Shares in Sky PLC (LON:SKY) edged lower this morning as Rupert Murdoch’s proposed takeover of the UK broadcaster was hit by further delays after the government asked Ofcom for further input.
The department for digital, culture, media and sport wants the media regulator to conduct further analysis of whether or not the billionaire mogul and his company, 21st Century Fox (NASDAQ:FOXA), would adhere to broadcasting standards in the UK.
Ofcom had no issues with broadcasting standards in original report
In its original report to the government at the end of June, Ofcom said that the merged entity would not “lack a genuine commitment to the attainment of broadcasting standards”, should the deal be approved.
As a result, culture secretary Karen Bradley said there was no need for the Competition and Markets Authority to investigate the merger on those grounds, although she added that she was still “minded to” refer the deal to the watchdog on the grounds of media plurality.
READ: Government ‘minded to’ refer Sky-Fox merger to competition regulators
Both Ofcom and the government have come under pressure this week to review that finding amid allegations that Fox News had colluded with the White House on a story that contained fake quotes.
A high-profile group of MPs led by Murdoch critic Ed Miliband, alongside campaign group Avaaz, have written to Bradley demanding that the deal be referred to the CMA on both counts, adding that they would consider legal action if that didn’t happen.
They said the recent allegations against Fox News – which Fox denies – suggested a “brazen disregard for the ethics of journalism” and that they showed new compliance procedures within the organisation had “failed miserably”.
Decision unlikely until next month now
“After assessing the large number of representations made in relation to the secretary of state’s referral decision, a number of these raise new evidence and/or comment on the Ofcom assessment,” the DCMS said in a statement.
“Any referral decision by the secretary of state must be taken on the basis of a valid assessment of all the relevant evidence. For this reason the DCMS has asked Ofcom to advise on a number of points arising from these representations.”
The government has asked Ofcom for a response by 25 August, making it unlikely that any final decision on whether or not to refer the deal to the CMA will be made before parliament returns from its summer recess on 5 September.
Disney/ Netflix drama also weighing
The Walt Disney Company (NYSE:DIS) dealt film and TV streaming giant Netflix Inc (NASDAQ:NFLX) a blow yesterday after saying it will launch its own streaming services in 2019.
The Mickey Mouse creator has a deal that allows Netflix to include its films on the popular platform, but that contract runs out in 2019 and won’t be extended, Disney said.
“The potential ramifications from this are huge, particularly for the pay-TV industry, which now faces the threat of disintermediation if others follow. It also emphasises, again, the importance of owning content that people want,” said the media team at Liberum.
“We suspect other big content providers are thinking of going down the Disney route.”
The analysts think Sky could be the European stock most affected by this trend, given the potential for its major sports providers to consider a direct-to-consumer route.
Shares were down 0.7% to 957p.