Wanting less News: Pay TV piracy and News Corp

If there was any doubt that News Ltd have too much power in Australia, it should be dispelled by their aggressive handling of the allegations of global Pay TV piracy this last week. The issue was launched internationally by a BBC Panorama program called “Murdoch’s TV pirates” and it was given a local angle with long time Murdoch tormentor Neil Chenoweth’s series of articles in the Australian Financial Review (Chenoweth was also an adviser to the BBC program). News Ltd has tried to bully the AFR out of their allegations while also questioning SBS for showing the documentary hinting it does not correspond with the station’s code of practice.

The Panorama program focussed on a British issue. It alleged News Corp security arm NDS (headquartered in Israel) hired an expert team of Pay TV hackers from the piracy site called The House of Ill Compute (THOIC). Originally known as News Datacom Systems, NDS established the “Operational Security” group in the 1990s to ensure the security of Murdoch’s growing pay TV interests. Cracking codes is not illegal but spreading the cracked code to encourage piracy is. NDS busted THOIC piracy but instead of prosecuting them they hired them. The THOIC brief was to open up the security codes of NDS competitors, Canal+ (from France), and flood them on the market. This action, Panorama said, was directly responsible for the death of On Digital (later called ITV Digital) which used the Canal+ system. On Digital was the biggest pay TV threat in the UK to Murdoch’s BSkyB which had smartcards made by NDS.

Panorama tracked down Lee Gibling, the former head of THOIC who told them NDS hired him to break competitors’ smart card systems. Panorama also secretly filmed two other key witnesses, former NDS employees Ray Adams (previously a Metropolitan Police commander) and Len Withall and aired the footage without their permission. The footage found evidence that emerged in 2002 showing links from THOIC to News Corp. Canal+ sued News Ltd who dealt with the problem by spending $1 billion on an Italian Pay TV company called Telepiu, owned by Vivendi Universal which was on the brink of bankruptcy. Vivendi Universal also owned Canal+. The terms of the deal was to drop the lawsuit and the Canal+ Tech team that developed the smart cards was also disbanded.

In Australia, the AFR published the end of what they called “a four year investigation” into similar allegations into the local pay TV market. They published an archive of 14,400 Ray Adams emails and said piracy cost Australian pay TV companies $50  million a year at its height in 2002. It helped cripple the finances of Austar, which Murdoch’s part-owned Foxtel (which uses NDS) is now buying. The AFR published emails which were submitted in legal cases brought against NDS by rival pay TV operators in the US (DirectTV, Echostar) Europe (Canal+ and Sogecable) and Malaysia (Measat). Like the way they dealt with Canal+, News Corp bought 34 percent of DirectTV to end that case. In the only one to go to trial, Echostar won three of six counts, but won only minimal damage and had to pay court costs.

In Australian law, unauthorised access to electronic networks and illicit modification of databases are criminal offences. But Bruce Arnold, Law Lecturer at the University of Canberra, is only prepared to say News Corp may have exacerbated the issue. “Academic and industry research over two decades indicates the problems experienced by the defunct or ailing television networks were primarily attributable to poor management, poor marketing and inadequate capitalisation,” Arnold said.

Finding hard evidence is not easy, as Terry McCrann alluded to when hauled out by the Herald-Sun to defend News. McCrann wanted to see an email quoted in the AFR. “You know, something like: Murdoch to 007: My plan for world pay-TV domination rests on your piracy skills. Let’s target one million pirated cards by Christmas.”

McCrann was flippant but giving the nastiness at the heart of News Corp exposed in the Levinson Inquiry, it not beyond the bounds of reason to think Murdoch wanted to see exactly that: one million pirated cards on the marketplace by Christmas. Such thoughts never make it to an email. Britain’s TV regulator Ofcom is examining if Rupert and James Murdoch are “fit and proper” to be in control of BSkyB based on the phone hacking scandal. One of the hacked MPs Tom Watson says the pay TV allegations should be added to that investigation.

The Australian Competition and Consumer Commission is reviewing the $1.9 billion Austar takeover bid. With such a cloud over the Empire, it seems beyond belief the Australian Government should allow yet another contraction of ownership in the most concentrated media landscape in the western world. Yet time after time, Murdoch gets his way in Australia. Robert Manne explains why this is a problem: “The more the media is concentrated, the greater is the problem for the health of democracy”, Manne writes. “Yet the more the media is concentrated, the less likely it is that the issue will be debated freely in the only appropriate forum for the discussion, the media itself.” News Ltd Australia should be broken up, not expanded.


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