The proposed deal for News Corp to buy out the other existing shareholders at BSkyB throws up some interesting scenarios in relation to the participants’ needs and how they can best be met. A quick look at the needs, bargaining power and behaviour patterns on all sides suggests that a deal will be forthcoming. But how this might be viewed in any investigation by the Competition Authorities is another matter.
Looking at the needs of Rupert Murdoch’s Newscorp it would seem that a familiar pattern is being played-out. The deal would provide a source of cash from BSkyB’s operations which are forecast to grow rapidly – by as much as 70% over the next 2 years. This would no doubt be useful to Murdoch’s media empire at a time when there is a reassurance need for cash-flow, as newspaper revenues plummet all over the world, and the jury remains out on whether this trend can be reversed through the introduction of the kind of “pay-walls” recently introduced by Murdoch for The Times newspaper.
In terms of other personal needs, there is no need to dwell long on the partial satisfaction of Murdoch’s ‘achievement’ need which this deal would also represent. The man has been executing headline-grabbing and ground-breaking media deals for 60 years, and is not likely to stop scratching that itch until he is 6 feet under, at the earliest. The deal is also another gratifying instalment in the saga of the Murdoch Dynasty, a family that loves to be seen to be commanding respect and attention.
That brings us to James Murdoch, who as CEO of BSkyB finds himself in an interesting position. It is hard to believe that Murdoch’s bid would have been launched without his son’s tacit support. However, though he is no doubt loyal to his family, I wonder if there is something just slightly irritating in this deal for baby James?
Like any child of a masterful parent, he may sometimes feel that his father’s shadow looms large in his life. Children in his situation often develop strong and understandable needs to create their own achievements. Over the last few years he has successfully escaped Murdoch Senior’s shadow by forging his own formidable reputation as a very successful and smart businessman. Now he finds himself on the brink of coming back under his father’s wing again.
It may well be that as part of the deal to garner his son’s support for this take-over, Rupert Murdoch has had to come up with some ‘coinage’ – a negotiating reference to a concession which may not have huge value to the giver, but is highly valued by the receiver because it meets a personal need. Perhaps this coinage is a potential new role for his son, maybe in another company or division, where James can continue to develop his reputation and success, and satisfy his own dreams and ambitions independently of his father. Or maybe, dare one say it, it’s even a promise that Rupert Murdoch will step aside from running the combined entity in due course in favour of his son?
And what of the other independent Board members of BSkyB, including heavyweights like Gail Rebuck (Chairman and CEO of Random House), Alan Leighton (ex CEO of Asda) and Nick Ferguson? They may well be feeling that this is a difficult deal to stop, regardless of their point of view. Newscorp has a lot of bargaining power to bring to the table:
- Market power, weight deriving from its size and resources
- Expert power in relation to its understanding of the satellite-TV market
- Network power based on the connection between Murdoch Senior and his son
In this context, other Board members may be feeling uncertainty as to their own position, if and when the takeover happens. Rupert Murdoch is known as a tough negotiator whose style is based on ‘pushing’ his own agenda, rather than accommodating the needs of others. So, the other BSkyB Board members may feel that their needs are best satisfied by preserving their own reputation for integrity and shrewdness, through pushing Murdoch to the highest price to which he will go.
This certainly seems to be the gist of the early exchanges of bids, with BSkyB rejecting Murdoch’s current bid of 700 pence per share and insisting that a price in excess of 800 pence per share is required. This would value the 61% of BSkyB shares that Murdoch wishes to buy at some £1 billion more than the News Corp offer of £8 billion (which itself represented a 27.5% premium above the average BSkyB share price over the last 12 months).
Rupert Murdoch is not a man easily put-off when he closes in on a potential acquisition, so the expectation must be that, ultimately, enough needs would be met by all participants that BSkyB agrees to the take-over deal. Whether the Competition Authorities will feel the same way is another question.
There may be issues in Brussels and in front of the OFT about an arrangement which would give one company control over the largest digital pay-TV platform in Britain, major newspapers such as the Times, Sunday Times, and the Sun, and a burgeoning broadband and telephony operation. However, that’s another deal for another blog