The European Commission has cleared News Corporation's proposed full takeover of British Sky Broadcasting without any conditions. The UK government must now decide whether the deal would threaten media plurality.
The EC ended its investigation by deciding that News Corporation's acquisition of the 60.9 per cent of the UK satellite pay TV platform it does not already own would not pose any competition problems. The combination of BSkyB with News Corporation will bring together the pay TV platform (which retails its own channels and those of third parties), the 20th Century Fox movie studio, and News Corporation's UK newspaper publishing interests. The deal could also potentially mean BSkyB joins the wholly-owned Sky Italia as part of News Corporation's direct broadcast satellite division. News Corporation also owns 40 per cent of Germany's Sky Deutschland. The EC said the combination of channels would not significantly increase News Corporation's market power in the UK advertising market and said that BSkyB would still have the incentive to acquire rights from rival Hollywood studios.
The EC also looked at whether the combined company would be able to offer bundles of subscriptions to BSkyB and the print and online versions of its newspapers. It judged that readers' choice of newspapers is not determined by price alone and said that subscription is a small part of the UK newspaper sector (six per cent of overall circulation and 25-33 per cent for quality titles (like News International's The Times and The Sunday Times). Furthermore, although News has moved its titles behind a pay wall, the vast majority of UK news websites are free.
The decision means that one regulatory hurdle remains in place for the deal. The UK government asked communications regulator Ofcom to report on the public interest implications of the deal by the end of the year. Ofcom's decision will determine whether the deal shoudl be subject to a full-scale competition review. News Corporation made a £7.3bn, 700p per share offer for full control of BSkyB in June 2010. The deal was turned down by BSkyB's non-executive directors although they said they would back an 800p per share deal.
The EC's green light reflects the fact that News Corporation's full ownership of BSkyB would have little impact on any of the markets in which the company operates in in the UK. It also shows the EC does not think that News Corporation would be able to exploit its ownership of satellite platforms in three European markets to extract better rights deals from film suppliers. Despite BSkyB's powerful position in the subscription television business in the UK, it has a smaller share of the TV advertising market than free-to-air channels.
The UK government is now faced with a decision which will, whichever way it goes, anger powerful media companies. News Corporation's European chief executive James Murdoch said that if it blocked the deal, the government would jeopardise an £8bn investment in the UK (although it could be argued that being 100 per cent owned by News Corp would actually make it more likely that some of BSkyB's operations would move outside the UK). On the other hand, a range of companies, including national newspaper publishers, the Telegraph Media Group, Guardian Media Group, Trinity Mirror and the Daily Mail & General Trust, toegtehr with BT, the BBC and Channel 4 have written to Vince Cable, the UK secretary of state for industry, to oppose the takeover.
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