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2017-05-01 13:31:03
Mediator: Murdochs’ TV Deal in Britain Hinges on 3 Words: ‘Fit and Proper’

LONDON — For most of the last 10 years, the Murdoch family, which controls 21st Century Fox, has wanted one thing for its global media empire above all else: the complete ownership of the popular and highly profitable Sky satellite and cable network.

Sky is the dominant pay television system here, a hub for Premier League soccer, movies, and networks like Fox News, MTV and Zee Punjabi. It was Rupert Murdoch who founded Sky, and 21st Century Fox already owns part of it.

Owning it outright, however, would give the Murdochs an important new cash generator to feed the rapacious appetite for growth and conquest that has made their family business the most influential media conglomerate in the world — one that helped hasten Britain’s “Brexit” from the European Union and helped deliver Donald J. Trump to the White House.

But three words threaten to stand in the way: “fit and proper.”

“Fit and proper” is that so-perfectly British standard by which regulators here decide whether a company should be allowed to gain and retain broadcast licenses.

It’s based on the premise that those who control news, information and entertainment options on television and radio should be held to high ethical standards, and that doing so determines “the kind of country we are,” as Jane Bonham-Carter, a member of Parliament, recently put it.

Understanding just how important the Sky deal would be for the Murdochs’ personal and global ambitions, and the complications that “fit and proper” could present to them, is vital to understanding the head-spinning developments at Fox News these past few months.

A fit and proper corporate culture — or one that wants to show it’s fit and proper — acts quickly to oust a division chairman when he is publicly accused of having sexually harassed various women over many years, no matter how wildly successful he is, and despite his denials. That’s what 21st Century Fox did with Roger Ailes last summer.

But would a fit and proper company have been so blind for so long to such serious alleged misbehavior at the top of one of its most important divisions, to the extent that the United States attorney’s office is now investigating whether it properly accounted for sexual harassment settlements?

Likewise, nothing says “fit and proper” like firing your highest-rated star after The New York Times reported that sexual harassment allegations against him had led to at least $13 million in settlements. (Yes, I’m talking about Bill O’Reilly, who also denies the accusations.)

But does a fit and proper company renew the star’s contract — to the tune of $25 million a year — just months after striking settlement deals with two women who had made allegations against him, ousting him only when public scrutiny was brought to bear?

The regulators at the Office of Communications here, known as Ofcom, will now have to answer those questions.

And the answers should matter to anyone who lives in a place touched by the Murdochs’ unique combination of political, cultural and journalistic power.

There’s no way to overstate how much this will matter to the Murdochs, and not just because of the 12 to 15 percent earnings accretion that the London firm Enders Analysis says the deal would bring within two or three years.

For Mr. Murdoch, approval would mean finally attaining the full fruits of a satellite television business that he began with his own grit and foresight, and at considerable risk — taking on a crushing debt load that forced him into a partnership with a direct rival, BSB, and ultimately cost him his majority stake.

It would also cap a remarkable comeback from the phone hacking scandal at his British newspaper division, where reporters were caught breaking into the voice mail accounts of royals, celebrities, athletes and crime victims.

That brought criminal investigations, humbling appearances by Mr. Murdoch and his son James at parliamentary hearings, and the final humiliation: a call from Prime Minister David Cameron, Rupert Murdoch’s political beneficiary, to drop the Sky bid, which he did.

Six years later, Mr. Murdoch is, if anything, at the height of his political power, given his special relationship with President Trump and the architects of the successful Leave campaign in Britain.

The Murdoch media stable showed just how little its political muscle had atrophied on the day of the European Union referendum, using the front page of The Sun to promote both the imminent release of its “Independence Day: Resurgence” movie and the Leave campaign with a headline that read, “Independence Day: Britain’s Resurgence.”

Now Mr. Murdoch has a chance to bring it all full circle with a successful Sky deal.

For James Murdoch, a Sky deal would solidify his hold on a business he’s credited with adroitly expanding to Germany and Italy and into broadband. But there’s something more at stake: “a chance at full corporate redemption,” as the London-based analyst Claire Enders put it to me last week, “after his perilously close brush in 2011.”

That brush is most closely associated with his testimony that he did not know the extent of the hacking inside the newspaper division that fell under his purview at the time. An email unearthed by investigators showed that a top editor had informed him that the hacking was more widespread than the company had acknowledged. (He said he had not read the email in full.)

But much of the judicial inquiry that followed centered on whether the Sky bid he led at the time had too aggressively sought to trade on the company’s political sway.

As he pursued the Sky deal, James Murdoch appeared to be an adept student of his father’s use of power and influence.

In 2009 he gave a speech calling the BBC, his biggest competitor, and Ofcom “unaccountable institutions” that were bucking the free market’s rules of Darwinian evolution.

A few months later, The Sun swung its support to the Conservative Party leader, Mr. Cameron — who had said Ofcom “as we know it” would cease to exist under Conservatives — and away from the Labour Party leader, Gordon Brown, who promised no such thing. (James Murdoch delivered the news to Mr. Cameron personally.)

After the endorsement, Jeremy Hunt, a member of the Conservative Party, declared that a Conservative government would “rip up” the BBC’s royal charter.

Mr. Cameron and the Murdochs denied Labour Party charges that there had been a quid pro quo; a judicial investigation known as the Leveson inquiry did not find that there was one, and Sky went through the expected regulatory scrutiny.

But the inquiry reported inappropriately close contact between the Murdochs’ lobbyist and Mr. Hunt, the key cabinet minister overseeing the process, and noted it was “regrettable” that James Murdoch had not sought to halt it.

That was in line with the findings of Ofcom, which cleared him of any wrongdoing related to hacking but said he “repeatedly fell short of the exercise of responsibility to be expected of him as C.E.O. and chairman.”

That critique came up again this year when the culture secretary, Karen Bradley, alerted 21st Century Fox that she might refer the Sky deal for regulatory review.

21st Century Fox says it’s confident it will win approval. It’s certainly hoping that regulators will focus on improvements James Murdoch and his brother, Lachlan, have ushered in at the company, like enhanced benefits and a new emphasis on diversity.

While some old opponents remain steadfast, like the consumer group Hacked Off, one former opponent, Ms. Enders, the analyst, is not opposed this time.

In an interview, Ms. Enders pointed to James Murdoch’s successful work in expanding Sky’s business — while placing a large number of women in senior positions — and a speech he gave at a conference in which he spoke warmly about the BBC.

“He’s understood the error of his ways,” she said, adding that he is now “20 times more cautious, anxious, obsessed with the corporate governance of Fox.”

Few are predicting where Ofcom will come down, though Wall Street seemed to think Mr. O’Reilly’s ouster helped the deal’s chances, given the boost in Sky’s stock price that followed it. The agency will have to determine whether the move against Mr. O’Reilly came from typical Murdochian pragmatism or from something Wall Street doesn’t necessarily reward: the fit and proper commitment to doing what’s right.