The Guest Blog

Guest blog post by Alicia Richart, former Spanish Digital Champion.

It could be a case of second time lucky for Rupert Murdoch, with the media mogul aiming to finally close a deal for full control over Sky plc, the owner of Sky News. Murdoch’s 21st Century Fox, formed in 2013 following the reorganisation of his long-standing News Corp brand, has put $14.6 billion (approximately €13.7bn) on the table in a bid to move from a 39% stake to full ownership.

Of course, this is not the first time that such a merger has been attempted – in 2011, News Corp’s first attempt to expand its empire was eventually derailed by revelations of phone hacking in the UK, Sky plc’s home base and largest market. Five years later, the Murdochs are having another go at it – success would be the final cherry on top of the 2016 cake for Murdoch, a close ally of Donald Trump.

Ironically, considering the overwhelming pro-Brexit bias in most of News Corp’s British newspapers, the European Commission seems unlikely to block the merger, having greenlighted the previous 2011 attempt. The Commission’s awareness of the opportunities offered by larger media mergers has already been reiterated this year, with its March 2017 approval of the merger between Time Warner and AT&T.

Indeed, the two cases are not so different– a likeness that Murdoch chooses to acknowledge only selectively.

The goal of the Sky-Fox merger – subject still to approval by British regulators – is to match the global content business of 21st Century Fox with Sky’s direct-to-consumer capabilities[1].The combination of Fox’s television and film empire with Sky’s role as leading European provider of internet and pay TV, would make the newly formed entity a global media giant.

Similarly, the AT&T-Time Warner merger aims to capitalise on the synergies between Time Warner’s impressive content capacity and AT&T’s position as a leader and innovator in the telecoms market.

But why now?

Competition in the sector has changed dramatically in the last decade. No longer can we speak of “horizontal competition” between traditional media players. Both the above deals are designed to allow these more traditional companies to innovate and compete in the new digital marketplace by further integrating distribution and content. In doing so, acknowledging the ever-growing importance of content production, they move towards “vertical integration” of services and products, and the ability to compete with online media giants.

At first glance, these media mergers may be seen as decreasing competition, simply by virtue of decreasing the number of players in the market. Zooming out though, we see how much the market has evolved away from traditional content providers, with names such as Google, Facebook, Apple and Amazon all being participants in the competition mix. On top of this, we see that the “digital playing field” is no longer just in (or for) Europe, Australia or North America – the game is now global, with particularly strong growth in China.

If anything, the deals should therefore allow for more effective competition in terms of real content output, and enable the involved companies to compete on the global stage. Regulators should take note of these realities, and adjust their market interpretations and definitions accordingly.

One rule for Murdoch, another for the rest?

One might assume that the negotiation of a multi-billion dollar deal might keep the Murdochs rather busy. Apparently though, they have managed to find the time to attack the AT&T-Time Warner merger, despite the similarities between the two cases. In January, the New York Magazine reported that Murdoch wanted ”conditions put on the AT&T-Time Warner merger, and he could lobby Trump to make that happen”[2].

Similarly, The Hollywood Reporter [3] 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.”

Back in 2016, Forbes declared Time Warner to be a prize that Rupert Murdoch had always craved[4] – is he motivated by a feeling of having missed out? Or is it as simple as the fact that Time Warner is arguably Fox’s most formidable competitor? It is certainly difficult to come up with any objective reason to argue in favour of a Fox-Sky deal with one breath, and against the AT&T-Time Warner merger with the next.

From a European perspective – especially one anticipating a post-Brexit EU – there is an important reality to acknowledge. With mergers such as these, the Atlantic Ocean shrinks as the English Channel gets wider. Faced with competition from massive global media giants, how is the EU to compete? Could Vivendi plan to form a European media champion that would include Italy’s Mediaset? What should be the European strategy to make the continent’s presence felt on the global stage?

 

 

[1] http://www.businesswire.com/news/home/20161209005567/en/21st-Century-Fox-Offer-Sky-plc

[2] http://nymag.com/daily/intelligencer/2017/01/megyn-kellys-departure-is-clue-about-future-of-fox-news.html

[3] http://www.hollywoodreporter.com/news/michael-wolff-trumps-tech-war-how-big-media-benefits-977254

[4] https://www.forbes.com/sites/steveschaefer/2016/10/24/with-time-warner-deal-att-gets-prize-rupert-murdoch-wanted/#2eb174b05724

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