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This was published 8 years ago
Murdochs on notice over Foxtel grab for Ten
By Dominic White
Competition watchdog Rod Sims has put the Murdoch family on notice that all of their local media interests will be taken into account in his ruling on the controversial deal between News Corp's pay-television venture Foxtel and Ten Network Holdings.
"We will take a holistic look to try and understand what influence News and or Foxtel could have over Channel Ten that would be a level of influence beyond the 15 per cent direct shareholding that Foxtel would have," the Australian Competition and Consumer Commission chairman told Fairfax Media in an exclusive interview.
His comments indicate that the ACCC will consider News's 50 per cent stake in Foxtel as well as News Corp co-chairman Lachlan Murdoch's 8.5 per cent stake in Ten through his private investment vehicle Illyria, which also owns radio company Nova Entertainment.
The approach could add a hurdle for News Corp and Foxtel in their efforts to convince the regulator that the deal would not give News and Foxtel effective control over Ten or substantially lessen competition in the market for sports rights and other content. Telstra owns the other 50 per cent of Foxtel.
First public commentary
It is Mr Sims' first public commentary on the complex deal announced last month which will reshape the local media landscape through the sale of 15 per cent of free-to-air broadcaster Ten to Foxtel, whose Multi-Channel Network will take control of the network's advertising sales. Ten will acquire 24.99 per cent of MCN.
"We are conscious that one of the News Corp executives (Lachlan Murdoch) has a shareholding (in Ten) separately and we will bear that in mind in our assessment of these things," said Mr Sims. "It is too early to say yet what our view will be but clearly the higher the level of shareholding the more likely it is that there will be greater control.
"There's no doubt that you can't ignore these things. You can't be mechanical about this. You have to take commonsense view of what the various ownership stakes mean."
The ACCC chairman, who sits on the four-strong mergers committee that is due to make a decision on the deal by September 10, has met privately with some of Foxtel and Ten's rivals who are concerned about the deal.
Mr Sims, who warned News Corp three years ago that it would struggle to get approval for any expansion into free-to-air television, also said that maintaining competition in the sports rights market would be key to the ACCC's decision.
The ACCC will ask whether will Foxtel have an incentive to partner with Ten in preference to other free-to-air networks such as Nine and Seven for the acquisition of sports or other program rights.
In 2012 Mr Sims blocked Kerry Stokes's Seven Group's effort to get hold of 50 per cent of Fox Sports through the acquisition of James Packer's Consolidated Media Holdings. The ACCC had voiced concerns that Seven's free-to-air rivals, Nine and Ten, would be disadvantaged in bidding for sports rights if Seven also owned half of Fox Sports.
'Very different' move
Mr Sims said that Foxtel's move was "very different" to Seven's and it was taking a smaller stake, but added: "There's no question that in the Channel Seven/Fox Sports matter our concern was largely around sports rights and there is no question that thinking is in our minds now."
News Corp and its family interests have woven together a mix of their publishing assets, their interests in Ten, Foxtel, Presto and radio … they have gamed the government. It's supposed to be two out of three and it's more like five out of five.
Greg Hywood, Fairfax Media chief executive
Any free-to-air network needs to work closely with Foxtel in winning sports rights because it is the richest company, making almost $1 billion a year in underlying profit, more than the three metropolitan free-to-air networks combined.
Mr Sims acknowledged that the market for video content has changed since 2012, an argument Foxtel is likely to make, noting the explosion of competition for content, including from overseas multinationals such as Netflix.
Fairfax and the free-to-air broadcaster Nine Entertainment Co are both expected to make the case that the ACCC should oppose the deal in their confidential submissions to the ACCC (which were due in on Friday but could for which some parties have been given an extension).
Greg Hywood, chief executive of Fairfax Media, owner of The Australian Financial Review, said last month: "News Corp and its family interests have woven together a mix of their publishing assets, their interests in Ten, Foxtel, Presto and radio … they have gamed the government. It's supposed to be two out of three and it's more like five out of five."
Private concerns
The views of Seven West Media, which is Foxtel's partner in the video streaming venture Presto, are unknown. Some Seven executives expressed private concerns prior to the deal being announced about increased competition in advertising from a combined Foxtel/Ten sales force. Mr Stokes has grown increasingly close to Lachlan Murdoch.
Asked a series of questions about the potential influence News Corp and its various companies could exert over Ten and the possible impact on competition in sports rights, content acquisition and advertising, Foxtel said it would be inappropriate to comment in light of the various processes underway.
However, Foxtel CEO Richard Freudenstein added: "As I stated at the time this transaction was announced, Foxtel regularly does deals with free-to-air broadcasters where to do so is in the best interests of the business and adds value for our shareholders.
"This has included commissioning A Place to Call Home from Seven, acquiring the World Movies channel from SBS, jointly commissioning Gogglebox with Ten, entering into the Presto joint venture with Seven and potentially Ten, and doing sports rights deals with every network other than the ABC. We will continue to seek the best partnerships we can to deliver great content for our subscribers."
A Ten Network Holdings spokesman said in an emailed statement: "As you would appreciate, given that the matters are currently before the ACMA and ACCC for consideration, it would be inappropriate for Ten to engage in a public debate/make any public comment on the issues being considered.
"However, as a general response to your questions we do wish to make two points clear: the proposed arrangements do not give rise to, or contemplate, any exclusive arrangement with Foxtel for the acquisition of any content, including sports. Ten's ASX announcements which describe the arrangement reflect this.
"And the proposed arrangements do not give Lachlan Murdoch, Foxtel or News control over Ten and Ten considers that the arrangements do not contravene the BSA (Broadcasting Services Act)."
A News Corp Australia spokesman said: "Foxtel is a 50/50 joint venture between News Corp and Telstra and operates as a standalone business. Any questions in relation the proposed investment by Foxtel in Ten, are a matter for Foxtel and Ten."
A spokesman for Lachlan Murdoch said he was overseas and unavailable for comment.