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Now UK broadcast regulator Ofcom tightens the screw on James Murdoch and BSkyB

It all seems a long time ago now but, pre-dating the phone hacking scandal’s full glory, the big media story in the UK was News Corporation’s bid to buy the 61 per cent of UK pay-TV operator BSkyB it didn’t already own.

News Corp was prepared to pay £8bn for the remainder of highly-profitable and cash-positive BSkyB and the BSkyB board, chaired by News Corp deputy COO James Murdoch (pictured), was expected to roll over after the customary round of horse trading.

Then, of course, the shit hit the fan in the phone hacking scandal with James Murdoch, in one of his other roles as chairman of News of the World owner News international, ducking desperately for cover.

When all this blew up UK broadcast regulator Ofcom said quietly that it was keeping an eye on things in line with its duty to ensure that people and companies were ‘fit and proper persons’ to hold UK broadcast licences. It also said that it was unlikely to come to a view regarding the Murdochs and BSkyB until the Leveson Inquiry and others (including by the police) had run their course.

But now it’s ramped up the pressure on News Corporation, James and BSkyB by saying it’s put a ‘team’ on the case, implying that it may no longer be prepared to wait until all the inquiries have run their course. The police enquiries, and subsequent trials if there are any, may take years.

Ofcom’s action looks likely to lead to the resignation of James as non-executive chairman of BSkyB (in reality he’s much more powerful than that, given News Corp’s 39 per cent holding). It has certainly killed off the possibility of News Corp ever buying all of BSkyB. It may lead to a demand that News Corp sells down its stake in BSkyB to a ‘non-controlling’ level, meaning less than 25 per cent presumably.

If that were to happen the outlook for BSkyB would change dramatically. It was always expected to drop into the Murdochs’ lap one day (News Corp did, after all, fund its spectacular growth) so concentrated exclusively on its UK franchise. News Corp owns Sky-branded pay-TV businesses in Germany and Italy so BSkyB was hardly like to cross the English Channel.

But if the Murdochs are out of the game (and News Corp COO Chase Carey has hinted that the company may exit BSkyB altogether if it can’t control the lot) BSkyB’s management, headed by CEO Jeremy Darroch, might well feel that the company needs to spend some of its money getting bigger before an American private equity outfit pounces and lumbers it with billions in debt.

The policy geeks at Ofcom won’t be very popular at News Corp HQ this morning. There’ll also be some anxious discussion on the lines of: what do we do next? at BSkyB.

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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.
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