Direct Benefit for Murdoch

May 12, 2003  •  Post A Comment

Even some of News Corp. chief Rupert Murdoch’s biggest critics in Washington last week were privately conceding that the company’s $6.6 billion acquisition of DirecTV, though still technically subject to government review, appeared to be a done deal.
One of the latest favorable omens for Mr. Murdoch: Word last week that the Department of Justice, not the Federal Trade Commission, won the right to review the merger for potential antitrust problems.
Watchdog groups wanted the FTC to do the job because the FTC is a bipartisan commission, with Democrats on board. Justice, an executive branch agency of the White House, is all Republican.
“Despite our best efforts, this administration will approve the deal,” said Jeff Chester, executive director of the watchdog Center for Digital Democracy.
“Murdoch gives to the Republican Party and the Republican Party is going to give him DirecTV.”
Gina Talamona, a Justice Department spokeswoman said the decision to give the case to Justice was in part because Justice recently led the government charge that resulted in the rejection of EchoStar’s proposed acquisition of the company.
“It’s expertise and previous cases,” Ms. Talamona said.
Mr. Murdoch’s critics also complained that the official hearings on the merger by the GOP-led House Judiciary Committee last week seemed a wee bit friendlier than usual, especially on the Republican side of the bench.
“I don’t understand why you have a hearing when you know you’re just going to bring your witness in and pat him on the back for being a great guy,” said Chris Murray, legislative counsel for the Consumers Union.
Said Mark Cooper, research director of the Consumer Federation of America, said, “Murdoch is a big-time Republican and Republicans are the majority over there.”
At the hearings themselves, Mr. Murdoch made clear that his promise to give competitors fair access to Fox programming as a condition of government approval of the DirecTV deal had at least one significant string attached: The access offer will expire if the Federal Communications Commission pulls the plug on similar program access obligations that currently apply to the cable TV industry’s programming.
“We do not think it would be fair [to face an obligation that none of Fox’s competitors do],” Mr. Murdoch said.
The News Corp. chief also made clear that the obligation, which appears to have disarmed many of the criticisms of the deal, would only apply to the company’s cable TV programming, not its broadcast fare.
One of the other witnesses at the hearing-Neal Schnog, president of a small cable company with systems in rural Oregon-said the nation’s small cable operators oppose the deal on grounds it would give Mr. Murdoch too much power over TV programming.
“This is really the Fox in the hen house,” Mr. Schnog said. “It’s time to say no.”
But Mr. Murdoch said that even without the access commitment-which also says that neither News Corp. nor DirecTV will discriminate against independently owned programming-the company’s best business interests will keep it honest.
“As a programmer, News Corp.’s business model is predicated on achieving the widest possible distribution for our programming in order to maximize advertising revenue and subscriber fees,” Mr. Murdoch said.
“Similarly, DirecTV has every economic incentive to draw from the widest spectrum of attractive programming, regardless of source, in order to maximize subscriber revenue.”
The deal was also opposed by Consumers Union, on grounds that the merger could lead to higher prices for both satellite and cable TV users, because News Corp. might jack up its earnings by raising prices for programming that virtually all cable and satellite customers buy.
But Mr. Murdoch said company programming transactions that could present such a conflict would be subject to the review of independent directors on DirecTV owner Hughes Electronics’ board.
Mr. Murdoch has developed a formidable reputation for getting his way in Washington over the past couple of decades.
In one major victory in the 1990s he won the right to buy the New York Post, even though he already owned WNYW-TV in New York and an FCC rule barred daily newspapers and broadcasters from merging in the same market. (Mr. Murdoch’s defenders note that the paper was on the verge of going bankrupt at the time and no other buyers stepped forward to bail it out.)
In still another triumph, he beat an effort by former FCC Chairman Reed Hundt, a Democrat, to nail him with a ruling that News Corp. acquisitions of TV stations had run afoul of a law barring foreign companies from buying U.S. broadcasters. (He won that largely by getting the behind-the-scenes support of former FCC Commissioner Jim Quello, one of Mr. Hundt’s fellow Democrats. Though News Corp. is still an Australian company, in the case’s ultimate decision Mr. Murdoch was praised for creating a fourth TV network.)
Sources close to the News Corp. chief said that part of the secret of his success in Washington is that he’s always been willing to work in person the issues that are important to him. “He’s happy to talk to the lowest staffer or the highest elected officials,” said one source.
On most of the issues he’s won, he also has what’s known in the lobbying trade as a “good story”-a high-minded-sounding justification for the end he has in mind.
“He’s never asked for anything outlandish,” said a source close to him.
Critics say it hasn’t hurt the News Corp.’s chief’s clout with Republicans that he also owns a successful national cable TV news network.
“They [Republicans] love his conservative reporting,” Mr. Cooper said.
Added Mr. Chester: “Fox News is a 24-7 campaign contribution to the White House by Rupert Murdoch.”