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Richard Branson, Rupert Murdoch and the logics of strategy

8 December 2006

I have said before that business strategy is like a war, and it is even fir to get hostages. Richard Branson, owner of Virgin, wanted to include ITV, the British Independent TV in his portfolio of Media, recently increased by the cable operator NTL. And then, out of the blue, monopoly concerns appear because the deal is not done. Who does understands this?

Not long ago NTL, soon to be renamed “Virgin Media” was bidding for ITV. And it seemed that everything was done. But then, all of a sudden, ITV rejects the bid saying that from ITV’s perspective there is little, if any, strategic logic for ITV to combine with NTL”.

The deal would be excellent for NTL, because it would include the capacity of producing contents of ITV, apart from the rights in UK for the Champions League. This detail might not look very important, but around the world, football is a major incentive for customers to subscribe to payment TV.

And for ITV? Well, given their recent problems of revenues, being part of NTL would ease this concern. It would give them new platforms to broadcast their content, and also the power of the broadband, which seems to be the future of TV.

So if they were happy with the idea some time ago, and it seems that the merger makes sense, why such harsh statement?

While the decision was taken, Rupert Murdoch increased his ownership of ITV to 18%. Murdoch is the owner of BsSkyB, the satellite broadcaster, owner of the majority of rights to the English football league, and who has recently moved into broadband.

Take this with a grain of salt, because it is just speculation but, what if Murdoch is using the old business strategy of weakening the enemy? Branson and Murdoch are fighting for the hill. Although Murdoch seemed to have it very well controlled, Branson has lately started a battle with new strength. Branson is dealing with a neighbouring tribe that was being neutral until the moment. He want them to join forces. But then, Murdoch manages to have a decisive authority in that tribe and make sure that they remain neutral.

Why is Murdoch not buying ITV himself? That would spread serious concerns of monopoly. But because the deal NTL-ITV makes a lot of strategic sense, Murdoch is making sure that it will not happen. This reassures him that NTL will not grow while he makes further deals to lock his position at the top of the hill.

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