UK gov’t turns against Murdoch BSkyB bid
Tuesday, July 12, 2011
LONDON (AP) — The cozy relationship that Rupert Murdoch long enjoyed with the British power structure came to an abrupt end Tuesday, just as he needed it to complete one of his biggest media buys ever.
The billionaire, tainted by a cell phone hacking scandal at one of his newspapers, suddenly faces stiff government opposition to his bid for total control of a much more lucrative property: the satellite British Sky Broadcasting company.
The news came in a stunning announcement from Prime Minister David Cameron’s office that the government will support a motion calling on Murdoch and his News Corp. to withdraw the $12 billion bid for BSkyB.
Cameron’s turnabout means the Australian-born Murdoch, who held great influence in British politics no matter who ran the government, suddenly finds all three major political parties lined up against him. He’s even been asked to appear before lawmakers next week to answer questions about the conduct of News International, Murdoch’s UK company.
A resolution calling for the scrapping of the BSkyB deal would be nonbinding but would likely be seen as a powerful expression of united opposition to any substantial expansion of Murdoch’s holdings. The deal is awaiting regulatory approval.
The long-brewing hacking scandal at Murdoch’s News of the World tabloid turned into a crisis for the media magnate this month following allegations that the paper’s employees hacked the phone of Milly Dowler, a 13-year-old murder victim, and deleted several messages in 2002. In response, News International closed the tabloid for good Sunday, but that has not stemmed the outrage among Britons or stopped new hacking allegations from emerging.
Cameron, who has enjoyed friendships with some top Murdoch executives, took action after his predecessor, Gordon Brown, gave an emotional televised interview Tuesday saying that Murdoch journalists with ties to the criminal underworld invaded his family’s privacy as well.
Brown said Murdoch’s papers, including the Sun and the Sunday Times, had used fraudulent and criminal means to obtain his confidential bank accounts, tax records and even health information about his son, who suffers from cystic fibrosis.
He said he was in tears after learning The Sun planned to publish stories about his son’s illness, which had been kept within the family. But he told the BBC that it was people “at rock bottom” who were most brutally exploited.
“What about the person, like the family of Milly Dowler, who are in the most desperate of circumstances, the most difficult occasions in their lives, in huge grief and then they find that they are totally defenseless in this moment of greatest grief from people who are employing these ruthless tactics with links to known criminals?” Brown said.
News International issued a statement indicating it had gotten the scoop about Brown’s son’s illness through legitimate means, but Brown’s allegations seemed to only heighten the anti-Murdoch mood spreading through Parliament.
Three senior Liberal Democrats — deputy leader Simon Hughes, party president Tim Farron and culture spokesman Don Foster — wrote to Murdoch on Tuesday evening urging him to drop his bid for the broadcaster in light of the long-running scandal.
“News International is simply no longer respected in this country,” they wrote. They said the company is tainted “by a history of completely unacceptable journalistic practices,” and that Murdoch should concentrate on cleaning it up rather than expanding his media empire.
Murdoch and News International did not respond to the government’s decision to join the opposition and try to put an end to the bid to buy BSkyB in full. Murdoch already owns a partial stake in the company.
The rapid erosion of Murdoch’s influence, and the fact that Brown alleged wrongdoing by News International papers not previously at the center of the scandal, is raising speculation that Murdoch may decide to close his remaining UK newspapers to avoid further legal problems and boost his fading hopes to seize control of BSkyB.
“I think it’s absolutely going in that direction,” said Steven Barnett, a communications professor at the University of Westminster. “It would make commercial sense, since newspapers are in decline, and it could be presented as the moral thing to do, given all the horrible things that are emerging.”
Barnett said “the real prize” for Murdoch is BSkyB because cable television is a growing enterprise and newspapers are not. He said New York-based News Corp. is essentially a broadcasting company, and Murdoch seems to hang on to his UK newspapers out of nostalgia.
“Newspapers are a sunset industry, and BSkyB is the absolute opposite,” he said. “It is projected to return an operating profit this year of 1 billion pounds ($1.6 billion). ... You can’t bet against an obvious trend.”
Murdoch biographer and Adweek editorial director Michael Wolff said the idea of a closure is being discussed at high levels of News International in New York and London.
“It’s one of many scenarios,” he said. “If they are going to make a full-court press for BSkyB, it makes a lot of sense. And there has always been a faction of the U.S. company that thinks the British company has outlived its usefulness.”
There are indications, however, that Murdoch plans to continue — Internet domain names that could be used if Murdoch starts to publish the Sun on Sundays have been transferred to News International.
And some observers think the idea of a UK newspaper shutdown is absurd.
“It’s completely bonkers,” said Claire Enders of Enders Analysis. “They just invested $1 billion in new presses. They have revenues of 1 billion pounds a year and around 50 million pounds profit.”
Enders said, however, that Murdoch might help his case for the BSkyB takeover by eliminating the newspapers because he would have a much smaller UK media profile, making it easier for regulators to allow him to take full control of the broadcaster.
Murdoch, his son James and News International Chief Executive Rebekah Brooks have been asked to appear before British lawmakers to answer questions about the hacking allegations. News International said it was aware of the request and would cooperate with it, but has not formally responded to the invitation.
The company, which is not under any legal obligation to attend, has until Thursday to respond.
The allegations of illegal eavesdropping on politicians, royalty and hundreds of ordinary people at Murdoch-owned newspapers has broadened, with among other accusations, the allegation that Murdoch reporters paid bodyguards of Queen Elizabeth II for sensitive phone numbers and travel plans.
The scandal has come close to Cameron, who enjoyed the enthusiastic backing of the Murdoch press in his campaign last year. He has been embarrassed by the arrest of former News of the World editor Andy Coulson, who was his communications director. His decision to hire Coulson despite suspicions about his possible links to phone hacking has raised questions about his judgment.
The scandal also has sparked anger at London’s Metropolitan Police for dropping an earlier investigation into News International practices.
At a tense House of Commons parliamentary committee hearing Tuesday, one current and two former senior officials of London’s Metropolitan Police said they regretted that an investigation of the News of the World in 2006 had not uncovered the extent of the alleged phone hacking. They blamed the News of the World and News International for not cooperating and pleaded that the force was preoccupied with terrorism investigations.
BSkyB shares fell for the sixth straight day, closing down 3.3 percent at 692 pence ($11.03) on the London Stock Exchange. At the start of last week, they were at 850 pence.