But he should accept a market geared to helping others challenge him
Wednesday 13 October 2010
The Guardian, Telegraph, Mail, Observer and Mirror, the BBC and Channel 4, even BT – all in agreement and all spitting mad. Who, you ask, can have conjured up this anguished collective? You guessed it, Rupert Murdoch.
Murdoch is the best thing that ever happened to the British media, and they hate it. Without him and his Fleet Street revolution it is most unlikely that today there would be any Guardian or Independent, any third news channel and any Sky Arts 2. When Murdoch came along the pundits predicted at most three newspapers in Britain by 1980, as in most unionised countries.
For a quarter-century Murdoch defied opposition to transform the economics of British newspapers and television, salvaging the first from union monopoly and the second from BBC/ITV duopoly. At every turn he worsted his rivals and left them whingeing to government. Now he wants to buy all of BSkyB and they are whingeing again. They have written a letter to Vince Cable, demanding that his bid be investigated.
This time they are right. The iron law of capitalism is that all markets tend to monopoly. On that, Adam Smith and Karl Marx agreed. Pro-competition laws may penalise success, curb enterprise and sustain incompetence. But competition trumps everything. It must be sustained in the short run if, in the long run, legitimate enterprise is to survive.
Murdoch arrived in Fleet Street in 1968 and emerged dominant from an industrial maelstrom, outsmarting such rivals as the Carrs, the Thomsons and Robert Maxwell. In 1978 Roy Thomson took on the unions at Times Newspapers and was defeated, handing the torch to Murdoch. Seven years later he opened his Wapping plant, to the hypocritical hostility of competitors who prayed he would succeed so they could imitate him. When he did, they did, including the Guardian. Pagination soared, supplements proliferated, and British journalism enjoyed two decades of the good life. There is still more reading in a British paper than before Murdoch.
At the same time he was launching satellite television, to predictions that the British would never subscribe for his dishes. They did in droves. The truth is that the British media has been stumbling and grumbling along in Murdoch's wake, letting him bear the risks and then riding on the back of his success. His latest much-ridiculed innovation is to ask his online newspaper readers to pay a subscription. The industry has declared as a matter of high principle that online news should be free – unless and until Murdoch succeeds, whereupon they will rush to join him.
Having taken Murdoch's shilling in the past, I am more than aware of his shortcomings as well as virtues. He may have kept British journalism alive, but he hardly enhanced its standing in British life. His competitiveness in bidding for the FT, undercutting rivals and tormenting the BBC was often motivated more by mischief than strategy. A journalist by instinct, he also found it hard to stop meddling in his papers. He loves the wielding of power and shamelessly uses his access to advance his businesses – though less often the other way round in the manner of Beaverbrook, Maxwell and Conrad Black. Murdoch is no politician manqué.
Yet it is one thing to recognise an innovator, another to release him from the bonds of customary regulation. The role of government is to maintain media diversity, industrial pluralism and consumer choice. The rule has been that no group should control more than a third of a market sector. But while a newspaper market can be crudely measured by circulation, for television it is less easy.
The new satellite, cable and set-top platforms combine and confuse access with content, medium with message, power with proliferation. Such concepts as market share, vertical integration and predatory pricing are opaque. As America's dotcom regulators found with Microsoft, a raging market can suddenly turn into a miasma of monopolistic packaging, bundling and micro-pricing. The regulator's target is always moving.
The culture secretary, Jeremy Hunt, wants to promote more local media outlets, currently circumscribed by statute and fair-trade rules. With local newspapers closing by the day and the BBC smothering local news outlets, he wants to relax controls on cross-media ownership. Given the dire state of the sector this seems reasonable. The rules can always be changed later.
On the other hand cross-media is changing its spots by the day. Practices that once seemed acceptable, such as the BBC competing with the press for online news, now seem unfair. Distinct platforms now merge into one through the internet. Soon there could be just two giants, Murdoch's News Corp and the BBC. And while those maddened by the BBC's brazen bias against the current budget cuts might welcome some balance, they would surely not welcome the brazen partisanship of Murdoch's Fox News in America.
The best approach is to steer clear of political emotion and stick to economics. In an ever more seamless media industry, it is clear that technology tends towards market dominance. The government's job is therefore to regulate pluralism. Murdoch's executives argue that they want the remaining 60% of BSkyB, which they in effect control, not for power but for revenue stream. But revenue is power. A move by Sky into local broadcasting, married to a bundle of subscriber channels and online and printed newspapers, would give Murdoch's companies overwhelming media penetration. It must be invigilated.
Today's letter to Cable is the greatest compliment Britain's great and good have paid Murdoch. He has reduced his foes to pleading for government protection. He should be cock-a-hoop. But he can't deny that he benefited from Thatcher's deregulatory environment in the 1980s, when he was left alone to challenge the unions and stuffy oligopolies of the BBC, ITV and Fleet Street. Now he has emerged on top, he should accept that the market should be geared to helping others challenge him.
The industry is changing so fast that nobody can say if the BSkyB buyout is anti-competitive. But it surely merits investigation, as does the whole industry constantly. Maintaining a diverse media is a crucial underpinning of democracy. As for Murdoch, the sun has shone and he has made hay. It is time he heard a regulator knocking at his door.
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