Murdoch's empire bids to rule the skies

Rupert Murdoch has unleashed one of the stormiest battles in his long and controversial career by bidding for full control of BSkyB, a hugely profitable British satellite TV and news outlet part-owned by his News Corporation.

In the face of fierce and exceptionally united opposition, the 79-year-old Australian-born magnate is pitching to buy the 60.9 per cent of BSkyB that News Corp does not already own.

BSkyB was born in 1990 from the merger of the two runners which entered Britain's satellite TV race in the 1980s.

After a period of struggle that nearly sank News Corp, the company is now hugely successful, thanks to offerings of live Premier League football, Hollywood movies, first runs of popular United States television shows and a 24/7 news channel.

It now has 35 per cent of the United Kingdom television market and two-thirds of its pay-TV sector, and is also a growing force in broadband. Three million of its 10 million subscribers have signed up for high-definition channels, up from 500,000 two years ago, and, earlier this year, the firm began 3D broadcasts. Income in the last financial year was £5.9 billion ($12 billion), dwarfing that of the BBC, while profits were £855 million.

This fast-growing bounty has prompted News Corp to make a £7.8 billion pitch for the rest of BSkyB. Independent directors have rejected the price as too low but have opened the way to discussions.

The proposed takeover now enters the jungle of regulatory scrutiny. In Brussels, the European Commission has until December 8 to see if the plan merits an in-depth probe into the impact on competition, a spokesman for the European Union's executive says.

In London, Business Secretary Vince Cable has asked communications watchdog Ofcom to report back by December 31 as to whether a BSkyB owned wholly by News Corp will interfere with "media plurality" - a rather nebulous issue that is more about media diversity than competition.

Murdoch's critics argue the takeover will dumb down TV programmes, lead to price-cutting, cross-promotion and product linkage that could destroy News Corp's rivals, and strengthen the tycoon's already considerable political clout in Britain.

Media groups that normally fight like cats and dogs have joined together in an unprecedented plea to Cable to scrutinise the takeover.

The letter, signed by the chief executives of groups that control the Daily Telegraph, the Daily Mail - which both support the conservatives - the pro-Labour Daily Mirror, the Guardian, the BBC and Channel 4 television, as well as telecoms firm BT, declared the move "could have serious and far-reaching consequences for media plurality".

"[The] deal has the potential to transform Britain's media landscape forever," warned the Independent, a centrist daily.

"Rupert Murdoch's News Corp is not just anyone. It is a business with a 37 per cent share of Britain's national newspaper market.

"It has a record of aggressively targeting its rivals with loss-leading tactics such as price wars and cross-subsidy, and it has clear and significant political influence."

News Corp's constellation of assets in Britain includes the daily tabloid, The Sun, which is a scourge of the Royal Family and relentless critic of the BBC, and the scandal-mongering News of the World. It also owns the respected middle-brow daily The Times and the Sunday Times, and Britain's fourth-biggest book publisher, HarperCollins.

In the US, News Corp owns the ultra-conservative news channel Fox and the sensationalist tabloid the New York Post, but also the Hollywood studio 20th Century Fox (which made Avatar and other hit movies) the Dow Jones financial newswire and the prestigious Wall Street Journal.

In a 20-page letter to Cable, an influential analyst of the media market, Claire Enders, said one of the biggest dangers would be the bundling of News Corp products. For instance, a subscriber to Sky's entertainment package could also be given access to one of the group's newspaper titles, thus undermining loyalty to rival papers.

At a time when all print newspapers are coming to terms with a world in which an increasing number of readers consume their news online, that could confer on News Corp a significant commercial opportunity not available to other media organisations.

There could also be the integration of news desks and stories across News Corp empire, diminishing the diversity of sources and competition in news gathering.

"There is a risk of reduction in media plurality to an unacceptably low level," she said.

Dominic Buch, associate director at Numis Securities in London and a specialist in media investment, said he expected the takeover to get the green light on the basis of regulatory criteria.

He notes the appeal to Cable is being made by commercial rivals, a point made by News Corp itself.

And he saw it as tinged by dislike of Murdoch himself, who shook up Fleet Street - the bastion of the national press in London - with his revamp of established titles, focus on nipples and splashy headlines and smashing of the print unions in the 1980s.

"Murdoch virtually has full control of BSkyB already," said Buch.

"Because the BBC, among others, is there, we don't really believe there's a threat to media plurality. In any case, Sky News has to be [editorially] independent under UK law. So you have a situation whereby people who stand to lose from a commercial aspect are also the ones who are complaining about the takeover on their front pages."

Politics, though, could complicate the process. Britain is governed by a coalition of Conservatives with the support of the Liberal Democrats.

The Conservatives were backed by the Murdoch press at the last May election and Prime Minister David Cameron's head of communications, Andy Coulson, was editor of News of the World at a time when the paper notoriously hacked into the phones of politicians and celebrities.

But Cable is a Liberal Democrat, from a party that has a visceral mistrust of Murdoch - a sentiment shared quietly by some conservatives.

"The coalition Government has been split on its approach to the [takeover] proposals," the Daily Mail reported this week, saying some Conservative members of the Cabinet were "more relaxed" over the merger than the Liberal Democrats.