Rupert Murdoch humbled: Sky deal blocked again

Rupert Murdoch's long-held ambition of taking full control of Sky was dealt a major blow on Tuesday when the watchdog said the deal would hurt media plurality and be against the public interest.

In a provisional ruling from the Competition and Markets Authority that was more strongly worded than the media mogul may have expected, the regulator said 21st Century Fox’s £18.5 billion purchase of Sky, of which it already owns 39%, should be blocked.

That raises immediate questions about the long-term future of loss-making Sky News.

While the Murdoch family passed the “fit and proper” test of whether they are suitable to control a major broadcaster, there were tough words about past events, such as phone hacking, at Murdoch entities such as the News of the World and Fox News.

The CMA noted that while Fox and the newspaper arm has taken steps to change culturally, they clearly counted against the Murdoch empire.

While remedies on Sky are possible, the watchdog said: “The CMA...takes the provisional view that prohibition of the transaction would represent a comprehensive solution to all aspects of the provisional adverse public interest finding and that it poses relatively few risks, compared to other options, in terms of implementation or effectiveness.”

The view from the Murdoch camp was mostly sanguine. Since Fox is now in talks to sell most of its business, including Sky, to Disney, the attempt to take control of Sky is seen as a far smaller deal. For Ofcom, the media regulator, the concern remains that Sky News is protected, given that it has become a major and respected provider of broadcast news.

Since the deal with Disney will conclude well after June, when a final ruling on the Sky offer is due, Fox will have to resolve the UK issue before it can fold into the US media giant.

Six weeks ago Fox announced a shock deal to sell its entertainment assets to Disney for $53 billion. That would bring together the Fox film studio behind X-Men with Disney’s Marvel, Pixar and Star Wars assets.

21st Century Fox today said: “We welcome the CMA’s provisional finding that the company has a genuine commitment to broadcasting standards and the transaction would not be against the public interest in this respect.

“Regarding plurality, we are disappointed by the CMA’s provisional findings. We continue to engage with the CMA ahead of the publication of the final report in May.”

Sky shares actually rose more than 2%, up 24p at 1027p. City analysts said that may be because investors think a weak UK government is unlikely to want to further alienate the Murdochs given their UK media power.

Fox insiders note that the CMA is concerned that Murdoch entities are consumed by nearly a third of the UK’s population. This is far lower than for the BBC or ITV, they point out.

Regulator suggests three ways to solve the problem

The watchdog has put up three possible remedies to its concern about media plurality:

• Block the deal

• Sell or spin off Sky News

• Appoint independent directors to ensure that Sky News is not influenced by the Murdoch family

The Competition and Markets Authority is now inviting submissions on these ideas and will provide its report to the Secretary of State, the newly appointed Matt Hancock, by May 1.

Of the remedies, City media watchers think the third is the most likely outcome. Disney’s takeover of Fox should eventually make the Murdoch’s control of Sky moot. And there aren’t that many obvious bidders for a loss-making news television station — at least not from sources deemed more reputable than the Murdochs.

Within the Murdoch camp, while there was some surprise at the severity of the language from the CMA, the overall tone was that the ruling was roughly as expected, and that the media tycoon will get, in the end, roughly what he wants.