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Sky News spin-off clears path for Sky takeover

March 3, 2011 08.12 Europe/London By Julian Clover

Culture Secretary Jeremy Hunt has approved plans to spin-off Sky News as an independent company, should News Corp’s bid to purchase the remaining 61% in BSkyB be accepted. Under the plan, shares in the traded Sky News would be distributed among the existing shareholders in BSkyB, in line with their current shareholdings.

News Corp would therefore hold a stake of 39.1% in the new company, which would be created as soon as practicable after the takeover, up to a maximum of nine-months. News Corp would be prevented from increasing its stake for ten years.

“Throughout this process I have been very aware of the potential controversy surrounding this merger,” said Mr Hunt. Nothing is more precious to me than the free and independent press for which this country is famous the world over. In order to reassure the public about the way this decision has been taken I have sought and published independent advice at every step of the way, even when not required to do so by law. And I have followed that independent advice.”

The undertakings by News Corp, released by the Department for Culture, Media and Sport show the new company would have a ten year carriage agreement with BSkyB, approved by the Secretary of State, and a seven year renewable brand licensing agreement. It would also have the benefit and burden of major carriage agreements with third parties that include Virgin Media and UPC. The document also provides for continued standard definition distribution through Arqiva on satellite and digital terrestrial (Freeview). Sky News high definition channel is not referred to in the document, though there is no reason as to why this would not continue. The document obliges News Corp to continue to provide the new Sky News with an EPG slot “which is no worse than Sky News current EPG slot”. Sky News currently sits at the top of the News section of the Sky Guide.

Leasing of its current broadcast premises, and the arrangements involving satellite capacity, playout and uplinking would also need the approval of the Secretary of State.

Despite the many plaudits won by BSkyB it is still loss-making to the tune of £20 million per year.

“While News Corporation continues to believe that the proposed acquisition of the shares in BSkyB that it does not already own will not result in insufficient plurality for any audience in the UK, it has submitted this comprehensive proposal in order to avoid a lengthy and costly review by the Competition Commission,” said News Corp. It has already been an expensive business; shares are already close to their 52-week high of 817p, some distance from the initial offer of 700p made in June 2010.

Editorial independence would be ensured through a board comprising a majority of independent directors, including an independent chair, and a corporate governance and editorial committee made up of independent directors with no ties to News Corp. One of the key objections to the News Corp takeover has been the reduction in media plurality, but the Media Alliance comprising BT, Guardian Media Group, Associated Newspapers, Trinity Mirror, Northcliffe Media and Telegraph Media Group warned the arrangements would do nothing to prevent News Corp from distorting the market through cross-promotion deals and the banning of rivals’ advertising. “It has been well-documented by former Murdoch editors that arrangements of this kind, including those put in place to protect the independence of the Sunday Times and Times, have proved wholly ineffective. Smoke and mirrors will not protect media plurality in the UK from the overweening influence of News Corporation”.

A brief period of consultation has now been launched, which will expire on March 21.

Ofcom has already indicated its approval of the plans and in December the European Commission cleared News Corporation’s proposed acquisition of BSkyB under EU merger rules.

Further Information

  • Ofcom and OFT’s reports to the Secretary of State, timeline, letters and related documents (DCMS website)
  • Ofcom advice to Secretary of State (Ofcom website)
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Related

Filed Under: Editor's Choice, Newsline, Regulation, Top Story Tagged With: BSkyB, DCMS, News Corp, News Corp-BSkyB bid, Sky News Edited: 15 July 2011 18:54

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About Julian Clover

Julian Clover is a Media and Technology journalist based in Cambridge, UK. He works in online and printed media. Julian is also a voice on local radio. You can talk to Julian on Twitter @julianclover, on Facebook or by email at jclover@broadbandtvnews.com.

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