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.


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