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27 January 2011

Murdoch eyes the prize as BSkyB profits soar

BSkyB profits up 26 per cent as Murdoch remains in London to negotiate with Culture Secretary.

By George Eaton

As Rupert Murdoch remains in London to lead negotiations personally with Jeremy Hunt over News Corp’s attempted takeover of BSkyB, here’s a reminder of why he’s so keen to seal the deal.

BSkyB has today announced that profits rose by 26 per cent to £467m in the last six months of 2010, with revenues up 15 per cent to £3.2bn. Sky has also now passed its target of ten million subscribers, set by James Murdoch in August 2004, when subscriber numbers were at 7.4 million. The graph I’ve put together below, based on data from Enders Analysis, shows what a full merger between News International and the broadcaster would mean for media plurality.

Media companies by revenue

A

In revenue terms, BSkyB is already the country’s largest broadcaster, with an annual income of £5.4bn, comfortably ahead of the BBC (£3.6bn). A pair-up between News International and BSkyB (Murdoch at present owns a 39 per cent stake) would produce a UK media company with revenues of £6.4bn.

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As Mark Thompson argued in his impressive MacTaggart Lecture, Murdoch’s bid, if successful, would lead to a “concentration of cross-media ownership” that would be unacceptable in the United States or Australia, News Corp’s other two key markets. Once the deal is complete, we can expect Murdoch to bundle his newspapers with Sky subscriptions in an attempt to offset falling circulation.

As the media analyst Claire Enders has predicted, by the middle of this decade, the News Corp head could control 50 per cent of the newspaper and television markets, a concentration of ownership that would make even Silvio Berlusconi blush. Regardless of the “undertakings” Murdoch is expected to offer to Hunt, there is an unarguable case for referring the bid to the Competition Commission.