Reach for the Sky
The inside story on Murdoch’s doomed television takeover bid
‘Politicians just wanted it approved,” says an Ofcom insider, recalling News Corp’s tumultuous takeover bid for Sky. “Obviously, Cameron wanted it approved. Obviously, James Murdoch thought it would be. If he was angry before about the pay-tv competition investigation, he was off the scale now. Absolutely furious. He tried seriously hard to undermine us.”
Ed Richards’ report was delivered to then Culture Secretary Jeremy Hunt on New Year’s Eve. The conclusion was couched in the indirect language of Whitehall but the meaning was clear.
Ofcom sought to make it impossible for the Government not to refer the deal to the Competition Commission, which had powers to impose restrictions or block it entirely. Ofcom said “it reasonably believes that the proposed acquisition may be expected to operate against the public interest since there may not be a sufficient plurality of persons with control of media enterprises providing news to Uk-wide cross-media audiences”.
Richards was impressed by Hunt’s response. After new year, Hunt called the Ofcom man into the Department for Culture and, with a panel of officials, spent hours grilling him. Days later Hunt rang Richards to tell him that unless News Corp could give undertakings that would deal with the concerns identified by Ofcom, he would indeed refer the bid to the Competition Commission.
The news was delivered to Murdoch at a meeting on Jan 6 2011. Notes prepared for Hunt confirm Richards’ success: “I have carefully read the Ofcom report and I find it very difficult on the basis of what I have seen to date to see any grounds which would allow me to not refer this case to the Competition Commission, especially given that the threshold for referring is relatively low.”
News Corp and its lawyers, Allen & Overy, scrambled to respond. They attacked the Ofcom report, accusing the regulator of closed mindedness and bias towards the company’s media rivals. Hunt rejected those concerns. Within a fortnight of the first meeting News Corp came back with an
indication it was willing to spin off Sky News as a separately listed company in order to gain control of Sky. Hunt said he would consider the “pretty big offer”, but would want advice from both the Office of Fair Trading and, once again, Ofcom. He would later describe it as “a very difficult meeting” with a “very cross” James Murdoch.
“I said I was going to ask for Ofcom’s independent advice as well. This was not welcome to Mr Murdoch, because … he considered Ofcom to be an organisation that was hostile to the interests of News Corp,” Hunt told the Leveson inquiry.
There followed weeks of wrangling over the details of how Sky News would be spun off. Richards insisted that Murdoch could not be chairman of the new company, in which News Corp was due to retain a 39pc stake.
“That was a very, very significant thing for Mr Murdoch,” Hunt said. “News Corporation thinks that one of its primary functions is what it says on the tin – it’s news.
“He first of all didn’t think he should have to spin off Sky News at all because he didn’t believe there was a plurality issue with the original proposal, and this was going to cost him hundreds of millions of pounds more; but secondly, he was at the time chairman of Sky, and that included being chairman of Sky News … he wanted to continue to be chairman.” The plan to spin off Sky News with a separate governance structure to avoid a Competition Commission inquiry was not finalised until March. It would, however, face further consultation and opposition from the Media Alliance, an extraordinary grouping comprising most of Fleet Street, the BBC, Channel 4 and others.
Newspapers remained opposed to a combination of Sky and the Murdoch press. Within days, lawyers Slaughter & May wrote to Hunt insisting that the proposal “entirely fails to address plurality concerns”.
The consultation ran until the end of June, when Hunt announced he planned further safeguards for the independence of Sky News, including an independent monitoring trustee. He showed no sign of buckling to pressure from Tom Watson, his counterpart on the Labour front bench, to take into account the growing weight of evidence that there had been phone hacking on an industrial scale at The News of the World. Hunt relied on legal advice that the issues were separate.
Murdoch believed he was days away from winning approval for the takeover. Then, on July 4, The Guardian revealed that, in 2002, The News of the World had hacked the voicemail of Milly Dowler, a 13-yearold girl who had been murdered in Surrey. The story catapulted the phone hacking scandal to the top of the national agenda and plunged News Corp into a full-blown crisis.
Within three days, News Corp announced the closure of The News of The World. It then tried to save the Sky bid by withdrawing its offer to spin off Sky News, hoping that the resulting Competition Commission inquiry would provide time for the crisis to pass. The outrage was simply too great. On July 13, the bid was abandoned before a Labour motion in the Commons against the deal was due to win support from all parties.
Inside Wapping there was complete disarray. In the days after the Milly Dowler revelations, James Murdoch fought to protect Rebekah Brooks on behalf of his father. He was advised by lieutenants that as chief executive of News International and editor of The News of the World during the Dowler inquiry, she had to be sacked. Murdoch slammed the table and growled that “over my dead body does she leave this business”. Brooks wound up leaving a week later, immediately
‘I said I was going to ask for Ofcom’s independent advice as well. This was not welcome to Mr Murdoch’
after the withdrawal of the Sky bid by Rupert, who flew into London to take control of the situation from his son.
Rupert brought Wendi Deng with him on that visit, who by this stage was viewed by James as something of an unwelcome influence. James’s older brother Lachlan, who was not at that point a News Corp executive, came to help in looking after their father through the crisis. James may have been fighting for his own survival but Lachlan was received by Rupert and staff at News International as a welcome calming presence amid the storm. He breezed into London from Australia and took up his place at his father’s side. The rapprochement appeared temporary, but was the start of a process that would ultimately lead to the eldest son inheriting the crown.
This is an edited extract from “The Battle for Sky: The Murdochs, Disney, Comcast and the Future of Entertainment”, due to be published by Bloomsbury on May 30 and available to pre-order now. Further extracts will be published in tomorrow’s Sunday Telegraph. The author is The Telegraph’s deputy business editor.