The Sky Is Falling

For Americans: There are some terms that you have to understand to know what the reporting is all about.

First off, Sky or BSkyB is British Sky Broadcasting, which similar to a combination of the US Dish Network, and a media company, like NBC. They provide TV via satellite to homes in Britain and Ireland, and have their own channels, like Sky News.

Next, Ofcom, [Office of Communications] covers most of the same areas of responsibility as the US FCC [Federal Communications Commission].

Finally, in British and European English, ‘undertaking’ normally has nothing to do with funerals. In business reporting it may refer to a ‘company’ or to a ‘promise or guaranty’.

OK, the news that the Sky Tour de France team lost its lead rider, Bradley Wiggins, and the White jersey is not the disaster it might have been, only because so many other things have gone wrong for the company this week, that have caused its stock to lose 8% of its value today.

BBC Business editor, Robert Peston informs us that Ofcom to rule on News Corp’s ‘fitness’ to own BSkyB

I have learned that Ofcom is deeply concerned by recent revelations about the years of mismanagement at the News of the World and is monitoring developments at News Corporation extremely closely.

It is expected to make a statement later today.

I understand that Ofcom regards evidence that the News of the World’s newsroom was out of control for many years as relevant to a judgement on whether News Corporation would be a fit-and-proper owner of British Sky Broadcasting.

Ofcom has a statutory and continuous duty to ensure that any holder of a broadcasting licence is fit and proper. It can launch an investigation into this question at any time of its choosing.

When it comes to the question of whether News Corporation is an appropriate owner of its 39% of BSkyB and of the 100% it wants to own, Ofcom will want to know how it was that the News of the World was able to engage in unacceptable journalistic practices for many years, who in theory had management responsibility for what went on there, and who knew what and when about all of this.

I would note that making 200 people who have inside information on the operation of News of the World redundant [British for firing them] is yet another in a long list of management screw ups at News Corp. What are people who are angry over losing their jobs going to do, especially when many of them are professional writers?

At this point, it appears to me the question is not whether News Corp will be allowed to buy the 60% of BSkyB that it doesn’t own, but whether it will be allowed to continue to own its current 39.1% share of the company. Ofcom has the authority to ban News Corp from owning an interest in any British broadcasting company for not being ‘fit and proper’.

News Corp was required to make certain ‘undertakings’ [guaranties] regarding the impartiality of Sky News, before the UK Competition Commission would approve the merger with BSkyB. There may well be a move to revisit that issue, as, if the senior executives were all ignorant of what the News of the World was doing. how can they claim to control what goes on at Sky News?

So, to recap Rupert’s week, they have shut down one cash cow, News of the World, that has been making tidy profits for decades, and may lose their stake in another cash cow, BSkyB. Further, if they are forced to divest themselves of the stock they currently own, I don’t see the gamblers in the City paying any premium prices for it.