Vince Cable referral of Sky takeover to Ofcom is about money not competition

Well they’re the same aren’t they? Not exactly.

Business secretary Vince Cable’s decision to refer the News Corporation bid for the 61 per cent of the Sky pay-TV broadcaster it doesn’t already own became inevitable when various other UK media owners including the BBC, Channel 4, Mail and Telegraph recently demanded he do so.

It’s bad enough upsetting Rupert Murdoch let alone that lot. As things stand Cable may do both.

Sky wouldn’t be here were it not for News Corporation, its money and Rupert Murdoch’s vision and dogged determination to see it through. Murdoch merged his Sky satellite business with the failing British Satellite Broadcasting to form BSkyB (to give it its full moniker) when few people thought this new-fangled pay-TV stuff would work.

Certainly ITV didn’t and it allowed Murdoch to pinch what is now Premiership football from under its nose and begin the process of building a company turning over more than £6bn a year, nearly four times the size of ITV.

The merger is one reason why Murdoch doesn’t own all the shares, the other was the need for a quoted company with outside shareholders to raise the mind-boggling amounts of money the business soaked up in its earlier days.

But it was always Murdoch’s baby. So what’s the problem if he wants to take it back into the family by paying Sky shareholders about £8bn for the 61 per cent he doesn’t own?

News’ pockets are deep (it’s just reported $809m quarterly profits, up from $597m) but not bottomless.

The UK media gang says it’s competition, Murdoch is already the biggest newspaper owner in the UK with the Sun, Times and Sunday Times and if he owned its biggest TV station (by revenue) that would be too much power in one company’s hands.

But revenue is the key. Sky, because it’s a pay-TV operator doesn’t attract big audiences by the standards of others. Sky programmes rarely attract ratings of a million or more. The fear is that access to the tidal wave of cash Sky generates by selling people packages costing an average £400 a year or so will mean that Murdoch can do what he likes on the UK media scene, like crunch the competition.

The latest fear is that he would bundle in his newspapers to Sky packages, selling subs to both the printed versions and his new paywall-protected newspaper websites, thereby using Sky to increase his hold on the print market.

But such cross-selling is almost exactly what his rather smaller rival Daily Express owner Richard Desmond is openly planning to do with his new TV station Channel 5 and there was nary a squeak from the Government and Ofcom about that deal. And Desmond owns a number of digital porn channels, which Murdoch most definitely does not.

Cable had to step in now because News has just approached the EU for its permission to complete the deal. The EU is felt likely to rule that there is no competition issue because it will look at audiences not money.

So the ball is firmly in Ofcom’s court which is rather ironic as prime minister David Cameron promised to cut the broadcast regulator down to size, leaving it to rule on issues of bandwidth and the like, leaving the clever ‘policy’ stuff to the politicians. Except that Cable has now discovered it’s quite handy to have a regulator who isn’t him around, saying to Ofcom boss Ed Richards, “just sort this one out for me, mate.”

And what will Ofcom decide? What should it decide?

As things stand it should leave the matter to Sky shareholders. They may decide they don’t want Murdoch’s money now, preferring a share of the huge profits everyone thinks Sky will make in the near future. They could say they want a few billion more for their 61 per cent, putting the company out of reach of even the Murdoch corporate wallet.

As for competition, or ‘diversity,’ Cable has just demonstrated that the Government has the powers to intervene in the media market should it so decide. It has quite enough powers to stamp on anti-competitive behaviour, more indeed in the media market than many others which actually make more difference to people in the UK, such as the energy market.

The only reason for stopping the deal is to stop the (already huge) Murdoch empire growing even bigger in the UK. That, on its own, doesn’t seem fair or reasonable.

But it will probably take a further referral, from Ofcom to the Competition Commission, before common sense prevails.

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About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.