Murdoch's influence in question, BskyB deal in doubt

The purchase was sailing through the approvals process just a few weeks ago, with the backing of the government and the Culture Minister Jeremy Hunt. Murdoch had promised to spin off Sky News, the largest privately owned 24-hour news channel in the UK, to a separate company to address monopoly concerns. Today he rescinded that promise, in a move that made it easier for a regulatory challenge to be made. The government referred the proposed purchase to its Competition Commission soon after. It was almost as if Murdoch was running up a white flag. Though the deal could still go through, the regulatory process could well take months with the general public and the rest of the UK press braying for blood.

What is BskyB?

In 1983 Murdoch purchased SATV, a Brittish-owned company that broadcast a few hours of recycled programming a day to Northern Europe. For the rest of the decade it continued to lose money, but Murdoch had the wherewithal to keep it going. It was eventually renamed Sky Television and in the ensuing years Murdoch and his lieutenants began laying the groundwork for what would become the most profitable satellite TV station in Britain. In that period, Britain granted a license to broadcast directly inside the country to another loss-making competitor, British Satellite Broadcasting. The company's management was weak and it hemorrhaged cash.

In 1990 a merger gave Murdoch a controlling stake in the enterprise, but not a majority. The renamed company, British Sky Broadcasting of BskyB, was turned to profit by Murdoch in 1992. Sky News became the UK's first 24 news channel. The company's new profitability was also driven by the money Murdoch pumped into English football (soccer). In 1992, the new "Premier League" for the top tier club teams in England was created, and Sky bid a then astonishing $450 million for broadcast rights on its pay-TV sports channels.

Jason Walsh, who's been covering the NotW story for us recalls in an email to me: "Up until this point no one in Britain had bothered much with subscription TV – in fact, the idea was pretty alien to people. Suddenly if you wanted to watch soccer live, you had to stump-up to get Sky Sports. Then he did the same for cricket, rugby etc etc. It was a major political issue at the time and is also the foundation for BSkyB's eventual profits."

That money machine, along with the Murdoch's purchase of part of Fox in the US in the 1980s, set the stage for his massive global reach and influence. When News Corporation held its Initial Public Offering in 1998, investors valued the company at $14 billion. Today, News Corp's market cap is $40 billion. The only real competitor to BskyB in the UK now is the government-owned BBC.

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