Are Mur­dochs ‘fit and proper’?

21st Cen­tury Fox awaits Bri­tish watch­dog’s de­ci­sion on the me­dia con­glom­er­ate’s deal for pay-TV gi­ant Sky

Los Angeles Times - - BUSINESS - By Meg James

Ru­pert Mur­doch’s 21st Cen­tury Fox me­dia com­pany has spent nearly a year clean­ing up a sex­ual and racial ha­rass­ment scan­dal at its in­flu­en­tial and po­lit­i­cally con­ser­va­tive Fox News.

Across the At­lantic Ocean, the me­dia com­pany has waged a sep­a­rate cam­paign: try­ing to per­suade a pow­er­ful Bri­tish me­dia watch­dog that the prob­lems at Fox News and a nearly decade-old phone hack­ing scan­dal in Britain rep­re­sent iso­lated in­ci­dents and that Fox should be trusted to fully con­trol one of the jew­els of Euro­pean broad­cast­ing, the satel­lite TV gi­ant Sky.

On Tues­day, the Bri­tish Of­fice of Com­mu­ni­ca­tions, known as Of­com, is ex­pected to com­plete its re­view of whether Fox’s pro­posed takeover of Sky should be ap­proved. The group will also de­ter­mine Tues­day whether Fox ex­ec­u­tives pass the “fit and proper” test re­quired for Bri­tish broad­cast­ers.

Sky reaches 22 mil­lion pay-TV sub­scribers — in­clud­ing in Ger­many, Aus­tria, Italy and Ire­land — with a bounty of en­ter­tain­ment chan­nels, in­clud­ing HBO and Show­time, pop­u­lar sports in­clud­ing soc­cer, cricket and For­mula 1 rac­ing, and the Sky News chan­nel.

21st Cen­tury Fox, based

in New York and con­trolled by Ru­pert Mur­doch, owns 39% of Sky and has of­fered nearly $15 bil­lion to ac­quire the 61% that it does not own. Tak­ing full con­trol of Sky would ful­fill the Mur­doch fam­ily’s goal to con­sol­i­date a lu­cra­tive en­ter­prise that Mur­doch launched 28 years ago to com­pete with the Bri­tish Broad­cast­ing Corp.

But the U.S. scan­dal has cast a cloud over its am­bi­tious growth plans. At­tor­neys rep­re­sent­ing women who al­leged they were sex­u­ally ha­rassed at Fox News have urged Bri­tish reg­u­la­tors to nix the deal. And a prom­i­nent group of Bri­tish politi­cians — in­clud­ing the for­mer head of Britain’s Labour Party — have asked that the deal be blocked, say­ing in a re­cent let­ter: “This bid goes to the heart of who wields in­flu­ence in our me­dia and who is fit to do so.”

The 86-year-old me­dia baron has long been a con­tro­ver­sial force in Bri­tish pol­i­tics. The Sky deal has rekin­dled mem­o­ries of an ear­lier scan­dal, in 2011, when the Mur­doch fam­ily was forced to aban­don its pre­vi­ous takeover of the satel­lite TV ser­vice af­ter ex­plo­sive rev­e­la­tions about phone hack­ing. Brits were ap­palled to learn that op­er­a­tives of Mur­doch’s since-shut­tered News of the World tabloid had lis­tened to voice mail mes­sages on the cell­phone of a mur­dered 13-year-old girl. Re­porters also lis­tened in on con­ver­sa­tions of celebri­ties, in­clud­ing Hugh Grant, and mem­bers of the royal fam­ily.

Mur­doch and his son, James Mur­doch, now Fox’s 44-year-old chief ex­ec­u­tive, were called be­fore a com­mit­tee of Par­lia­ment in­ves­ti­gat­ing the scan­dal.

“These me­dia com­pa­nies have a cor­ro­sive ef­fect on our so­ci­ety and cul­ture, and we feel that if they take over Sky, that will send our me­dia stan­dards plum­met­ing,” said Alex Wilks, a mem­ber of the global ac­tivist group Avaaz, which has led the cam­paign to thwart the Fox bid.

Fox rep­re­sen­ta­tives de­clined to com­ment.

Fox’s deputy gen­eral coun­sel, Jef­frey Palker, wrote in a March let­ter to Britain’s De­part­ment for Cul­ture, Me­dia and Sport: “We wel­come a thor­ough and thought­ful re­view.… For the past 30 years, 21st Cen­tury Fox and Sky have been broad­cast­ers of good stand­ing in the UK, a re­spon­si­bil­ity we take se­ri­ously.”

The sec­re­tary of state for cul­ture and me­dia will have 10 days to re­view Of­com’s rec­om­men­da­tions.

Fi­nan­cial and le­gal an­a­lysts in Britain do not ex­pect the deal will be blocked be­cause of the va­ri­ety of news and en­ter­tain­ment out­lets in Britain. Sky News has only 5% of the Bri­tish mar­ket for TV news view­er­ship; the BBC com­mands the lion’s share. Sky has an un­blem­ished record of op­er­at­ing within rules for me­dia con­duct, and Of­com typ­i­cally doesn’t scru­ti­nize work­place is­sues such as sex­ual ha­rass­ment, ac­cord­ing to an­a­lysts. What’s more, the trans­ac­tion has al­ready re­ceived the bless­ing of the Euro­pean Union.

None­the­less, reg­u­la­tors could im­pose re­stric­tions to limit the Mur­doch fam­ily’s con­trol over Sky News.

Mur­doch has wielded great power in Bri­tish pol­i­tics for decades through his sta­ble of news­pa­pers: the over-the-top Sun tabloid, which ag­i­tated for Britain’s with­drawal from the Euro­pean Union, and the more re­spected Times of Lon­don. But his stand­ing may be weak­en­ing af­ter Bri­tish Prime Min­is­ter Theresa May and her Con­ser­va­tive Party lost a ma­jor­ity of seats in Par­lia­ment this month. On elec­tion night, the deputy leader of the op­pos­ing Labour Party crowed that Brits “saw through the lies of the Mur­doch ma­chine who tried to frighten peo­ple” into sup­port­ing Con­ser­va­tive can­di­dates.

Late last month, when top Fox ex­ec­u­tives met with the head of Of­com, Sharon White, Ru­pert Mur­doch’s sons, James and Lach­lan Mur­doch, made the case for 21st Cen­tury Fox’s takeover of Sky. Ru­pert Mur­doch did not at­tend the meet­ing.

Al­though the el­der Mur­doch still con­trols Fox, “James and Lach­lan are the ones who are in charge of the com­pany, so they are try­ing to em­pha­size the fact that Ru­pert Mur­doch is not a driver around this trans­ac­tion or of 21st Cen­tury Fox,” said Alice En­ders, a prom­i­nent Bri­tish me­dia an­a­lyst.

The two broth­ers have been try­ing to move the com­pany be­yond a scan­dal that erupted last sum­mer when for­mer an­chor Gretchen Carlson sued Fox News, al­leg­ing she lost her job be­cause she re­sisted the ad­vances of for­mer Fox News Chair­man Roger Ailes. Fox fired Ailes, who died last month. In the last year, sev­eral other women came for­ward with sim­i­lar complaints against Ailes and for­mer star host Bill O’Reilly, who left last month. Fox has paid about $45 mil­lion in set­tle­ments to al­leged vic­tims of sex­ual ha­rass­ment. Fed­eral pros­e­cu­tors also have been in­ves­ti­gat­ing whether set­tle­ment pay­ments were prop­erly dis­closed.

Britain’s me­dia watch­dog has heard plenty about the scan­dal. Los An­ge­les ra­dio host Wendy Walsh, who al­leged that she was de­nied a po­si­tion at Fox News af­ter she re­fused to have sex­ual relations with O’Reilly, traveled to Lon­don with her at­tor­ney to share her story.

“Ac­tions should have con­se­quences — and not just in­di­vid­u­als, but also cor­po­ra­tions,” said Walsh’s at­tor­ney Lisa Bloom. “Fox News has al­lowed its work­place to be­come a cesspool of sex­ual ha­rass­ment and re­tal­i­a­tion for decades.”

Bri­tish reg­u­la­tors are ex­am­in­ing two is­sues: whether Fox would ex­ert too much con­trol over Bri­tish me­dia and whether its lead­ers pass what is known as the “fit and proper” test, a loosely de­fined mea­sure of the moral char­ac­ter of peo­ple in lead­er­ship po­si­tions. “Fit and proper is a term of art,” said Dun­can Lamont, a long­time me­dia at­tor­ney in Lon­don. “We all know it when we see it.”

Reg­u­la­tors could rec­om­mend a frame­work so that Sky News op­er­ates with a de­gree of ed­i­to­rial in­de­pen­dence, ac­cord­ing to En­ders. Reg­u­la­tors, or even Fox, could pro­pose that a board, with sev­eral in­de­pen­dent di­rec­tors, would over­see Sky News.

Among the con­cerns is that Sky News might morph into the Euro­pean ver­sion of Fox News.

But some con­sider that un­likely be­cause of Britain’s stiff rules gov­ern­ing broad­cast­ers.

“You can’t have ex­tremely right-wing com­men­tary,” Lamont said. “At Sky News, you just don’t get that. It has to be fair, ac­cu­rate and im­par­tial. There’s just no ap­petite for that kind of thing.”

Leon Neal Getty Images

THE HEAD­QUAR­TERS of satel­lite TV com­pany Sky in Lon­don. 21st Cen­tury Fox owns 39% of Sky and has of­fered nearly $15 bil­lion to ac­quire the rest. Sky reaches 22 mil­lion pay-TV sub­scribers.

Carl Court Getty Images

WENDY WALSH, right, has ac­cused for­mer Fox News star host Bill O’Reilly of sex­ual ha­rass­ment.

Leon Neal AFP/Getty Images

RU­PERT MUR­DOCH, flanked by sons Lach­lan, left, and James in 2016. The sons made the case for 21st Cen­tury Fox’s takeover of Sky be­fore the Bri­tish watch­dog.

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