Rupert Murdoch's Real Problem Is The $12 Billion BSkyB Deal That's Suddenly On Shaky Ground

The media mogul may be all smiles at Wednesday’s launch for his iPad newspaper, The Daily, but he’s depressed about his suddenly shaky prospects for gaining total control of something much more important—the $12 billion BSkyB. Howard Kurtz reports.

Controversy swirls around Rupert Murdoch like a cloud, from thunderclaps of overheated rhetoric at Fox News to the phone-hacking scandal at News of the World. But the 79-year-old mogul has a way of getting what he wants.

The journalistic establishment was aghast when Murdoch tried to buy New York magazine in the 1970s, the Times of London and Sunday Times in the 1980s, and The Wall Street Journal four years ago. In each case, the billionaire prevailed.

Murdoch’s latest target is total control of British Sky Broadcasting, which would enable him to tighten his grip on the U.K.’s media machinery. But there are signs that he suddenly faces a rocky path, complete with twists and turns suitable for a BBC melodrama.

“He himself is very depressed about the prospects now,” says Andrew Neil, a veteran British journalist and broadcaster who was once a top Murdoch editor and left on bad terms. “It’s not Mission: Impossible, but he thinks it’s very difficult. The government is trying to distance itself from the Murdoch organisation. That’s why he’s come in to take direct control himself, a last roll of the dice to rescue the situation.

“The atmospherics couldn’t be worse for him,” Neil says. “Because of the whole News of the World thing, it’s open season. The phone hacking was clearly systemic and endemic, it wasn’t a rogue reporter. You couldn’t imagine a better whip with which his enemies could lash him.”

Murdoch, whose News International conglomerate has called the review process “seriously flawed,” recently flew to London to meet with his senior staff, blowing off a scheduled appearance at Davos in the process. Suddenly, what had looked like a slam dunk was anything but.

Britian’s business secretary was supposed to decide whether the takeover should be referred to the powerful Competition Commission. But undercover reporters for The Daily Telegraph, posing as Liberal Democratic supporters, videotaped the minister, Vince Cable, saying he had “declared war” on Murdoch. Not exactly a fair and balanced approach. Now the job of weighing the deal has been handed to the culture secretary, Jeremy Hunt, whose speedy approval could save Murdoch billions.

A News International executive, who declined to be identified, dismissed the idea that the proposed acquisition “negatively impacts the whole of the market.” Sky News attracts only 6 per cent of news viewers in the U.K., this executive said, and the British broadcasting code has “regulatory safeguards” against blatant bias.

As for the rival media outlets opposing the takeover, this person said, “many of them are motivated by commercial concerns.”

Murdoch already holds a controlling 39 per cent interest in British Sky Broadcasting, or BSkyB. But buying the rest of the stock in a $12 billion deal would allow him to oust the independent directors and run it as a private fiefdom, which is pretty much the way he prefers to operate.

“He already has an enormous chunk of the press,” says Alan Rusbridger, The Guardian’s editor. “There’s never been a figure in the history of the British media who’s got the influence he’s got. It’s just bad for the plurality in Britain to allow anybody to have complete domination of the major commercial broadcaster as well as the press.” What’s more, says Rusbridger, “there are so many unanswered questions” about the phone-hacking case that this is the wrong time to “wave through” the Sky deal.

Prime Minister David Cameron has already been tarnished by the unfolding scandal at the News of the World. His communications director, Andy Coulson—the tabloid’s former editor—was forced to resign after evidence emerged that he may have known more about his reporters hacking into the voicemail of royals and celebrities than he had let on. The renewed investigation, and civil suits by such phone-hacking victims as actress Sienna Miller, have kept the mess in the headlines.

Sky Broadcasting isn’t having a great run either. Two of its top soccer announcers were sacked for making sexist comments about female referees and a female soccer executive. The recording wasn’t broadcast, but someone slipped it to The Mail on Sunday.

One of the amusing sideshows is how Murdoch’s rivals—including The Guardian, The Telegraph, The Mail, and the BBC—are formally opposing the Sky takeover, even as they report with relish each new Murdoch embarrassment. No one has completely clean hands here. Ordinarily, a group of American rabbis taking out a newspaper ad to protest allegedly anti-Semitic remarks by Glenn Beck—and Roger Ailes calling NPR executives Nazis (in an interview with The Daily Beast)—might arouse little interest in London. But they fuel the narrative of a media mogul who needs to be reined in.

Indeed, Murdoch’s team believes opposition to the deal heated up only after The New York Times resurrected the phone-hacking case last fall with new revelations, which his lieutenants cast as the paper’s response to the Journal’s ramped-up challenge in New York.

While News International says Sky News can’t be forced under British law to toe a company line, Murdoch has a history of undermining the independence of the properties he buys, most recently at the Journal, where he soon forced out the editor he inherited. In a 2003 interview with The New York Times, Murdoch was asked whether Sky News had begun to imitate Fox News. “I wish,” he said. “They don’t have the entertaining talk shows—it is just a rolling half-hour of hard news all the time.”

But that could change. While British rules on media impartiality would prevent Murdoch from turning Sky News “into a Fox-style tub-thumping cheerleader for the British right,” Steven Barnett argues in the British Journalism Review, there are larger issues.

The country’s only viable source of television and radio news, he writes, could wind up being owned “by a single individual who has frequently demonstrated his appetite for editorial intervention and who also happens to own more than a third of Britain’s national press. By any standards, that has to be an unacceptable level of media concentration in a democracy.”

Opposing newspapers aren’t exactly taking a hands-off approach. “The Independent on Sunday has little faith in the safeguards offered by Mr. Murdoch, and believes that giving him more power over Sky’s editorial direction—and Sky News in particular—crosses a line that must be held in the public interest,” the paper declared in an editorial.

Further stirring the pot are reports that Cameron and James Murdoch, the chairman of BSkyB, secretly dined over Christmas at the home of News International’s CEO, Rebekah Brooks. Given Rupert’s history of influencing prime ministers backed by his newspapers, this suggested a certain coziness with the latest occupant of 10 Downing Street.

Some London politicos are downright wary of the company. A former member of Parliament, Adam Price, told me his committee dropped plans to subpoena Brooks to testify last year because of a “fear factor” among some lawmakers that “if we force her to come, they’ll go after us”—they being Murdoch’s media empire. He said the committee chairman had offered him that assessment.

“Let’s be honest: It’s the most powerful investigative press in the Western world. That may have been a risk factor for some,” Price said. “They wield huge, huge power. They are in the business of character assassination.” On the News of the World fiasco, he added, Murdoch and his aides “played this terribly badly and it’s all blown up in their face.”

A delay for the Sky deal could prove costly for Murdoch. He offered 700 pence a share last June, and the stock is now up to 760 pence on surging profits. If Hunt, the culture minister, refers the case to antitrust regulators, the review would take at least six months, potentially making the price tag even more expensive.

Murdoch has other ventures cooking—on Wednesday he is launching The Daily, the first newspaper designed solely for the iPad—but they pale in comparison to his stalking of Sky. In financial terms, the deal would be more than twice as large as his purchase of Dow Jones. And he is determined to get it done.

Andrew Neil says the arguments against the Murdoch takeover make no sense, except on a “gut” level.

“It’s kind of irrational in a way,” he said. “In fact, it’d make no difference to diversity because he already controls BSkyB. The general feeling is that he’s already big enough.”

This post originally appeared at The Daily Beast.

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