Rupert Murdoch And A Fundamentally Changed World

Michael Hedges January 24, 2011 Follow on Twitter

Rupert Murdoch will reportedly fly to London this week to rally his generals for the next skirmish in a war he cannot lose. The war to gain decisive competitive advantage for News Corporation in the UK media market is one he did not expect to fight on open terrain. Battles are very hard to control.

Insurgent competitors, largely newspaper publishers, won a small but perhaps decisive victory last week when UK Prime Minister David Cameron’s communication director (read: spin doctor) Andy Coulson felt compelled to resign. Prior to his political career, Mr. Coulson had been editor of News Of The World (NOTW), the popular, profitable and prurient tabloid owned by News International, which in turn is owned by News Corporation. He was a News Corp insider. He left that job, too, when a minor scandal and major embarrassment broke out over payments made to a contractor for information gleaned from surreptitiously accessing telephones of celebrities, the stuff tabloid fans love to see. Inconveniently, this phone hacking is quite illegal in the UK and the contractor went to jail.

The spin from News International was that it was a “rogue” writer who contracted for potentially titillating details from the lives of Royal Family members, sports figures and, occasionally, politicians. Official investigations would yield no grand conspiracies, no hints of a wider misconduct. Reporters for competitor news organizations, largely, moved on to bigger stories.

The bigger stories included economic meltdown and the UK general elections. The economic meltdown caused much soul searching within the UK media sector, including News International. Ad spending fell, disproportionately affecting newspapers. The internet was both taking a chunk out of newspaper circulations and a big chunk out of ad revenues. Media, not limited to the UK, was facing nothing but change upon change in the first decade of the 21st century.

In addition to newspapers in several countries, News Corporation owns radio and television stations, giant film and television producer 20th Century Fox, internet portal MySpace (reportedly soon to close) and much, much more. It is one of the most highly developed – vertically and horizontally – media concern in the world. Through News International it owns 39% of UK pay-TV operator BSkyB. Like all large multi-nationals in times of change News Corporation reacts defensively and offensively simultaneously.

Mr. Murdoch has never parsed nuance on his positions on issues of concern to News Corporation. Google was stealing his movies. Public broadcaster BBC had no right to his audience. Media regulation in the UK was onerous. He’d not stand for the “free culture” of the internet. And nobody would tell him how to run his newspapers. Many of his UK competitors agreed, at least in principle.

Also in general agreement were Conservative Party politicians. During the 2010 general election campaign they received editorial endorsements from News International newspapers. Though the election was less than an overwhelming victory for the Conservative Party yielding a governing coalition with the slightly less right-wing Liberal Democrats, Conservative Party leader David Cameron became Prime Minister. He brought with him Andy Coulson. Rupert Murdoch paid them a special visit, details of discussion points not made public.

Shortly thereafter, News International announced its intention to acquire the 61% of pay-TV operator BSkyB it did not already own. The company would pay half in cash and half in stock at a cost of about €9 billion. The company’s ambition to own BSkyB entirely was well known. James Murdoch is already BSkyB chairman.

Competing UK media operators wailed, dragging out every possible imagined horror. Rupert Murdoch, they said, would hold too much power within the media sector and, perhaps, within the body politic as well. The UK government ceded a preliminary anti-trust inquiry to the European Commission, which found no problem. UK regulator OFCOM would report on the media pluralism question. Business Secretary Vince Cable, on viewing that report, would decide on further action, which, at the very least, would delay government approvals for months.

During discussions with the European Commission DG Competition staff News Corporation lawyers, reportedly, offered to jettison the Sky News channel to sidetrack criticism of Mr. Murdoch’s intention to see a more opinionated news offering along the lines of the ‘teabagger’ supporting, veracity-challenged US Fox News channel. A more nuanced offer to the UK government would place Sky News in an independent trust. More recently, the company said it would make no more concessions.

Those months would cost News Corporation millions in interest and transaction fees. James Murdoch made a slimly veiled threat to exit the UK if a quick decision couldn’t be made. Nobody believed it but, clearly, temperatures were rising.

Then two reporters for the Telegraph – a competitor – posing as constituents taped Vince Cable saying he’d “declared war” on Rupert Murdoch.  Mr. Cable, from the Liberal Democrat part of the coalition, was pulled from the BSkyB review, replaced by Culture and Media Secretary Jeremy Hunt, a Conservative Party appointee and acknowledged News Corporation supporter. Secretary Hunt’s decision on referring the BSkyB – News Corporation deal for further investigation – and publicly releasing the OFCOM report – is expected within two weeks. Secretary Hunt also announced (January 20) “a thorough review of media and communications that will lead to a new Communications Act.” Prime Minister Cameron pledged in November to have “the most open and transparent government in the world.”

On returning to the phone-hacking story reporters found plenty of red meat. More celebrities and their lawyers had begun asking for more information, suspicious that their phones had been hacked more recently than the old NOTW admissions. Less than subtle allegations have been raised about collusion between News International executives and police agencies to limit formal investigations. Fresh allegations have led to the suspension of another News International executive and doubts about statements from News International executives. That, and a renewed probability of further civil litigation, led Mr. Coulson to fall on his sword.

Damage control – both hard cash from pending civil suits and hard reality of increasing public awareness of the media plurality issue – will top Mr. Murdoch’s London visit with News Corporation executives. Then he can retreat to Davos in the Swiss mountains for the World Economic Forum (WFE) at the end of the week where Prime Minister David Cameron will also be in attendance and the media is always kept at great distance. The focus of this year’s WEF is the “fundamentally changed world,” something Mr. Murdoch knows from experience.

See also in ftm Knowledge

Rupert Murdoch and News Corporation

News Corporation is a highly competitive media giant a global, multi-media footprint. From paywalls and pay-TV to tabloid troubles and new ventures the media industry watches Rupert Murdoch. Update includes family ties, succession plans and other News Of The World. 172 pages PDF (April 2011)

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