Rupert Murdoch’s Disney deal shows the old fox is still capable of a power play

Walt Disney chief executive Bob Iger and Fox owner Rupert Murdoch announcing the deal. EPA-EFE/THE WALT DISNEY COMPANY

Rupert Murdoch’s recent sale of a lifetime of accumulated assets to Disney may best be seen as an indicator of the rapid changes taking place in the international entertainment and news markets. With this unexpected move, Murdoch appears to have chosen the path of political influence over the uncertainty and expense of profitable entertainment. He’ll no doubt continue to combine drinks with movers and shakers at Davos with seeking to shape the views of voters.

He does this by retaining his company’s news assets across three continents: The Wall Street Journal and Fox Television News in the US and a range of still influential newspapers in Australia and the UK (the future of Sky News in the UK and Australia remains unclear).

Meanwhile, Murdoch has moved away from the expense and risk of fictional entertainment, sanctioning the disposal to Disney of Fox Studios with all the group’s entertainment assets including the film Titanic and the groundbreaking TV series The Simpsons. Additional elements in the goodbye package are the 39% of Sky UK already owned by Fox, the Sky Europe networks, and the 58 channels of the Star India network.

For the British – whatever their views on the role of the Murdoch newspaper and TV outlets – all eyes are on the prize of the judgement to be made by the UK’s Competition and Markets Authority. The CMA is currently reviewing the legitimacy (on grounds of both pluralism and standards) of 21st Century Fox’s attempt to buy the remainder of Sky in the UK, beyond the 39% that it already owns.

The standards issue relates back to the highly charged phone-hacking scandal associated with Murdoch’s British papers in 2011. Disney has indicated that, should the judgement be against 21st Century Fox, it would not then itself attempt to acquire the remaining 61% of Sky. The intricate conundrum that this situation poses is perhaps best left until the outcome of the regulatory process.

Who decides what we watch?

However, a bigger, longer-term issue arises from this case: would Disney be a better multinational producer and gatekeeper of television content for UK audiences than Fox? What material and cultural costs are involved and what policies drive investment in content?

Who will invest in original film and television content and who will decide on what stories are to be told? For richer countries, including Australia and Britain, such content has been seen not only as a desirable commodity for sale abroad but also as a key constituent of the national culture. For poorer countries, national self-expression is also a key issue, as the powerful movie Félicité (2017), recently completed in the Democratic Republic of Congo, attests.

Yes, but is it British? National Archives UK

In 1927, Britain felt able to pass legislation requiring a national cinema screen quota – though the amount of homemade product was given the small protection of a five per cent share of total screen time. This merely reflected the reality of a situation in which the vast majority of films screened were imported from the US. By 2007, the five per cent share had risen to something more like 15%, though of course the number of cinemagoers had radically reduced and the legal requirement had long since disappeared in the Thatcherite bonfire of trade-inhibiting regulations.

Small screen

In the field of television, the national share of broadcast time was almost exactly the reverse of the situation in cinema – and by the 1970s regulators required major British broadcasters to deliver a peak-time quota of European-made programmes (in reality UK-made) at around 70% to 80% (see BBC and IBA annual reports for 1979). This was made practicable as a consequence of the invention of a national content creation fund – otherwise known as the BBC licence fee – and because the number of channels drawing on advertising revenue was kept low (as low as two – ITV and Channel 4 – until 1997).

The high peak-time requirement for BBC One remains the same. In 2016, with some 500 licenced channels available to viewers, the BBC’s share of total TV viewing was just over 32%, by contrast Sky’s share of total viewing was just over eight per cent. With around half of all UK homes subscribing to Sky, profitability was, nonetheless, high.

Britain: turned on and tuned in. Ceri Breeze via Shutterstock

In the US over the past few years, the steady reduction in the proportion of homes subscribing to cable television packages – referred to as “cord-cutting” – has caused much anxiety and turmoil in the business. And just as TV was once the game changer that displaced cinema, so now the new online subscription services from Netflix and Amazon are changing decades of reliance on traditional TV.

It is this revolution in viewing habits that is causing anxiety for the multinational providers. Though change is perhaps faster in the US than in the UK, where free-to-air television has remained relatively popular and the existential threat to the old package TV subscription services is less – though arguably still serious.

It is this slow erosion of the old world of home entertainment, including even the once revolutionary provision of Sky’s satellite (not terrestrial) signals, that is a key underlying factor in the new Fox flight away from TV.