Pay TV piracy charges: Murdoch's empire strikes back

London: Rupert Murdoch didn't build News Corporation into a global media empire by being a pushover, and with allegations striking at the heart of his empire – the lucrative pay TV business — his lieutenants are aggressively pushing back against them.

Both the BBC and the Australian Financial Review reported that a subsidiary of News Corp, News Datacom Systems (NDS), leaked information that could be used to obtain pay TV services from News Corp competitors for free.

In the US, there is a saying: Never pick a fight with someone who buys their ink by the barrel. Murdoch is the quintessential example of this warning, and despite being wounded by the phone hacking scandal in the UK, he is showing that a cornered beast can still be dangerous.

Newspapers might have been the foundation of Murdoch's media empire, but now, it is pay TV that funds his global ambitions. The media mogul might be willing to shut down a tainted tabloid, but he won't let these charges stand without a fight.

There is a saying: Never pick a fight with someone who buys their ink by the barrel. Murdoch is the quintessential example of this warning. Reuters

Full arsenal used in fightback

Murdoch has pulled out every weapon in his vast media arsenal to push back against these allegations, including top executives at News Corp and NDS, as well as his Australian newspapers.

NDS told the BBC that the claims were “simply not true”. The company has demanded a retraction from the Australian Financial Review and demanded that the newspaper take down thousands of emails that it has posted on its website, as reported in the Murdoch owned newspaper, The Australian. NDS chief executive Abe Peled said in a letter to the Australian Financial Review:

“You further mischaracterise 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.”

NDS said that it used THOIC to gain information on pay TV piracy.

Murdoch's empire may be rooted in the media of the 20th Century, but he has taken to a decidely 21st Century tool to begin his fightback — Twitter. The Australian Financial Review is owned by a rival group, Fairfax Media, and Murdoch said on Twitter:

“Proof you can't trust anything in Australian Fairfax papers, unless you are just another crazy.”

He also accused competitors of “piling on with lies and libels”, which hinted that News Corp might be preparing a legal challenge to the reports.

In response to the allegations, News Corp is pointing to a $2bn piracy suit brought by US satellite TV provider EchoStar that is similar to the allegations in the BBC and Australian Financial Review stories. NDS prevailed, and EchoStar was forced to pay NDS almost $19m in legal fees.

Emboldened critics

In the past, legal threats from News Corp and editorialising might have cowed critics to beat a hasty retreat, but Fairfax is standing its ground, in part because they can point to the vigorous defence that News Corp mounted in the UK phone hacking case for years before evidence was uncovered that phone hacking, computer hacking and illegal payments went far beyond one disgraced reporter and private investigator at one British newspaper.

One can see parallels between the investigations at The Guardian and the investigation by The Australian Financial Review's Neil Chenoweth.

Replying to NDS claims that US courts have already rejected claims in the reports, Australian Financial Review editor-in-chief Michael Stutchbury, said:

“Chenoweth's report drew on masses of email material that was not presented to the court cases concerned.”

Moreover, Richard Ackland, writing in Fairfax-owned The Age, says:

“The emails contradict sworn testimony given in courts and show NDS sabotaged business rivals of News, and as Chenoweth says, 'fabricated legal actions and obtained telephone records illegally'.”

If these allegations were in isolation in News Corp owned companies, they might be easily dismissed, but News Corp is facing an increasing number of inquiries and investigations in the UK related to not only phone hacking but also computer hacking.

Apart from its trouble in the UK, News Corp also settled a lawsuit in the US by a company called Floorgraphics against Murdoch-owned News America Marketing Group.

News America had made a bid for Floorgraphics but was rebuffed. After its bid was refused, News America was accused in the suit of hacking into Floorgraphics' computers to obtain their competitor's customer lists. News America then was accused of using those lists.

Floorgraphics settled for $29.5m and was acquired by News America mid-trial.

At the centre of the allegations of pay TV smartcard hacking is former French pay TV company, Canal+. Canal+ made the smartcards for British pay TV company OnDigital, which was crippled by piracy allowed by the cracking of Canal+ smartcards.

Canal+ sued NDS, but the suit ended when News Corp bought the Italian operations of Canal+ and merged it with Sky Italia.

The NDS allegations will be a key test of whether Murdoch can still manage damaging allegations in the past. News Corp is already under scrutiny by British broadcasting regulators Ofcom to see if the company meets the “fit and proper” test for broadcast ownership in the country.

In the next days, we will know whether News Corp still has the power to make such allegations disappear.

Updated Date: Mar 30, 2012 18:23 PM

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