasing numbers of channels and the scarcity on spectrum front have made the issue of media ownership and control largely irrelevant instead it should be regulated by applying general competition law. Hitchens also mentions about the limitations of the general competition law as enforcement procedures delay the much needed healthy competition in the market. That is why he stresses for a need to have effective enforcement regimen in the field of broadcasting sector. Media pluralism is also propagated by the European Union. In 2007, in a working paper released on media pluralism, the European Commission stated that the pluralism of ownership is not enough to ensure media pluralism. The underlying necessity of ensuring Media pluralism is to provide citizens access to myriad of opinion, information sources, so that one dominant opinion does not influence them (Europa 2007). Rationale for an Effective Regulator– Another Perspective Baldwin and Cave (1999) argue in favour of the state regulations as being the force of law that forbids certain forms of behaviour and necessitates positive actions for entry into a particular sector. (Baldwin and Cave 1999, p 35) Baldwin and Cave maintains that free competition with regulatory body in place has several benefits and that can be listed as per the following. 1. It facilitates the possibility of public scrutiny. 2. Certain minimum standards of operational behaviour can be established among all players 3. Due to applicability of the force of law, the possibility of any deviation is reduced to minimum. 4. Larger objective of the universal welfare within the society can be achieved with ease. Why a Regulator needed in ICT Sector Murray (2006) correctly specifies that the key to understand regulation lies in knowing how regulatory conflicts arise and in what way they are resolved. Some of the areas are regulated for the good of our fellow countrymen and television media is also a part of such regulation. Regulatory body establishes rules and guidelines, decide monitoring processes and provides the incentives on compliance. ICT sector, due to its nature of the industry needs regulation. Due to limited spectrum availability its proper allocation becomes a necessity and that is not possible without a regulatory body. The regulatory body is also needed to see that proper competitive forces are in operation with all fairness towards consumers. Usually, the regulatory body is given proper shape by enacting the necessary law by the government so that it operates with full authority developing all necessary rules and regulations that keeps a check on all unfair practices and safeguards consumer interests. Due to convergence in ICT related technologies, it is important in the larger interest of nation that fair allocation of spectrum is made. This necessitates having a regulatory body in place so that various policies, rules, and procedures could be formulated that ensures a healthy and competitive environment to fulfil the following objectives: 1. Management and allocation of limited resources for the optimum use. 2. Spearheading ICT technology and services for the benefit of consumers. 3. Building up an environment for healthy competition. 4. Consumer interests are kept in forefront maintaining privacy and security. Non-discriminatory treatment to all players in the free market is also one of the prime objectives of a regulatory institution. The transparent environment ensures sustainable investment that helps meet existing as well as future demand. That is all possible only when a proper regulatory body is in place. The UN Task Force on ICT matters advocates the introduction of independent regulators. According to them, that reinforces investor confidence and enhances consumer benefits (ICT regulation 2011). Competition Commission on This Buyout It would be quite appropriate to mention here that News Corp has several other interests in many other countries, to mention some of them such as Cable networks, 20th century Fox film studios, Wall Street Journal, Fox broadcast, Pay channels in Asia. In view of this, the acquisition under discussion cannot be seen as a simple business deal. The proposed buyout can have long-lasting implications. Since this buyout could create the substantial clout in favour of one group, matter can be referred to Competition Commission (CC) of UK which can start an investigation in the matter on the recommendation of Ofcom. The Competition Commission will look into only competition aspects as to how the buyout is likely to lessen the competition in the market and may work against the consumer interests (Baldwin 2010). Conclusion Broadcasting and Print media can greatly influence the political outcomes at the crucial juncture. Democratic setup in Britain or for that matter anywhere else has many institutions to support and media is certainly one of the essential pillars of these institutions. Murdoch by virtue of his media strength can twist the political outcome in future and can disturb the democratic setup. Pluralism and diversity of media are the most desired aspects and that can best be achieved through an appropriate regulatory body at place. Even from the competition view point, regulatory bodies are needed to have appropriate interventions so that the interests of nation and its citizens are adequately safeguarded. References 1. Baldwin, R. Cave, M, Lodge, M. (2010), The Oxford Handbook of Regulation, Oxford: Oxford UP 2. Baldwin, R.; Cave, M. (1999), Understanding Regulation, 1999. P.35 and chapter 4. 3. Competition Commission Framework (2011), [Online] Available at http://www.businesslink.gov.uk/bdotg/action/detail?itemId=1084810492&type=RESOURCES [Accessed 12 April 2012] 4. Douglas, T. (2010), BBC, Analysis: Murdoch and media ownership in UK. [Online] Available at http://www.bbc.co.uk/news/uk-12062176 [Accessed 11 April 2012] 5. Europa (2007), Media pluralism: Commission stresses need for transparency, freedom and diversity in Europes media landscape, [Online] Available at http://europa.eu/rapid/pressReleasesAction.do?reference=IP/07/52&format=HTML&aged=0&language=EN&guiLanguage=en [Accessed 12 April 2012] 6. Feintuck, M.; Varney, M. (1996), Media Regulation, Public interest and the Law, Edinburg, 2nd edition 7. Hitchens, L. (2006), Broadcasting Pluralism and Diversity: A Comparative Study of Policy and Regulation, Oxford and Portland, Oregon: Hart Publishing. 8. ICT regulation (2011), [Online] Available at http://www.ictregulationtoolkit.org/en/section.3106.html [Accessed 12 April 2012] 9. Murray, A. (2006), The Regulation of Cyberspace: control in the online environment, London: Routledge 10. Prodhan, G.; Sandle, P (2010), Ofcom intervenes in News Corps proposed BSkyB buyout [Online] Available at http://uk.reuters.com/article/2010/11/04/uk-bskyb-newscorp-intervention-idUKTRE6A31IA20101104?pageNumber=2 [Accessed 10 April 2012] 11. Media Pluralism (2006), UNESCO, [Online] Available at http://www.unesco.org/bpi/pdf/memobpi46_mediapluralism_en.pdf [Accessed 10 April 2012] Read More