Should the News of the World hacking scandal and Rupert Murdoch’s BSkyB takeover bid have been connected?

This was originally submitted to Roy Greenslade as part of my MA assessment in Journalism & Society (a module on media history, structure and ethics).

Through News Corporation, Rupert Murdoch is the world’s leading newspaper proprietor. His company is also the largest pay TV owner and stood to grow larger still if its bid for BSkyB had been approved. That was aborted following the phone hacking scandal at his newspaper, the News of the World.

Should the newspaper scandal and the TV bid have been connected?

The issue with Rupert Murdoch’s attempted takeover of BSkyB is clearly one of media conglomeration, as well as the notional idea of a ‘fit and proper’ media owner.  The proposed acquisition of BSkyB by News Corporation was undoubtedly advantageous for both companies, but the threats to media plurality and the increasing evidence that Murdoch would be seen as ‘exercising power without responsibility’ due to his involvement in the phone-hacking scandal at the News of the World meant that the deal’s collapse was seen by many legal commentators (as well as journalists) as inevitable.

The Broadcasting Act 1990 is the first to assert that Ofcom license-holders must be ‘fit and proper’ – but it does not define what is meant by this term.  Indeed, section 253(3) of the Communications Act 2003 also states that applicants must be ‘fit and proper’ and this is once more reiterated in Ofcom’s Change of Control Notification Form in Section 1.  It is only in this document that some guidance is given regarding actual specifications for a ‘fit and proper’ media owner: absence of criminal convictions and civil penalties make up the entirety of the advice given.

However, Jason Chess of media law firm Wiggin examines a loophole in the guidelines, stating that ‘someone with a criminal record “…will not necessarily be prevented from holding a licence”’.  In his experience, he argues that Ofcom’s priority appears to be to find an owner capable of complying with UK broadcasting codes, rather than any previous ethical misdemeanours.

To study the (un)ethical activities of license-holders we must first analyse the make-up of BSkyB’s current shareholders.  At present, only 39% of BSkyB is owned by News Corporation; the remaining 61% is held across a wide range of shareholders nowhere near the scale of News Corporation.  News Corporation is therefore a minority owner of BSkyB, but the single largest block shareholder.  Nevertheless, News Corporation is not the license-holder of BSkyB, nor is technically the absolute controlling interest.

Eleanor Steyn points out that ‘basic principles of corporate liability mean that it is difficult to pin what is done by executives of a company on the company itself, let alone pinning it on another group company’. Indeed, one would have to look at the crossover in board membership between BSkyB and News Corporation, not to mention that of its UK arm, News International, if we were to ascertain whether those suspected of being culpable of grave ethical malpractice would be in the same position of power at BSkyB.

It can be said, then, that the public backlash was against a company thought to have unethical practices across all facets of its operation, yet it can be seen as preposterous to link one aspect of a business with another entirely different enterprise.  Yet David Cameron’s comments that ‘they should stop thinking about mergers when they’ve got to sort out the mess they’ve created’ implies that a multi-national business (and indeed its CEO) is unable to manage other aspects of that business while an internal review is being conducted.

Ed Miliband asked for ‘the purchase of BSkyB [not to] proceed until after the criminal inquiries are complete’, yet Ofcom’s own stringent regulation would have taken care of any broadcasting malpractice, the general journalistic category of which has not yet been proven at the director-level of News Corporation.

Secretary of State for Culture, Media & Sport, Jeremy Hunt, told the House of Lords via Lady Rawlings that there were ‘sufficient safeguards’ in place for Rupert Murdoch’s bid, and advised that it need not be delayed in the wake of the phone-hacking revelations.  Lady Rawlings added that ‘the decision would be made purely on the issue of media plurality’.

The tactical move of reversing the decision to spin-off Sky News, therefore triggering a referral to the Competition Commission, was a shrewd way of placing the takeover bid’s agenda (and all associated media focus) firmly within the sphere of ‘Monopolies and Mergers’, rather than the ethical activity of Rupert Murdoch’s corporation at large.

Rival media organisations, including BT, the Guardian Media Group, Associated Newspapers, Trinity Mirror, the Telegraph Media Group and Northcliffe Media, formed a loose alliance to condemn Murdoch’s takeover even when Sky News was assuredly going to become an independent entity.  A spokesman for ‘The Media Alliance’ stated that the takeover gave News Corporation ‘greater power to restrict or distort competition through cross-promotion, bundling…and distorting the advertising market’.

There can be no doubt that News Corporation’s ultimate desire is to compete with the BBC and other media organisations in buying up programmes and securing sports rights across its infrastructure of broadband and high definition services.  The key to the BSkyB takeover is likely to be financial, with the profit margins of the Sky digital service far outweighing the UK newspaper assets controlled (and owned) by the Murdochs.  However, it is also important to note that The Times, thought to be a print stalwart, makes a huge financial loss and requires ample subsidy from other News International services.  In the same way, Sky News was widely reported as having approximately £20 million of its own losses to deal with annually.  With these examples, Murdoch can be seen as dedicated to news services far more than their bottom lines.

The influence that Rupert Murdoch employs in the political sphere through these news services is well-documented, yet the allegations by Chris Bryant that BSkyB was operated as a ‘fear and favour’ process appears weak in comparison to Murdoch’s proprietorship of three intensely dominant newspapers.  There is no sign that potential ownership of BSkyB can be compared to the power exercised by these titles (not even with the inclusion of Fox News as a broadcast example), owing to Ofcom’s regulations on impartiality.

If the phone-hacking investigation is to highlight missing or inadequate regulation of newspapers, there is no equivalent investigation or admittance into such an issue for broadcasters. The closest investigation was an internal review commissioned by BSkyB’s board into the editorial practices of (and spending of the editorial budget by) Sky News, which concluded ‘no suggestion of impropriety’.

With James Murdoch being current chairman of BSkyB and executive chairman of News International, it is no surprise that 156,000 people and organisations made last-minute submissions to the Government’s public consultation on the proposed bid, yet the link between phone-hacking and the takeover bid for BSkyB is one fabricated by commentators convinced that the Murdoch family run a vast-reaching criminal outfit in which they are able to precisely micromanage every corner of their consortium for maximum nefarious gain.  Although it cannot be argued that the Murdochs are free of responsibility for the illegal undertakings by their employees, they certainly do not fall foul of all the legal tests set for both their print and broadcasting ventures.

UPDATE (4/2/2012): Roy‘s feedback – Well, Nick, this is a well argued polemic, clearly well researched. I don’t agree with you, but that’s beside the point in terms of the marking. I’d just like you to consider the implications of media being concentrated in too few hands, regardless of whether it involves Murdoch. Should there be a cut-off point in terms of size. Anyway, it’s a good read.