Ed Miliband Et Al Submission
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Overview of submission of Ed Miliband, Sir Vince Cable, Kenneth Clarke and Lord Falconer to CMA on plurality and broadcasting standards issues raised by proposed acquisition by 21st Century Fox of Sky plc The attached document sets out our detailed case on why we believe the purchase of the remaining 61% of Sky by 21CF would operate against the public interest on grounds of plurality and broadcasting standards. References to page numbers in the text refer to this document unless otherwise stated. Plurality: Summary of Case 1. The issues for the CMA raised by the reference in respect of plurality are whether the bid threatens the diversity of viewpoints that are available and consumed and whether it would give one media owner too much influence over public opinion and the political agenda. 2. Our case is that Sky would come under the control of the Murdoch Family Trust as a result of the takeover and the takeover would undermine plurality on both of the tests required to be considered by the CMA. 3. It is uncontested that the Murdoch Family Trust (MFT) would enjoy exactly the same ownership rights of Sky post-takeover as it currently enjoys in relation to its UK newspaper titles. 21CF would own 100% of Sky, with the MFT owning 39% of 21CF, just as currently News Corp owns 100% of News UK (and therefore the print titles of that company), with the MFT owning 39% of News Corp. 4. It is clear from the record of the Murdochs, the words of Rupert Murdoch, and Murdoch employees that Mr Murdoch and his family exert total control over their UK newspapers through the MFT’s 39% stake in NewsCorp. Indeed, not even the Murdochs have, to this point, contested this. Rupert Murdoch told the Leveson inquiry “If you want to know what I think, read The Sun” (see p.65 of detailed submission) 5. It is logical, particularly in the absence of evidence to the contrary from 21CF, to believe just as the Murdochs control their UK newspaper titles with current ownership arrangements so they would have control of Sky with parallel ownership arrangements should this takeover take place. 1 6. This argument is bolstered by an analysis of the executive control that the Murdochs exercise over 21CF: Rupert Murdoch and Lachlan Murdoch are Executive Chairmen of 21CF and James Murdoch is CEO of 21CF. We would also point out that the second largest shareholder in 21CF, Prince Alwaleed bin Talal (owning 6.6%)has been an undying supporter of the Murdochs, including during phone-hacking and the Murdochs have the insurance of non-voting stock in the company which could be converted into voting stock. We contend that there is no reason to believe from their record or their incentives, which lie in commercial gain, that other shareholders at 21CF are a countervailing, independent force against the media power of the Murdochs (see p.14-16). 7. This situation contrasts sharply with the current situation at Sky where the Murdochs do not enjoy an executive position, and independent shareholders have shown a willingness to act as a constraint on the Murdochs’ power. For example, it was pressure from independent shareholders that led to James Murdoch’s removal as Chair of Sky in 2012 after phone-hacking and following his re-appointment as Chair in 2016, just this month 48.4% of independent shareholders refused to vote for his re-appointment. Furthermore, Rupert Murdoch himself has previously complained to a Parliamentary Committee about his lack of power over Sky (see p.91) 8. Total control of Sky by the Murdoch family would give them power over the UK media landscape which would be unprecedented for any commercial company: added to their current ownership of the largest circulation newspaper group in the UK, they would have, with the takeover, total control of the third most important supplier of TV news, the second most important 24 hour TV news channel, three major UK news websites, the control and supply of national and international radio news to “almost every commercial radio station in the UK” (to quote the words of Sky News Radio) as well as the second largest share of household broadband supply, to more than 6 million households. 9. Ofcom concluded in their public interest report of June of this year that the combined group would, at 10% of share of references, be “in line with ITN” (Ofcom Public Interest report, June 2017, paragraph 1.6) vying to be the media group with the second highest reach, as measured by reference share. As Ofcom went on to say: “The true reach and share of the merged parties may…be materially larger than survey data would suggest.”(1.7). This is because some of the share attributed to Facebook, an intermediary, in fact 2 relates to content from Sky News and The Sun. According to Ofcom, among UK Facebook users the Sun is the second most popular news and current affairs page and Sky News is fourth. 10. We submit that even this approach underestimates the power of the Murdochs should this takeover be allowed. The cross-platform empire that would result would retain its current ability to influence the news agenda on other outlets, including the BBC, through its newspapers but in addition would now be able to amplify that through Sky News and Sky News Radio. Should the Murdochs desire to do so, we believe they would be able to drive a particular story through their newspapers, Sky News and Sky News Radio. This power in the hands of owners who have shown a desire to pursue a particular political agenda would be unprecedented and would put them in a different league to any other commercial media owner, including ITV. We believe it would be deeply threatening to plurality. 11. Some, including 21CF, would have the CMA believe that the increase in the Murdochs’ reach as a result of this takeover is answered by digital media as a guarantor of plurality. This is profoundly wrong. Quite apart from the major influence of Murdoch media outlets online (According to Ofcom’s public interest report, The Sun has the third highest reach of any news website and Sky News reaches 8.5 million people online and The Sun and Sky News reach 70% of online consumers---see p.19 ), there is a bigger point around the challenging economics of producing news in the online world. The internet has destroyed the commercial value of producing news by making it very difficult to charge for content, and through the migration of advertising away from news sources to social media platforms like Facebook. That increases significantly the potential power of those who can finance news production making the stakes of the Murdochs controlling Sky even greater. A Sky News wholly controlled by the Murdochs, cross-subsidisied from the rest of its group, aggressive in its approach, would have even greater power than a static analysis would suggest. (see p. 26-8) 12. Furthermore, the risk of this takeover lies not just in the quantitative metrics but qualitatively too. The Murdochs use their extensive media influence to protect and advance their commercial interests. For example we point in the document to the persistent use of their newspaper titles to attack the BBC, argue for the privatisation of Channel 4, and to attack internet rivals (see p. 53-4) 3 13. They also use their power for a clear political agenda. The examples of the use of this power for political ends are many: to cite one, all 175 News Corp newspapers across the world supported the Iraq war in 2003 (see p.67) This is merely one illustration of the way the Murdochs use their power to support a particular agenda. We see the same pattern on a daily basis in their newspaper titles in the UK, in Fox News in the United States, and most recently, Sky News Australia, after the acquisition of 100% ownership by News Corp just a few months ago (with exactly the same ownership structure as proposed for Sky in the UK by 21CF). (see p.71). Indeed, we would urge the CMA to examine the experience of Sky News Australia once the Murdochs took full control late last year. 14. In approaching the issue of plurality, we believe the right question for the CMA is to ask about the effect of the takeover in itself in the current media environment. We believe that the correct starting point in any historical analysis is the view taken at the time of the revelations around phone-hacking in 2011. It was at that point that politicians of all parties concluded that the reason Murdoch-controlled companies had been able to act with impunity was because of the scale of their media power. As David Cameron said when he set up the Leveson inquiry in relation to News Corporation: “Never again should we let a media group get too powerful." (see p.10) These words are significant because they reflect the view across society and politics that Mr Murdoch had too much power back then in 2011, with just a 39% stake in Sky through News Corp, in addition to other holdings. 15. We believe that Mr Murdoch would have too much power over public opinion and the political agenda if this takeover were to proceed. Moreover, we believe that by removing the check of independent shareholders at Sky, this takeover would reduce the independence of Sky and therefore the diversity of voices in the media landscape. Further, we do not consider that post-takeover, the rules on impartiality are sufficient protection for the independence of Sky because of the ability to select stories and alter the tone of coverage, which a regulator cannot, and indeed should not directly control.