The European Commission’s antitrust investigators say competition would not be weakened if News Corp (NSDQ: NWS) buys the 60.9 percent of UK satcaster and telco BSkyB (NYSE: BSY) it doesn’t already own (case notes).
“News Corp and BSkyB are mainly active in different markets … and compete with each other only to a limited extent – in the wholesale supply of basic pay-TV channels and in the supply of online and TV advertising space,” according to the EC judgement.
Rival news publishers had opposed the deal, though analysts have said implications would be minimal – there has been no indication News Corp wants to bundle Sky News or BSkyB together with News International newspapers.
The UK will ultimately decide on whether to allow the buy-up, after Ofcom publishes its investigation on its effects on media plurality by December 31. News Corp already owns 39.1 percent of Sky, one of the world’s most successful subscription TV businesses; the full takeover was prompted by Sky hitting 10 million customers this year, the pair are yet to agree a price.
The EC’s logic on news publishing is most compelling, speaking to opponents’ bundling fears…
“The Commission investigated whether the merged company would be able to foreclose competing newspaper publishers by offering mixed bundles of subscriptions to Sky and News Corp’s print, online or tablet-based newspapers. With respect to bundling with print subscriptions, the market investigation revealed that price is only one, and not the main factor determining readers’ choice of and loyalty to a newspaper. Furthermore, no such bundling has been attempted before. Finally, tabloid papers such as The Sun do not offer any subscriptions to its print editions and a low subscription rate to newspapers of 6% of overall UK circulation and of 25-33% for quality titles indicates that the subscription model currently does not appeal to a majority of readers. With respect to bundling with online news, the vast majority of newspapers’ online editions – apart from most News Corp titles – as well as other news sources are currently free of charge and there is no evidence that this will dramatically change in the foreseeable future. For these reasons, the Commission excluded that competition concerns in the newspaper publishing sector would arise from the transaction.”
On that basis, either the EC hasn’t noticed that News International absolutely is aiming to make more of its readers multimedia subscribers, or it is suggesting that paid variants of this strategy are bound to fail…
The EC seemed to acknowledge that Sky could refuse advertising space to its competitors, saying that “there are sufficient alternative opportunities to advertise with other print media” and “in any event, News Corp’s refusal would not have a significant impact on subscription rates in the pay-TV market” (a kick in the teeth for Virgin Media).
In premium movies, the EC declared: “News Corp lacks sufficient market power in the market for the licensing of broadcasting rights for premium movies and that BSkyB’s competitors would retain several alternative suppliers with equally attractive content.” The UK’s Competition Commission is already investigating this issue.