Is media consolidation a bad thing for plurality of the media?

On 4 November 2010, Vince Cable, the UK Business Secretary, referred News Corporation’s (News Corp) proposed takeover of BskyB to the UK telecommunications regulator, Ofcom. News Corp in the UK owns 39% of BskyB, the British satellite television operator and broadcaster; the publisher Harper Collins; The Sun, the News of the World, The Times and The Sunday Times newspapers. The News Corp newspapers have a total market share of 37% on the newspaper market and BskyB has a 67% share of residential television subscribers. Mr Cable has the power to refer media mergers to Ofcom on ‘public interest’ grounds: that the merger could lead to a reduction in the plurality of the media in the UK. Ofcom’s investigation will be limited to this aspect while the European Commission will deal with competition issues. The transaction follows Northern & Shell’s recent takeover of Channel Five, the fifth terrestrial television channel. Northern & Shell owns the Daily Express, the Daily Star and OK! Magazine. Among the other issues raised, two in particular stand out: i) whether the political backing given by News Corp newspapers could spill over into Sky News; and ii) whether the new entity will offer combined Sky television and News Corp newspapers thereby reducing the circulation of other newspapers.

 The first issue could really be understood as one of impartiality. The News Corp newspapers supported the Conservative Party at the 2010 election but had supported the Labour Party at the previous three elections. Sky News is one of the three major news content providers in the UK but, as a broadcaster, is subject to the impartiality rules on broadcasters set by Ofcom. These rules mean that a News Corp newspaper endorsement would not necessarily spill over into Sky News reporting. The link between endorsements and actual voting is disputed although some studies suggest that endorsements can increase the votes for parties at general elections. However, it is more the editorial decision of which stories to cover and how they are covered which strongly affect individuals economic and political perceptions. A possible combination of the news teams of Sky and News Corp newspapers as a result of the merger could result in the same stories being covered in the same way by both Sky and the News Corp newspapers. This would reduce plurality. An additional problem is that Rupert Murdoch, head of News Corp, has an acknowledged role in deciding the editorial tenor of the News Corp newspapers although this is less so as regards The Times. The counter argument is that at the moment all four News Corp newspapers occupy premises in the same building and use the same suppliers but do not report exactly the same stories in the same way. It is entirely possible that this separation be maintained after the merger.

 The second issue, a tie-in between Sky television provision and the News Corp newspapers, presents difficulties because of the combined positions of Sky and News Corp as measured by viewers and readership: Sky could use its strong position in the pay-television and general television markets to encourage or force viewers to take a News Corp newspaper. In addition, Sky currently has the momentum in the television market – between 2006 and 2009, total BskyB subscribers (in the UK, Ireland and other countries) rose by 15%. This rate of increase is expected to continue especially as Sky has an 80% of pay-tv revenues and can, and does, outbid competitors for exclusive broadcast rights to major sporting events, such as Premier League football; all new film releases and many new television shows imported from the United States. At a time when the total newspaper market is shrinking, were Sky to use this strong position to increase the circulation of News Corp newspapers this would be to the detriment of other newspapers. Even the use of Sky revenues to prop up the News Corp newspapers (what Competition Lawyers refer to as cross-subsidisation) would buoy them up while other newspapers are going down. Unchecked, this would result in News Corp newspapers sharing out the entire print newspaper market. This is very bad for plurality. However, as part of the competition review, the Commission can require commitments by which the new entity commits not to undertake such product bundling or cross-subsidisation. Such commitments are binding on the company and breach is severely punished.

This blog has only examined two of the issues thrown up by News Corp’s proposed takeover of BskyB. It is clear the merger presents serious concerns for the plurality of the media but that is need not, in and of itself, a ‘bad thing’. It now comes down to the concurrent Ofcom and Commission examinations to decide whether it will go ahead.