BSkyB Red Card Bad News for Sports

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London -- Media companies keen to exploit Britain's
obsession with soccer may need another game plan following the government's decision to
block British Sky Broadcasting Group plc's bid for Manchester United.

The Department of Trade and Industry quashed the $1 billion
bid after the Competition Commission said it would give BSkyB an unfair advantage in any
future rights negotiations. The direct-to-home platform has exclusive rights to all of the
country's Premier League matches.

The decision surprised many in the industry. Not only did
the commission reject BSkyB's bid as not in the public's interest, but it also strongly
hinted that it could rule against any media company taking control of a Premier League
club.

Although no media has as strong an interest in existing
premium pay TV rights as BSkyB, the report cast doubt on "multiple mergers." It
said competition for rights among several television companies that owned soccer clubs
would "still be likely to be less satisfactory than it would in the absence of such
mergers."

Although the report didn't formally set a precedent for any
other deals -- including MSO NTL Inc.'s bid to take control of Newcastle United -- the
tone made it unlikely that they would be approved. NTL's bid has also been referred to the
Competition Commission. The MSO declined to comment.

The European Commission recently launched an investigation
into cross-ownership of sports clubs and media companies, and it's believed to be unhappy
about the influence that television companies such as Italy's Mediaset and France's Canal
Plus S.A. hold over sports in which they own clubs.

In a prepared statement, Rupert Murdoch, whose News Corp.
owns 40 percent of BSkyB, said the company was surprised that the concessions offered to
regulators -- such as assurances that the club would withdraw from any talks between the
league and broadcasters over broadcast rights -- weren't sufficient.

He added that similar concessions had been enough for him
to buy sports teams in the United States, including the Los Angeles Dodgers Major League
Baseball team.

It is likely now that media companies will have to be
content with noncontrolling stakes in British soccer clubs if they wish to exploit new
revenue streams such as pay-per-view.

United News and Media (UNM), which controls a number of ITV
broadcast franchises, recently said it was in advanced negotiations with champion club
Arsenal over a possible investment. It is believed that UNM is after a 20 percent stake in
the club.

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