The News International scandal, which today led Jeremy Hunt, the culture secretary, to refer Rupert Murdoch’s bid to acquire complete control of British Sky Broadcasting, throws the entire shape of his UK operations into doubt.
Might the ultimate effect be that News Corporation disposes of its troublesome UK print operations to focus on its far bigger and more profitable entertainment assets in the US and elsewhere in the world?
That possibility, raised by Andrew Hill last week, would have seemed implausible even a week ago. Rupert Murdoch is an inky-fingered newspaperman who loves papers of every stripe and infuriated investors by paying $5bn for Dow Jones four years ago. Events are, however, moving very fast.
News Corp’s threat earlier today to abandon its undertaking to spin off Sky News if its bid for BSkyB was referred to the Competition Commission was an aggressive effort to seize control of events. It was duly followed by Mr Hunt announcing the referral.
This turn of events suggests that UK television news has suddenly become as important as UK papers to News Corp, if not more. Mr Murdoch clearly does not want to lose Sky News as well as the News of the World while his other assets are under scrutiny.
David Carr points out in the New York Times this morning:
In America, newspapers have been seen as an expensive hobby for Mr. Murdoch, the bane of the News Corporation’s shareholders, but as it turns out, the newspapers in Britain may end up being more costly to him in the long run.
So useful in wielding influence, if not producing revenue, his newspapers are the very thing that brought his company into the cross hairs, and delayed, at least temporarily, his efforts to expand it by gaining full control of British Sky Broadcasting.
James Murdoch has already shown that he feels far less sentimental attachment than his father to newspaper traditions by closing the News of the World. If he were in charge of News Corp, along with lieutenants who rose on the entertainment side, how safe would the other UK papers be?
For now, the more likely outcome is that the News of the World, a profitable enterprise until its demise, is resurrected in the form of the Sun on Sunday. But if the BSkyB bid is scuppered by the affair, it will have a profound long-term effect on how papers are seen inside News Corp.
It will not be helped by allegations reported in The Guardian that the Sunday Times and the Sun, two other News International papers, were involved in attempts to obtain the bank and medical records of Gordon Brown, the former prime minister, and his infant son.
As long as Fleet Street papers were Rupert Murdoch’s pet projects, that was tolerable for investors, and other executives within News Corp. If they prove more trouble than they are worth to its core profitability, that will change.
As Andrew wrote last week about the possibility of a disposal of News International:
Sounds outlandish. But who, apart from the wily Murdochs and their lieutenants, really thought 24 hours ago that closure of the News of the World was a likely strategy?
Update: John Cassidy of the New Yorker expands on this theme.
