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Murdoch's media empire strikes back

LONDON (Reuters) - Rupert Murdoch on Thursday declared war against "enemies" who have accused his pay-TV operation of sabotaging its rivals, denouncing them as "toffs and right wingers" stuck in the last century.
/ Source: Reuters

LONDON (Reuters) - Rupert Murdoch on Thursday declared war against "enemies" who have accused his pay-TV operation of sabotaging its rivals, denouncing them as "toffs and right wingers" stuck in the last century.

Reports by the British Broadcasting Corporation and the Australian Financial Review newspaper this week said that News Corp's pay-TV smartcard security unit, NDS, had promoted piracy attacks on rivals, including in the United States.

NDS and News Corp had already denied the claims, but on Thursday the media empire mounted a fight back as a corruption scandal that has plagued its British newspapers began to encroach on its far more lucrative pay-TV business.

"Seems every competitor and enemy piling on with lies and libels. So bad, easy to hit back hard, which preparing," News Corp Chief Executive Murdoch, 81, tweeted.

News Corp, whose global media interests stretch from movies to newspapers that can make or break political careers, has endured an onslaught of negative press since a phone-hacking scandal at its News of the World tabloid blew up last year.

At its height last July, Murdoch told British parliamentarians: "This is the humblest day of my life," after meeting the family of a murdered schoolgirl whose phone News of the World journalists had hacked.

On Thursday, it appeared that Murdoch had had enough of apologizing. "Enemies many different agendas, but worst old toffs and right wingers who still want last century's status quo with their monopolies," he tweeted.

For an avowed republican such as Murdoch, describing someone as an upper class "toff" is a damning insult - although he is now seen by many in Britain as part of the establishment.

The BBC has a long history of ideological clashes with BSkyB, which is 39 percent owned by News Corp, and both Rupert and his son James Murdoch have publicly attacked the British public service broadcaster over the years.

The Australian Financial Review is owned by Fairfax Media, the main rival to Murdoch's News Ltd newspaper group in Australia.

On Friday, an alleged target of the attacks, Australia's second-largest pay-TV provider, Austar United Communications, said there were no signs of any conspiracy.

Austar, about to be taken over by larger rival Foxtel which is part-owned by News Corp in a $2 billion deal, said there was a piracy issue over a decade ago across the whole industry.

"In Australia, we've had over 150 prosecutions subsequent to improvements in the copyright laws," Austar Chief Executive John Porter told Australian radio. "I've never once heard the name of NDS or News Corp in those investigations or prosecutions,"

Shareholders in Austar vote on Friday on the Foxtel takeover, which still needs regulatory approval.

In a letter sent to the Australian Financial Review by NDS on Thursday, the company's executive chairman, Abe Peled, accused the newspaper of mischaracterizing NDS.

"You repeatedly mischaracterize communications about third party pirate devices to suggest that NDS was responsible for those devices," Peled wrote."You further mischaracterize NDS emails to suggest that NDS encouraged piracy of competitor systems while ignoring evidence that NDS was responsible for bringing to justice the sources of that piracy."


Richard Levick, a public-relations expert, expressed sympathy for Murdoch although he would have advised a more measured response.

"He's going to back to the old tools here, going on the attack, going for blustery headlines," he told Reuters. "I understand the natural inclination to do that and I have some personal sympathy with him."

Murdoch's British newspapers, relatively subdued since the phone-hacking scandal emerged, have gone back on the offensive.

The Sunday Times mounted a sting operation in which reporters posing as financiers were promised exclusive access to Prime Minister David Cameron in exchange for donations of 250,000 pounds ($400,000) a year.

That led to the resignation of a fundraiser from the ruling Conservative party, forced Cameron to disclose details of guests at his apartment, and sparked a discussion on party funding.

The Sun tabloid seized on an obscure tax the government planned to impose for the 2012 budget on hot pies, seen as a staple of a working-class diet, and offering readers a free pie.

A week later, Cameron, his finance minister and the opposition leader were still vying to be seen as the most avid pie-eater at every photo opportunity.


The latest allegations bring the crisis closer to Murdoch's son James, who sits on the board of NDS, which News Corp and co-owner private equity firm Permira agreed to sell for $5 billion to Cisco this month.

The younger Murdoch, who is also chairman and ex-CEO of BSkyB, has been criticized for not uncovering the scale of phone-hacking at the News of the World, though he had not yet joined the newspaper operation when the hacking took place.

He has since moved to New York after being promoted within News Corp to deputy chief operating officer, and has severed all ties with the British newspapers. His focus is now the company's international pay-TV operations, where he made his career.

Chase Carey, News Corp's COO and James Murdoch's immediate boss, on Wednesday condemned the BBC documentary.

"The BBC's Panorama program was a gross misrepresentation of NDS's role as a high quality and leading provider of technology and services to the pay-TV industry, as are many of the other press accounts that have piled on - if not exaggerated - the BBC's inaccurate claims," he wrote.

NDS has complained that it was not asked for its side of the story before Monday's Panorama program, which said NDS had leaked secret codes that allowed rampant pirating of BSkyB rival ITV Digital, which went bust in 2002.

On Thursday, NDS's Peled published a letter accusing Panorama of using manipulated emails to support its allegations.

The BBC said the emails shown in the program "were not manipulated, as NDS claims, and nothing in the correspondence undermines the evidence presented in the program".

Also this week, the Australian Financial Review published a story saying that NDS had allowed piracy to thrive at its client U.S. satellite broadcaster DirecTV, which Murdoch had ambitions to buy.

It reported, on the basis of a four-year investigation, that NDS ran a secret unit in the mid-1990s to sabotage competitors.

"We are not motivated in any way by any desire to damage any financial rival to the company that runs the Financial Review," the AFR's Editor-in-Chief, Michael Stutchbury, told Reuters.

"We are simply following the story and publishing what we have uncovered."

None of the evidence presented by Panorama and the AFR this week suggests that the Murdochs or any other News Corp executives were aware at the alleged practices at NDS.

NDS has won several court cases brought by rivals accusing it of promoting piracy, while others have been dropped - in one case because News Corp bought a subsidiary from the rival, Vivendi, which at the time was struggling with debt.

News Corp made $3.8 billion in revenues and $232 million in operating profit from satellite TV in its last fiscal year. It does not detail financial results for its newspapers but its British titles bring in less than 3 percent of group profit.

($1 = 0.6309 British pounds)

(Additional reporting by Sakthi Prasad, James Grubel and Victoria Thieberger; Editing by Ed Davies, Will Waterman, Mark Potter and Ron Popeski)