Brown Tries To Bring Murdoch To Heel

For Rupert Murdoch, the Blair years of certainty are over. From 1997 to 2007, Rupert Murdoch kept all his media privileges as regards TV and football by providing Blair with the support he needed to stay in power. The EU Competition Competitioner stayed his hand and did not pressure Murdoch to divest himself of any TV, football rights or newspaper titles.

Even in the last two years of Blair’s premiership, Murdoch was able to carry on acquiring further privileges including the TV coverage rights to Test Cricket, paid as a thank you for securing the 2005 general election (and possibly the promise of a job on the Board of News International), and in 2006 Murdoch was able to acquire a vital 17.5% of ITV enabling him to block Virgin Media’s attempt to compete with BSKYB using the cable network, offering a combination of media services at lower cost, threatening BSKYB’s profits and market share.

Murdoch was able to keep all decisions playing his way by ensuring that Blair was kept in power, and by not seriously threatening the growing power of Brussels to govern the United Kingdom. From 1997 to 2007 Murdoch played EU and Blair ball and profited handsomely.

But Since Gordon Brown took over, Murdoch has allowed the Sun newspaper especially to start fronting an anti-Brussels campaign to promote the promised-and-then-removed Referendum on the EU Constitutional Treaty, against the wishes of Gordon Brown, and clearly meeting the disapproval of Brussels. Surely his business interests would be better served by carrying on a similar deal with Brown and Brussels as he played with Blair and Brussels from 1997 until Brown’s accession to the Premiership. Murdoch, however now seems to be looking at a different strategy, challenging the power of Brussels, reducing the stature of Gordon Brown, and in doing so, running the substantial risk that he could lose some or all of his UK media privileges.

It is hardly surprising given these new circumstances that Murdoch is already starting to feel political pinch starting to be exerted on him, to try to force him back into line, to give some badly needed support to Gordon Brown and leave the EU alone to carry on its power grab over the UK.

Today the TV Regulator has queried Murdoch’s shareholding of ITV which he bought in 2006. Murdoch successfully blocked Virgin Media’s takeover in 2006 and barred the attempt to compete with him by buying a crucial 17.5% shareholding with enough voting rights, as the political environment under Blair enabled him to do so. The Regulator has now ruled, somewhat belatedly that this takeover of shares is ‘against the public interest’.
The Regulator is presumably basing his decisions on both EU Policy and the EU legal framework, which can be little different now to what is was in 2006 when Murdoch was allowed to buy his ITV shares. It seems that political influences could be having a bearing on the timing and outcome of the Regulator’s actions.

The final decision as to what will happen, is not to be taken by the Regulator, but by John Hutton the Business Secretary, who has no choice but to accept the Regulator’s findings as to BSKYB’s shareholding being ‘against the public interest’. He can however modify the Regulator’s suggested remedy, which is that Murdoch should sell the majority of his ITV shareholding, taking it down from around 18% to 7.5%. Hutton could increase the forced sale to the full shareholding, or reduce its impact or cancel it completely.

Will Murdoch now agree to back down and stop fighting against the EU Constitution, as long as Hutton overrules the regulator in Murdoch’s favour and allows him to keep his crucial stake in ITV?

BSKY are facing a big loss if forced to sell, let alone the loss of their strategic position to block competition. ITV shares are currently down on the floor, and Murdoch could lose around UKL 200 million if he has to sell before the share price recovers. He is therefore likely to go to appeal if Hutton goes after him, and use lawyers to do all they can to delay the decision.

The next election could be in 2009, and if he can delay the decision long enough, Murdoch might be in a position to negotiate with a Conservative government, which shares his views about resisting the growth of undemocratic Brussels power. He might be able to keep his shares by then, or at least not feel that he is going to be put under a continuing campaign of political duress to force his compliance with Brussels’ political requirements.

Playing the decision long might also suit Gordon Brown and the EU. If they go after Murdoch and force him to sell quickly guaranteeing a large loss for BSKYB, this might harden his views against the EU and Gordon Brown still further. If on the other hand, they keep his hopes up of his possibly being allowed to win in the end of the day, they might be able to get his arm twisted up his back far enough and for long enough to force him to stop making political trouble in The Sun, and elsewhere.

Murdoch is no doubt following the UK opinion polls closely and can see that Cameron might be less than two years from winning power. In the US where he has just been able to acquire the Wall Street Journal, his Republican backers are no doubt starting to see that the EU is turning into a very different animal from the one they hoped it would become in the days when Kissinger was advocating the EU as in America’s best interests.

Before the Berlin wall came down, support for the EU from the US was near total. While the previous Warsaw Pact countries were being absorbed, the EU was still seen as a good thing Stateside. But since 9/11, the wars in Iraq and Afghanistan, and the negotiations over Iran and the Middle East, the US has at last taken on board that the EU is turning into a very strange bureaucratic self-serving animal, and not a responsible government capable of running the European sector of the world to advantage.

The US might well be encouraging Murdoch to take a few business casualties short term in London, to seek a better political environment, and one that is more conducive to business success longterm. If he can hold on til Cameron wins power in the UK, and with the EU starting to be rolled back, Murdoch could look forward to a better future all round. The European market which has remained a closed arena for him might finally open up. It might seem a better risk to keep up open resistance against Brussels for now, and start playing to free Europe, than to facilitate its collapse into a totalitarian state in which Murdoch would probably lose all his UK media privileges.

In any case the WSJ prize just won in the US is worth 25 times the potential ITV loss in London, which is all he is facing for now. Money rather than idealistic purity will no doubt be the arbiter of Murdoch’s next moves. There will be plenty of cat and mouse play going on, I am sure, and a few behind-the-scenes negotiations as Gordon Brown desperately tries to bring Rupert Murdoch to heel. I doubt they will succeed.

The Tap Blog is a collective of like-minded researchers and writers who’ve joined forces to distribute information and voice opinions avoided by the world’s media.
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