01 May 2003

Shock and awe. It's a tactic employed by Rupert Murdoch that has served him well throughout his career. Most recently he used it in his hard-fought campaign to win control of the biggest pay-satellite TV platform in the US.

As with the war against Saddam, there were nay-sayers who thought Murdoch's campaign to gain control of DirecTV wouldn't work. In fact several months ago, when Charlie Ergen's Echostar sealed a deal to take control of DirecTV (snatching it out from under the very nose of News Corp) many media watchers said that Murdoch's Midas touch had perhaps faded.

Watching him speak within a few days of Echostar's strike, some of us were witness to a Murdoch not bowed, but angry and, yes, shocked. His anger quickly turned into an intense lobbying campaign in Washington to persuade regulators that Ergen's Echostar and DirecTV together would create an unwelcome monopoly. And, guess what: Murdoch's lobbyists won the day and it was Ergen's turn to be astounded.

Now, with DirecTV in his pocket, Murdoch is back on the road to realising his long-held dream of creating the first ever global pay-TV network.

He already has several jewels - BSkyB in the UK, Star TV in Hong Kong, footholds in Latin American, Japan, Australia, China and, most recently, Italy. North America has always been a massive gap in his global picture.

Murdoch owns a Hollywood studio, a national TV network (Fox), a US news network (Fox News) and is therefore a programming powerhouse in the US and around the world. But in the US pay-TV market, Murdoch has remained a supplicant to the cable operators and to DirecTV and Echostar, having been forced to rent space on their platforms. This was not a happy position for a man who is unaccustomed to having to do these kinds of deals.

So the DirecTV capture means thoughts of Sky Global Network (SGN) have been re-awakened. When Murdoch was on the threshold of gaining control of DirecTV the first time, the bankers were swarming to put together an initial public offering for SGN that would create a satellite pay-TV tracking stock separate from the other News Corp core businesses. Now the prospect of Sky Global has re-emerged. Not only has Murdoch corralled DirecTV, but he has also taken advantage of the weaknesses that are being played out across other major media houses. AOL Time Warner is struggling to clean up the financial drain of its online business unit and there is still in-fighting in the top management echelon at Viacom. Vivendi Universal is battling against shareholder lawsuits and a debt load that needs to be paired down. Meanwhile, Murdoch seems to be getting his second wind.

In Italy, he has played a classic waiting game and taken advantage of VU's financial distress to become the sole pay-TV operator. Given rampant satellite card piracy and the many free-to-air channels, the creation of Sky Italia will not be without challenges, particularly since the Italian prime minister Silvio Berlusconi also happens to be the country's biggest media magnate and may find ways of holding up the Murdoch advance.

The News Corp executives now in charge of Sky Italia need to fix the piracy problem (which they will do as they switch from the old Canal Plus encryption system to NDS) and figure out a better price-package combination that will win the subscription loyalty of the Italians.

While Murdoch has won over the Italian regulators, he now needs to work the same magic in the US. He has sealed the deal for DirecTV and must now convince Washington that his strategy will benefit consumers. Murdoch is unlikely to face the massed ranks of lobbyists and opponents that he marshaled against Charlie Ergen, but ultimate victory is not a shoo-in. However, Murdoch, with control of a major media company, can galvanise his troops to support his business interests. Against Ergen, Murdoch got the Christian Right on his side, promising them distribution while implying that Echostar/DirecTV would throw their channels off air. It's not a huge leap to imagine that Fox News's pro-war coverage of the strike against Iraq may have something to do with Murdoch's hope that he will gain a fair hearing from US regulators.

So will Murdoch get the regulator's approval where Ergen failed? The answer is a great big "Yes, sirree". You see Murdoch doesn't like losing.

Where his major media rivals have shareholders and squabbling board members and executive egos of differing strengths, News Corp has Big Daddy M.

And no one, not anybody, likes to fool around with this guy, whether they be businessmen or politicians, all are at the mercy of the Murdoch media machine.