Last December, Rupert Murdoch’s 21st Century Fox made a second bid, worth £11.7 billion, for complete control of Sky plc. The relationship between Fox and Sky has been of great interest to both European regulators and consumers for many years. The companies’ previous effort to combine, in 2010-2011, was derailed following the reputation-scarring fall-out of the phone-hacking scandal in the now defunct News of the World. Since then, Sky has expanded its presence on the Continent, buying Sky Deutschland and Sky Italia in 2014.
The deal points the way for the future of media, particularly for the distribution of content and online advertising, in a digital era in which content and distribution fit naturally together and few platforms are large enough to survive on their own.
The competition in a single digital market is harder and harder and this is the reason why the market is going in the direction of biggest companies to compete at World level. Rupert Murdoch shows with his forward-looking integration that there is no other way to be a global player.
One might expect the Murdochs to be too busy with their own deals to have time to interfere with other companies’ attempt to navigate the complex 21st century media landscape. However, that assumption would apparently be incorrect. In January, New York magazine instead reported claims that Rupert Murdoch wanted “conditions put on the AT&T-Time Warner merger, and … could lobby Trump to make that happen.”
Similarly, Michael Wolff of The Hollywood Reporter claimed in February that Rupert Murdoch “now regularly lobbies Trump against AT&T and Time Warner’s tie-up, urging the President to move the review of the deal from the Justice Department’s antitrust division, with its high hurdles to blocking a deal, to the FCC, which needs only to find the deal not in the public interest in order to block it.”
Murdoch’s desire to purchase the 69% of Sky that he does not own is understandable. The competition is not anymore within different player on the same level (horizontal competition) because the play level is changed completely in the last ten years.
Vertical integration of media makes sense and can encourage further innovation and more effective competition with the new online content giants such as Google, Facebook, Apple and Amazon.
However, the Murdochs’ alleged opposition to the proposed AT&T – Time Warner merger (which the European Commission cleared earlier in March with no opposition), while advocating that their own merger raises no concerns, makes far less sense.
Both deals are designed to address the growing importance of content in the new global online media landscape.
Both are designed to respond effectively to the unique challenges posed by new online media giants. Both are designed to allow traditional media companies to innovate and compete in the new digital marketplace by further integrating distribution and content. And, to the extent regulatory concerns have been raised in Europe, it is OFCOM’s public interest investigation whether the Fox-Sky deal would jeopardize media plurality and broadcast standards especially for news outlets.
If it’s true, therefore, that the Murdochs are arguing against the AT&T – Time Warner merger, then their arguments cannot help but carry a hint of hypocrisy.
Fox and Time Warner’s CNN are competitors, of course, and this could explain the selective critique. But a belief in the value and benefit of competition is surely the most important underpinning of competition law.
Even President Trump has conceded the value of competition in the media: “I don’t want to comment on any specific deal, but I do believe there has to be competition in the marketplace and maybe even more so with the media because it would be awfully bad after years if we ended up having one voice out there”.
Fox’s own statement on its Sky merger said it “would bring together 21st Century Fox’s global content business with Sky’s world-class direct-to-consumer capabilities, which have made it the number one premium pay-TV provider in all its markets. It would also enhance Sky’s leading position in entertainment and sport, and reinforce the U.K.’s standing as a top global hub for content generation and technological innovation.”
The business case for such vertical integration is quite clear: content matters. As Google and Hulu (partially-owned by both Fox and Time Warner, as well as Comcast and Disney) look to introduce new video streaming services, getting the links between distribution and content right will become increasingly important to companies and to consumers.
And the “digital play level” is not anymore just for Europe, Australia or North America. The fight in this new digital market is global, with a strong growth of the Chinese players.
It is important to understand that the digital market is single and vertical integrated and it is necessary to have some great American players in this new competitive arena.
Again, the Murdochs’ efforts to buy the rest of Sky are perfectly understandable. What is far less credible is the apparently hypocritical attempt to undermine the actions of another company pursuing a similar goal of effective competition in a changing media landscape.