BSkyB future up in air after News Corporation takeover bid collapses
July 18, 2011
While members of the UK parliament celebrate the crisis afflicting Rupert Murdoch's News Corporation empire, which held them almost like puppets on a string for over two decades, a significant subplot is swirling around the country's dominant pay TV broadcaster BSkyB. With 10 million subscribers, about 70 percent of the UK's pay TV population, BSkyB's position, with its stranglehold over premium content, especially sports, had looked almost unassailable. But its position has been thrown into doubt by the tsunami sweeping through News Corporation, which owns 39 percent of BSkyB.
Before the phone hacking scandal involving News Corporation newspapers in the UK broke, leading to Rupert Murdoch's dramatic closure of the 150-year-old "News of The World" Sunday newspaper, it looked highly likely that Murdoch's bid to acquire the 61 percent of the BSkyB shares he did not already own would be waved through by the UK regulator Ofcom. But that all changed when all three of the UK's leading political parties joined forces to vote that such a takeover should not take place in the light of the revelations that illegal tapping of phones had taken place on a large scale. The tipping point came when it turned out that reporters at the "News of the World" had been tapping phones not just of celebrities, but also members of the public who, often through some misfortune, had become subjects of major national news stories.
For BSkyB, the consequences of Murdoch's failed bid are hard to assess at present. It could even be positive in the longer term, enabling BSkyB to prosper as an independent pay TV company no longer tainted by association with an increasingly negative parent brand. Indeed, it is possible that Murdoch may be forced, by public or even regulatory pressure, to divest himself of his existing 39 percent of BSkyB shares.
But BSky B may in the short or medium term find its position compromised in terms of attracting large advertisers and obtaining rights to major sporting events. While that may or may not lead to loss of rights, one thing for sure is that it is not going to be business as usual for some time to come.