Broadcasters opposed to 21st Century Fox’s proposed £11.7bn takeover of Sky are preparing to lodge complaints with regulators in the UK and Europe after expressing concerns that the pay-TV broadcaster will dominate bidding for top-flight sport, TV shows and movies.
Rupert Murdoch’s 21st Century Fox, which owns Fox News and a Hollywood studio, made a formal bid to take full control of Sky, owner of Sky News and pay-TV operations in the UK, Germany, Austria and Italy, on Thursday.
In the past year Sky, which is 39% controlled by Fox, has started to flex its muscle as a pan-European broadcaster. It has signed its first exclusive continent-wide deals with US networks HBO and Showtime, and the film-making arm of Sony, for content that includes Westworld, The Young Pope, Game of Thrones, Billions, Twin Peaks and Ghostbusters. Broadcasters in the UK, Germany, Austria and Italy are concerned that they will be locked out of future rights competitions by such blanket deals.
One concern among broadcasting rivals is that Fox could enable Sky, which has found its resources stretched with the costly rollout of its advanced Sky Q box and an upcoming launch into mobile, to dominate in bidding for sports, film and drama rights.
“When you effectively have one shareholder [Fox] you have the freedom to be more long term, more ballsy,” said the chief executive of a broadcaster that competes with Sky for rights deals.
“In the case of Sky it could mean it will never again lose out to BT on sports rights. Essentially, if you have Murdoch in the background saying ‘do whatever it takes, don’t lose those rights – they are integral to the business’, that is much simpler than having to propel and justify multibillion-pound bids with large numbers of shareholders.”
Fox believes there will be no competition hurdles and is buoyed by the precedent set in 2010, when the European commission – the EU’s executive arm – cleared a bid for Sky by Fox’s predecessor, News Corporation, although the phone-hacking scandal ultimately derailed the transaction. Fox is also encouraged by the green light from Brussels for Sky’s takeover of its sister operations in Germany and Italy in 2014.
Rivals disagree, however, arguing that the Fox/Sky combination needs to be given tough scrutiny regardless of favourable decisions in recent years. They are expected to lodge their concerns with Brussels and the Competition and Markets Authority in the UK.
“Compared to six years ago this is a very different environment,” said a second top executive at a major TV group. “The 2010 bid was about [Murdoch buying Sky in the] UK and Ireland. This is multi-market and there are issues of [pay TV viewing] share and dominance.”
In the UK, there is the possibility that the media regulator, Ofcom, could be asked to conduct a public interest test. This would determine whether a successful bid would give Murdoch too much control of UK news media. As well as bringing together Fox News and Sky News under the same ownership, the takeover would see Sky being fully controlled by a media tycoon who also owns the Times, the Sunday Times and the Sun newspapers through a separate group, News Corp.
Once Fox notifies authorities about the formal bid, the culture secretary, Karen Bradley, will have 10 working days to decide whether to trigger the Ofcom test. A spokesman for the Department of Culture, Media and Sport said it had not yet received notification from Fox or Sky about the offer, so Bradley’s quasi-judicial process is yet to start.
In 2010, Murdoch was forced to table a plan to spin off Sky News to satisfy media plurality issues raised by Ofcom, a deal that was accepted by the government. Fox believes the industry landscape has changed so much in the past six years that media plurality issues will not be a concern this time and it is not planning to sacrifice Sky News.
If a public interest test takes place, Sky is expected to point to factors including the decline in newspaper sales and rise in the plurality of news provision through players including Facebook, Google, Vice, BuzzFeed, Mashable and the Huffington Post.
“We do think that this [deal] passes regulatory muster,” said James Murdoch, chief executive of Fox and chairman of Sky, as he announced the formal offer this week. “We think as the relevant authorities look at the fact set around both the competition and potential UK intervention issues that no meaningful concessions will need to be made.”
