Match of the day: Branson-Murdoch Round three

October 3, 2007

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The battles between BSkyB and Virgin Media continue. This round goes to Richard Branson, as the competition commission rules that the Murdoch move which acquired a stake in ITV was anti-competitive.

According to The Guardian

Sky could be forced to sell its 17.9% stake in ITV at a substantial loss after the Competition Commission said this morning that the holding restricts competition and is against the public interest … It is likely to please Sir Richard Branson, who last year attacked Sky’s “reckless and cynical attempts to stifle competition, and secure creeping control of the British media”.

In a provisional ruling, the commission said that the shareholding, which has been fiercely criticised by rivals, would allow the satellite broadcaster to weaken ITV or prevent it competing fully with BSkyB.

In an earlier post I noted that

Both companies have a capacity to damage the other’s competitive position. As a complete victory for one side seems unlikely, the organizations will have to find ways of co-existing and collaborating, as well of competing

That has not stopped a bitter feud deepening between both organizations.

Earlier in the year Virgin’s TV subscribers were caught in the crossfire. Virgin lost an estimated 40,000 of its 3 million-plus subscribers when BSkyB pulled the plug (or at least, the dispute resulted in loss of BSkyB content to Virgin subscribers.

Both parties have continued to react energetically in the fast-changing media market-place.

This week Richard Branson launched the new TV channel Virgin 1, which even if planned otherwise will now fill the gap left by the loss of the Sky channels.

A day before the competition ruling, BSkyB yesterday unveiled Picnic, a new subscription service for Freeview digital TV, which initially will offer three channels (Sky One, Sky Sports 1 and Sky Movies).

Setanta Sports, originally positioned as viewing for Irish ex-pats, has muscled itself into a more visible position in its advertising campaign for cheap monthly subsriptions. In the UK, the most recent sale of transmission rights of Football matches has illustrated how what’s right for the Competition Commission may not be right for viewers wanting to follow their favorite team, and who now have mind-boggling calculations to make in view of the multiple bundling possibilities on offer.

What’s going on?

Here we have a developing story of some appeal to wannabe leaders. Is it a war-game? Are there rival teams of grand-masters planning move and counter-move?

While my favorite notion of Chess as a source of strategy insights offers a starting insight to the complexities, maybe a deeper study is required. One colleague suggested the various theories of Industrial Organization economics. These are even more complicated than the Branson Murdoch battle. A nice introduction can be found in the review by Kathleen Conner. Although not covering more recent work, it explores various theories, with particular attention to the Resource Based View of the firm. This remains a way of understanding how a firm’s competitive position may defined by a “bundling” of unique resources.


The Branson Murdoch match: Round Two

May 25, 2007

James Murdoch for Sky TV and Richard Branson of Virgin Media continue to slug it out. Both companies have a capacity to damage the other’s competitive position. As a complete victory for one side seems unlikely, the organizations will have to find ways of co-existing and collaborating, as well of competing.

The dispute

The wider battle was explored by Jeremy Warner for The Independent in February.

It can be traced to the formation in April 2006 of Virgin Media, from the ailing NTL cable company. The move was presented as one which would offer a bundle of services to users. It brought the new company into more direct competition with Sky. Competition in this emerging multi-media context is intricately mixed up with inter-dependence, as services are shared and traded. Sky promptly acquiring a minority stake in ITV. This was seen as a protective strike, as ITV was a take-over target for the newly formed Virgin Media.

It is this move which led to complaints against Sky, and to the decision this week by Secretary of State Alistair Darling to refer the issue to the Competition Commission.

Background

In the last few months the dispute became serious when Sky and Virgin Media failed to resolve a dispute over re-negotiated charges requested by Sky. Customers of Virgin Media were deprived of the disputed bundle of Sky programmes previously accessed through the former NTL cable service.

It is tempting to portray the dispute as a battle between Richard Branson of Virgin Media and James Murdoch of Sky. We can predict Murdoch junior’s actions to some degree. He is unlikely to present himself as anything but the son of superdad Rupert. So tough and mean is likely to be the order of the day. Branson will continue to find ways of representing himself as a benign socially-caring figure.

Meanwhile, the dispute is a bit of a no-brainer. There’s evidence that the combatants have blundered into a messy situation which can turn out badly for all concerned. Corporate attention may be distracted from issues of running creative media organizations to political and legal efforts.

What happens next?

The least violent outcome is a period of increasing lack of progress, followed by some resolution, togther with a bit of cosmetic face-work for the weary warriors. There may even be some creative initiative accompanying restoration of Sky channels for Virgin Media subscribers.

More catastrophic solutions might include a regime change. But recent military history reminds us of the dangers of such a policy. Time-scale for significant developments? Weeks would be possible but unlikely. Months would be unfortunate, and not beyond the bounds of probability. But cash haemorrhaging is a condition which brings even the strongest of egos into line.


The Branson Murdoch match: Skirmishes in the opening rounds

April 13, 2007

Sky TV and Virgin Media head for the high court in the opening skirmishes of their contest. Young master Murdoch of Sky defends charges from the charismatic Richard Branson of Virgin Media. The battle will test the charge that BSkyB abused its market position in imposing new charges for some of its services to Virgin Media. The dispute has deprived customers of programmes, and is costing both companies in advertising revenues.

The wider battle can be traced to the relatively recent formation (in April 2006) of Virgin Media, from the ailing NTL cable company. The move was presented as a strategic one which would offer a bundle of services to users. It brought the new company into more direct competition with Sky. Competition in this emerging multi-media context is intricately mixed up with inter-dependence, as services are shared and traded.

Sky promptly acquiring a minority stake in ITV (November 2006). This was seen as a protective strike, as ITV was a take-over target for the newly formed Virgin Media. Branson mutters about spoiling tactics.

Claims and counter-claims followed. For viewers, the spat became serious when Sky and Virgin Media failed to resolve a dispute over re-negotiated charges requested by Sky. Customers of Virgin Media were deprived of the disputed bundle of Sky programmes previously accessed through the former NTL cable service.

Branson versus Murdoch?

It is tempting to portray the dispute as a strategic battle between Richard Branson of Virgin Media and James Murdoch of Sky. If so, the story inevitably presents James Murdoch as Rupert Murdoch’s son and heir apparent.

The reality is more complex. James is the youngest of three Murdoch offspring to a previous marriage. His sister Elisabeth seems the sparkiest of the three, but both she and brother Lachlan seem to have sought more independence, and have broken with promising roles within Murdoch’s media empire. But there may be other candidates to succeed father Rupert, who also has potential heirs from a more recent marriage.

Young James seems to have had a somewhat rumbustious time in his formative years (hardly surprising). His roles in the family firm have been conducted with inevitable publicity. Progress has been swift (hardly surprising). Results have been not totally convincing, but public skepticism has been somewhat weakened through his evidential touch in leading the BSkyB business.

And in the opposite corner …

Richard Branson. Media darling, celebrated entrepreneur, self-publicist, philanthropist , billionaire, business icon. If he wanted it, his catch-phrase for a TV series would be not ‘you’re fired’, but ‘hang around, there’s a party going on here’.

The battle would seem a non-contest, if we were not aware that young James still has his dad, that gnarled old warrior of a hundred successful battles, in his corner.

So what’s going to happen?

Financial sanity will prevail sooner or later. Any battle of the egos will have less ultimate significance than the realities of the bottom lines. The relatively narrow issue of the renegotiated charges for the Sky channels on Virgin Mobile will be resolved, perhaps by a creative bit of face-saving on both sides. Even in the jungle, most fights are biologically programmed so that there is no ultimate victor and fatally wounded loser.


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