Why the U.K. media deserve Rupert Murdoch: Somebody has to teach them how to compete.

Media criticism.
Oct. 15 2010 7:43 PM

Why the U.K. Media Deserve Rupert Murdoch

Somebody has to teach them how to compete.

Rupert Murdoch. Click image to expand.
Rupert Murdoch

Anytime more than two newspapers agree on anything, grab your wallet and make a break for the door. Somebody is getting robbed, and you could be next.

The U.K. media establishment staged such a prelude to robbery this week when some of its most prominent members petitioned the government demanding that it block Rupert Murdoch's News Corp. from buying the 61 percent of satellite broadcaster BSkyB that it doesn't already own. Executives from the Daily Telegraph, the Daily Mail, the Guardian, the Daily Mirror, the BBC, Channel 4,and the BT Group signed the letter that bleated, "We believe that the proposed takeover could have serious and far-reaching consequences for media plurality."

Where does the BBC get the moxie to accuse anybody of undermining "media plurality"? The Beeb—which, thanks to the regulatory vise grips applied by the U.K. government, has dominated British broadcasting for more than 75 years—pulls in about $7.7 billion a year in global revenues. BSkyB commands about $9.4 billion in annual revenues. But the biggest difference between the two businesses is that BSkyB customers volunteer their payments. Most BBC revenues come from a compulsory annual license fee of about $230 (and rising) that every U.K. residence that views broadcast TV must pay (residents viewing on black-and-white TVs pay $79). If you don't pay the fee and are caught watching, prepare yourself for a fine of up to $1,600.

Joining the anti-Murdoch chorus but not signing the petition is the Financial Times, which editorialized (subscription required) last month that Murdoch should be brought "to heel" by the government and the takeover blocked. The Financial Times, a division of the international publisher Pearson, competes in the United States against Murdoch's Wall Street Journal and in the United Kingdom against his Times of London and Sunday Times. The FT opposes the takeover because it imagines Murdoch might use his "unfettered power" at BSkyB, which has 10 million subscribers, to bundle subscriptions to his U.K. newspaper Web sites that he's stuck behind pay walls with BSkyB subscriptions.

Now, two of Murdoch's newspapers (the Times and the Sunday Times) are losing more than before, and his two profitable titles, the Sun and News of the World, are suffering declining profits. Media diversity in the United Kingdom, such as it is, depends on Murdoch propping up his two prestige money pits. If he were to fold the Times and Sunday Times, he'd be guilty of reducing media diversity. If he explores a new way to keep them going, he's also guilty of reducing media diversity. He can't win for losing.

The idea that a 100 percent Murdoch-owned BSkyB would give the genocidal tyrant supreme leverage over U.K. media by making it easier to offer Web subscriptions to his newspapers is ridiculous. If it was such a terrific idea, he'd have already pushed it through with his controlling stake. If it was such a terrific idea, his competitors would be furiously working on finding a way to bundle their paid Web offerings. But they're not.

The fundamental complaint against Murdoch isn't that he's reaching for a consolidating grip over U.K. media, or that he's a news twister, or that he's a vulgarian. What drives the U.K. media establishment insane is that four decades after his original invasion of their shores, he's still teaching them about competition. And for the most part the U.K. media establishment hates competition, hates price wars, and hates innovation. If these companies had their way, the media landscape would be run like a nature preserve, with all the creatures in fixed equilibrium.

It's been this way for almost 100 years. According to Eli M. Noam's 1991 book, Broadcasting in Europe,the British government did everything it could to prevent competition and preserve a state-sponsored monopoly in the 1920s when radio broadcasting arrived in the United Kingdom. In those early days, when only three stations broadcast intermittently, the government rejected applications for new stations saying, "The ether is already full." U.K. newspaper publishers enthusiastically supported the "public" broadcasting efforts of the BBC because it posed no threat to their advertising revenues. So intense were noncompetitive instincts in the United Kingdom, Noam writes, that "no television was provided at all for an hour during Sunday evenings in order not to interfere with church services held at that time" until 1959.

The BBC's powers-that-be so adored radio in the 1950s that they resisted expanding the network's television operations, Noam notes. When the government finally allowed commercial TV competition in the mid-1950s, it did so tepidly and restricted cross-ownership by newspaper companies. Commercial radio competition wasn't allowed until 1973. Regulators governed how many feature films could be shown a week and how many game shows that gave prizes could air. Rules about when commercials could run and how many could be screened were erected. Ads were censored. "Of the 12,000 advertising scripts reviewed annually, about 20 percent violated the code and were returned," he writes.

The government also suppressed cable TV, and even after it started granting cable franchises, it hobbled them, lest those stations win too many viewers from the BBC. Cable operators were forced to bury their cables, which is much more expensive than stringing them from poles. As Noam points out, these cable-throttling regulations gave satellite broadcasting and the VCR real competitive advantages, reducing "consumer demand for cable programs." But even the VCR got fenced in when a Tory-feminist coalition pushed through the Video Recordings Act 1984 to censor sex and violence on videocassettes.

Everybody knows how Murdoch introduced competition to the U.K. newspaper industry—breaking the unions, introducing new technology against the screams of the Luddites, cutting prices, and, well, tarting up the whole package. Less known is the story of how he absorbed billions in losses to found a U.K. satellite broadcasting service and prevail as the controlling owner of BSkyB. That Murdoch is even in a position to extend his stake in BSkyB is a product of his wicked desire to beat the competition. Without him, there might not even be a successful satellite service in the U.K. If satellite broadcasting is of such monumental importance to U.K. media, why didn't the petition-signers at the Guardian et al. jump in with their own satellite services? Perhaps if the media establishment hadn't toiled so hard over the decades to exclude new competitors, there would be other successful upstarts besides Rupert Murdoch in the media market, and he wouldn't loom so large.

Noam observes a monumental downside to a highly regulated telecommunications scheme dominated by established cartels and political interests. Not only is innovation crushed, so is expression. Noam writes:

A television of privilege is a television of limited independence. The absence of independence does not mean that these television channels will extol the government in power. But it implies caution in being identified as oppositional. The television of privilege tries to make no political waves. The American experience in the first decades of television provides ample evidence for self-imposed caution. [Emphasis in the original.]

Murdoch owes some of his success in the United Kingdom and the United States to hidebound regulations that discourage all but the most driven capitalists to compete. (Example: Murdoch so believes in his competitive powers that he thought that he could do business as a broadcaster in China!) Once Murdoch burrows in, he profits from the regulations because he understands precisely how best to placate the regulators. Oddly, that makes him both a victim and a benefactor of the United Kingdom's anti-competitive ways.

If the petition-signers were serious about thwarting Murdoch's BSkyB takeover, they'd do better to increase competition than restrict it. Why not chop the publicly funded BBC into a dozen pieces and privatize them? (That's what Murdoch's son James came close to advocating in a speech (PDF) last year, but what he and his father really seek is a weakened BBC, not several new nimble entities nipping at News Corp.'s flanks.) Why not liberalize the allocation of spectrum? Why not allow spectrum-holders to reallocate their spectrum to new uses without having to clear regulatory hurdles? The very best way to weaken Murdoch would be to release the Kraken of competition.

******

They should release the Kraken here in the United States, while they're at it. Murdoch sort of looks like the Kraken, doesn't he? Express your mythological sensitivities in an e-mail to slate.pressbox@gmail.com. Monitor my Twitter for my compensation demands. (E-mail may be quoted by name in "The Fray," Slate's readers' forum; in a future article; or elsewhere unless the writer stipulates otherwise. Permanent disclosure: Slate is owned by the Washington Post Co.)

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