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Wednesday, 22 December 2010

"I have declared war on Mr Murdoch" - Vince Cable at his best and worst

Vince Cable
The most explosive thing that Coalition Government Business Secretary Vince Cable said to the two undercover Daily Telegraph reporters in the recent sting operation was actually not immediately printed by the paper for quite an obvious reason. When asked what battles he has been fighting with the Tories he said that he has been "picking his fights" and when pressed for an example he said "I don't know if you have been following what has been happening with the Murdoch press, where I have declared war on Mr Murdoch and I think we are going to win".

Rupert Murdoch is attempting to buy the remainder of BskyB at the moment. The EU Competition Commission has said today they see no problem with this on competition grounds, so the decision on whether it can happen falls to...the Business Secretary (Cable), who can refer the case to the Competition Commission but then acts on their advice. As a Government Minister, the Business Secretary should remain above having opinions on decisions like this. But Cable says he has "declared war on Mr Murdoch" and "we are going to win" - so he obviously feels he isn't above having opinions.

Why didn't the Daily Telegraph publish these comments at first (eventually, after Robert Peston of the BBC released the comments having been passed them by a Telegraph Whistleblower, they published them at 3pm)? Well, the Daily Telegraph doesn't want Murdoch to be able to acquire BSkyB, but knew that these comments by Cable would prejudice the inquiry, and lead to News International (Murdoch's company) having immediate grounds for appeal against any decision he makes. Why doesn't the Telegraph (a newspaper group) want News International to buy BSkyB (a satelitte television company)? Well, this is where the media world is about to become really very interesting, and to explain we need to go back to an announcement by James Murdoch, son of Rupert, who was BSkyB CEO back in 2004.

James Murdoch
Having taken over from Tony Ball and observed the crumbling infrastructure around the company, both in housing employees and serving customers, James Murdoch announced that there would need to be a massive amount of investment in upgrading the ability of Sky to serve their end of 2010 customer target of 10 million, a number which seemed like pie in the sky (no pun intended) at the time. In a portent of the short-term thinking that precipitated the recent financial crisis, banking analysts said that this was absolutely the best strategy for Sky to undertake long-term, but since short-term profits would be affected, investors should sell. Sure enough, Sky shares halved in value, but now, here we are, at the end of 2010, and BSkyB have 10 million subscribers.

This means they can change their business model from acquiring customers to retaining customers, which essentially means their costs could be cut by about 80% and the profits will start to really roll in.

The issue that the other major newspaper groups have is that News International, should they acquire 100% of BSkyB, will have access to 100% of those massive profits, and COULD use them to cross-subsidise a massive price cut at the newspapers that they own (The Sun, News of the World, The Times, The Sunday Times), which account for 26% of the British Newspaper industry. This could effectively put their competitors out of business.

Rupert Murdoch
It also creates a hugh media empire, with an annual turnover of £7.5 billion, compared with £4.8 billion for the BBC. This  creates a media dominance, granting Rupert Murdoch huge power, leading to a continuance of his already enormous influence on British politics, and is why the BBC, joined with the owners of the Daily Telegraph, Daily Mail, The Guardian and the Mirror write to Vince Cable in October urging him to block the deal.

The European Commission gave the green light to the deal yesterday - although they did solely focus on competition issues, and left the way open for the UK to decide whether or not to take appropriate measures to protect media plurality (power in the media is shared by many). Ofcom, the media regulator, will advise Jeremy Hunt (the Culture Secretary who yesterday had this lumped into his intray) on what to do about any public interest issues.

The European Commission's officials have already looked into many of the issues being investigated by Ofcom. In particular the possible "bundling" of cut-price combined subscriptions to its papers and Sky Channels. They argued that "price is only one, and not the main factor in determining readers' choice of and loyalty to a newspaper." If you want to see what this means, go up to a Guardian reader (cost: £1) and offer them the Daily Telegraph for 20p's just not going to happen!

Ultimately, the case against the full takeover of BSkyB rests upon what Rupert Murdoch and News International MIGHT do once they have it. News International's entire legal defence against this could be "but we won't do that" and the Government could extract legal commitments that they won't bundle newspapers and pay-TV subscriptions and won't use predatory pricing to force others out of business. Of course, then we get into the whole issue of whether THAT is in the public interest. What if you are a Sky subscriber and a Sun or Times reader? Are you not allowed access to lower prices then?

There is also the issue of Murdoch's political influence. There is no doubt that the courting of News International's support has been one of the main strategies of political parties, certainly this year and 1997, and when that support does change it does have a huge influence on voters.

Others cite what they say is the pernicious effect on US politics of Murdoch's Fox News Channel's one-sided coverage of it. Here is a great example of where two countries are divided by a common language. In this country BBC1, BBC2 and BBC News have a 73.5% share of broadcast news viewers and Sky News has 6.3%. In this country we have proper public television stations, with a commitment to neutrality. The US don't, which is why their politics is so partisan, and this is fuelled by the extremism of both Fox News on the right and MSNBC on the left. Fox News is the result of privatising news, meaning business people use it to chase profits, and right-wing views mean money over there. So there is little here to justify the regulator turning down this deal.

As for the Business Secretary himself there are some issues here.  Once again it suggests that Cable was very comfortable in a protest party but far less comfortable in a party which shares government responsibility. It also shows him to be very aware of his own value to the success of the coalition (given he commented that he could always resign and bring the government down if he really didn't like what was happening). In fairness, it also shows Vince Cable doing what he does that made him popular, speaking candidly and openly in answers to questions. It is an unfortunate fact for Cable that the collective responsibility ethos of being a Cabinet Minister means he probably needs to stop doing that so much...especially during what he thought was a normal constituency surgery meeting.

1 comment:

  1. News update: Ofcom has apparently categorically recommended that the case should be referred to the Competition Commission. Will be interesting to see what happens next.