BSkyB – James Murdoch’s master plan comes closer to fruition

Sky camerman

Today's announcement that BSkyB has made a £4.9bn bid to buy Sky Deutschland and Sky Italia from 21st Century Fox is, on the surface, a straightforward play by a British pay-tv business to become a European giant.

Jeremy Darroch, BSkyB's chief executive, wants to run a business whose interests do not stop at the Channel. The deal would open up the German, Austrian and Italian pay-tv markets which are not as well developed as the UK's.

As BSkyB reaches 11.5 million customers in Britain and Ireland, the room for endless subscription growth is slowing.

New products such as Sky Store (a download DVD service) and Now (the availability of Sky services without a long term subscription) do provide some opportunities for growth.

But they are probably not game changers.

This deal is.

If successful, BSkyB would go from being a UK and Ireland based business with £7bn in revenues to a business with 20 million customers and revenues of over £11bn.

Ultimate goal

Investors will have to digest the impact of the issuing of shares (which they will buy) and the increase in debt BSkyB plans to finance the deal.

The business's credit rating is likely to be downgraded as its debt increases.

One of those investors in BSkyB is of course 21st Century Fox itself, which owns 39% of the company.

So, in part, the Murdoch empire is paying itself to finance the deal.

And that leaves the bigger question - what is the ultimate goal?

James Murdoch is the chief operating officer of Fox. He was also once the chairman of BSkyB when News Corporation tried to buy the whole of the business in 2010.

That deal floundered in 2011 over media plurality issues and the fact that part of the News Corporation empire - the newspapers - was embroiled in phone hacking allegations.

James Murdoch quit as BSkyB chairman.

But he is still on the board. As is Chase Carey, to all intents and purposes Rupert Murdoch's deputy. Both men retain a high-level interest in the fortunes of the business.

James Murdoch launched the bid for BSkyB as a way of creating a vehicle for an assault on Europe.

This could well be a similar project, just via a different route.

Burning ambition

Mr Murdoch's quotes today - welcoming the BSkyB offer - are worth digesting.

"We have always believed that a combination of the European Skys would create enormous benefits for the combined business and for our shareholders," he said.

"Ultimately, a pan-European Sky is good for customers, who will benefit from the accelerated technological innovation and enhanced customer experience made possible by a fully integrated business."

"We look forward to participating in Sky's exciting next chapter under the leadership of Jeremy Darroch."

That next exciting chapter, say senior observers of the situation, could be for Fox to buy the 61% of BSkyB it does not already own.

Such a move would be a few years away, if it ever happened.

There is still the small matter of Rupert Murdoch's desire to buy the American entertainment behemoth Time Warner for $80bn. That deal will take some doing, and the cash raised by the offer from BSkyB will be welcome.

But do not bet against James Murdoch fulfilling his ultimate ambition of leading a pan-European pay-tv business.

Those close to him say that despite the defeat in 2010 and 2011, that ambition still burns brightly.

Kamal Ahmed Article written by Kamal Ahmed Kamal Ahmed Business editor

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  • rate this

    Comment number 196.

    I don't like Murdoch and I don't trust Murdoch which why I don't buy his newspapers and don't pay to watch his TV channels. It's about time we followed the US and made it illegal for non-British citizens to own any of our media companies and one person/company should be allowed to own more than one media outlet - one newspaper, one TV channel, one film studio, etc. Let's bring back some balance.

  • rate this

    Comment number 195.

    185. Ninj 

    So this is essentially a win win for Murdoch as he pursues his attempt at world media domination. Forget truth and just listen to good old friendly, reliable Uncle Murdoch

    Perhaps the monopolies commission could for the Murdoch empire to be broken up and sold to independents. Too much power in too few hands.

  • rate this

    Comment number 194.

    But I thought that James Murdoch and his Father were to be up before UK Parliament again shortly to answer charges of Corporate Criminality over phone hacking and other News of the World convicted crimes. All very bad stuff carried out under News International banner based at Wapping.

    Rupert Murdoch will not get any custard pie protection from pretty wife Wendi this time as she has divorced him?

  • rate this

    Comment number 193.

    I've never held back from criticising the Beeb where appropriate - the cack handed mismanagement of HYS would be a good example.
    That said , for all it's faults it's light years ahead of most of the commercial competition and I worry greatly that the dark underworld of News International is being allowed to unravel it's tentacles yet further.
    Murdoch is not fit for purpose in any sense.

  • rate this

    Comment number 192.

    @189.Phil Dawson
    Good man, well said, agree with you 100%.


Comments 5 of 196


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