Commission to vet Murdoch’s pay-TV bid

Date: 06/06/1996

By Fiona McHugh

RUPERT Murdoch's plans to enter the German digital television market by linking his pay-television channel BSkyB to three leading European media groups are to be submitted to the European Commission for approval in July if the deal goes ahead.

According to officials at the media company Bertelsmann, BSkyB's investment in Germany's main pay-TV channel, Premiere, should be finalised by the end of June and notified to the Commission before the summer break.

BSkyB, which is 40&percent;-owned by Murdoch's News Corporation, is paying 217 million ecu for a 25&percent; stake in the channel which is currently owned by France's Canal+ and the German media groups Bertelsmann and Kirch Gruppe.

This week, BSkyB and Canal+ wrote to Bertelsmann expressing concern that the deal was taking so long to put together, but all sides are still hopeful it will go ahead.

If approved by the Commission, the move should ensure the speedy spread of pay-TV across Europe, and further expand Murdoch's already huge media empire.

Competition Commissioner Karel Van Miert has warned that he will examine the deal closely, but has refused to speculate on the likely outcome of any investigation.

However, media analysts, pointing to the tough approach to media mergers taken by Van Miert in the past, say there is a strong chance of the plan running into trouble.

“The Commission is going to be very wary of a deal like this which could easily stitch up a large part of a new European market,” said one media lawyer. “Because the companies in question will control the decoder boxes, the Commission will have to ensure that they do not use their gatekeeper position to lock rivals out of the market.”

But representatives from BSkyB played down the threat the Commission poses to the deal, saying they were confident the link-up would be approved.

That optimism may be misplaced. So far, the Commission has shown itself to be ruthless in enforcing anti-trust law in this sector. It has blocked three of 12 media cases lodged with its competition authority, DGIV, in recent times. That represents a 25&percent; failure rate for media mergers, as opposed to 10&percent; for mergers in general.

“The Commission feels that it has to be extremely cautious and, where necessary, extremely firm where the affected markets are in a transitional phase due to technological innovation and liberalisation,” explained Olivier Guersent of DGIV. Media concentration is particularly sensitive since it not only involves market power, but social and political power too.

Van Miert, who has come under fire for his eagerness to break up media marriages, will have to balance those concerns with the EU's anxiety to encourage the emergence of the information society in Europe.

Under the deal, BSkyB, Bertelsmann and Canal+ will each hold a 30&percent; stake in the joint venture, while French media and advertising group Havas will have a non-voting 10&percent; stake.

According to Sam Chisholm, chief executive and managing director of BSkyB, the incursion into mainland Europe is a major step forward for the company. “As Europe's largest pay television operator, we have joined with strong partners to exploit the opportunities available in Germany and the rest of continental Europe.”

Digital satellite pay-TV is set to become a major entertainment industry and a huge source of advertising revenue for broadcasters. But it is not yet clear which type of decoder box will become the dominant one.

In a re-run of the battle between VHS and Betamax video technology, pioneers of pay-TV are already wrestling with each other to capture the lucrative decoder market. The decision by Premiere's owners and owner-to-be to use the SECA decoder, developed by Canal+ and Bertelsmann, instead of the D-box, being marketed by Kirch, may determine the final outcome of that particular battle.