Britain

Blighty

News Corporation and BSkyB

The Sky and the limit

Mar 3rd 2011, 12:02 by J.B. | LONDON

ON MARCH 3rd Jeremy Hunt, Britain's culture secretary, effectively cleared the way for New York-based News Corporation to take full ownership of BSkyB, a British broadcaster. News Corporation will spin off Sky News, so as to avoid the appearance of one company having too much control over the information Britons get. There will be a brief consultation. Rival media outfits, including the BBC and Guardian Media Group, will wail and gnash their teeth at the prospect of Rupert Murdoch taking a larger slice of the British media pie. But this deal is done.

The legal and regulatory obstacles to News Corporation's effort were never as great as those rival media companies made them out to be. News Corporation already owns 39% of BSkyB, which emerged from an outfit set up by Mr Murdoch in the 1980s. That is a controlling stake. If there is a problem with Mr Murdoch controlling Sky, the problem already exists: an outright purchase does not create it. The more-or-less openly-voiced fear that Mr Murdoch would turn Sky News into a British outpost of America's conservative Fox News Channel is also misplaced. The point of Sky News, which loses money, is that it burnishes BSkyB's image, turning the broadcaster into something more respectable than a purveyor of football, films and American dramas. Taking Sky News downmarket or compromising its objectivity would damage a valuable brand.

Another obstacle, which had been largely overlooked in the political and regulatory kerfuffle, now looms. News Corporation offered £7 a share for BSkyB last summer. It was rebuffed by BSkyB's board, which suggested that only offers over £8 a share would be entertained. That may not have been too much of a stretch for News Corp at the time. But three things have happened in the past few months. First, BSkyB announced record earnings. It is on track to bring in £1 billion in profits this year, raising its value. Second, the pound has strengthened against the dollar—the currency in which News Corporation will pay for BSkyB. Last June £7 cost $10.82. Now it costs $11.40—a greater than 5% increase. Third, News Corporation has agreed to pay £415m for Shine, a production company run by Elisabeth Murdoch, of the clan. The spat over regulation is over. Let the arguments over money begin.

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1-8 of 8
speculatorjon wrote:
Mar 3rd 2011 1:55 GMT

Is the Guardians main worry that the cash flow from Sky can be used to keep Murdoch newspapers alive?

MathsForFun_2 wrote:
Mar 3rd 2011 2:34 GMT

I find it difficult to understand the psychology of a man whose British offerings include The Times (a brand name intelligent newspaper), The Sun (a mass circulation newspaper for people who do not take the news seriously) and BSkyB - a satellite broadcaster that relies mainly on football and American dramas. Where is the synergy?

An additional comment: I have noticed that more and more of my fellow football supporters are watching live premiership games via free streams - either through the internet or by picking up foreign satellite services. This is an unstoppable trend IMO - and will only worsen as mobile phone video transmission gets better in quality and lower in price. I see this as a VERY serious long term threat to BSkyB's revenues and, by extension, the revenues of football clubs - most of which are heavily indebted and absolutely cannot afford to lose the Sky Sports money!

lesslunacy wrote:
Mar 3rd 2011 3:54 GMT

Sorry about going off the topic, but this is the way for the USA to award down its 9.0% unemployment rate. With the falling dollar vs foreign currency, business taxes (an oxymoron) will perform while the price of imports increase; and to spend money any where else other than paying bills and business stock investment would be uneconomic. Leverage is for any for any earnings per net assets greater than the company's liability interest rate, earnings are dived among fewer equity shares with greater minimum expense taken by greater liability amount. The FED likes lower debt/equity ratios as it gives a greater chance of TARP completely reimbursing the Treasury with interest with a greater book-asset/liability ratio; perhaps the debt/equity ratio limit should be 50%/50% as similar to the lower limit of buying stocks on margin requirement. Gold is Napoleon mercantilistic specie currency, and would only be applicable in a W2K type apocalypse. Some hedging against the team is in order (silver has an I but there is no I in team), but specie offers no contract to return interest or dividends--only capital gain/loss; and specie will ultimately perform similar to gold in 1981, the NASDAQ in 1999, and housing in 2006. Equity holding companies are a good thing because they encourage investment in equity (which fund investees' asset capital) and the holding company enjoys a dividend to another company tax which should be as low a the personal income dividend/capital-gain tax of 0%/15%.

Ahd1 wrote:
Mar 3rd 2011 4:34 GMT

@LessLunacy- What on god's green earth are you talking about?

LaContra wrote:
Mar 3rd 2011 6:30 GMT

less lunacy...more accuracy?
I'm guessing LL has posted that on the wrong blog forum? ;)

MathsForFun_1

I think that while you look for synergies, Murdoch is looking for world domination.

red till dead wrote:
Mar 5th 2011 11:35 GMT

No matter what the Dirty Digger acquires, he is a failed billionaire. An oxymoron you say? Not when one considers that this person has singularly failed in his two main intentions, viz, the abolition of the BBC and the British royal family. These were his two main targets in the late 60s when he brought his smut to Britain. Yes, he's succeeded in dumbing down a large enough minority of Brits to ensure the continuance of successive right-wing governments of his choice. But is poor old Rupe happy?

red till dead wrote:
Mar 5th 2011 11:35 GMT

No matter what the Dirty Digger acquires, he is a failed billionaire. An oxymoron you say? Not when one considers that this person has singularly failed in his two main intentions, viz, the abolition of the BBC and the British royal family. These were his two main targets in the late 60s when he brought his smut to Britain. Yes, he's succeeded in dumbing down a large enough minority of Brits to ensure the continuance of successive right-wing governments of his choice. But is poor old Rupe happy?

Cassandrina wrote:
Mar 5th 2011 11:01 GMT

Red till dead
" Yes, he's succeeded in dumbing down a large enough minority of Brits"
Murdoch has certainly not done as good a job in the last 13 years as the Labour government, who with its constant ally the BBC, has dumbed down education and the populace in general - an example would be the last local election in Barnsley - can these 14,000 UK tribal deluded misfits be worse than any uneducated and deprived people in Bangladesh?
I think they are, as they seem incapable of learning from experience, let alone education.

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On this blog, our correspondents ponder political, cultural, business and scientific developments in Britain, the spiritual and geographical home of The Economist. It takes its name from a fond but faintly derogatory name for the mother country often used among British expats.

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