Jeff Randall Live 21.05.12 Interview with Jeremy Darroch, Chief Executive, BSkyB
JEFF RANDALL: Presenter The Culture Secretary has come under renewed pressure today after it was announced that he faces an investigation over claims of unregistered donations from media companies. Jeremy Hunt is already under intense scrutiny of his office with News Corporation during its putative bid for BSkyB, the owner of Sky News. All this comes against the backdrop of the ongoing Leveson Inquiry into press standards and continued speculation about the future of BSkyB. In June 2010 News Corporation, which holds a 39.1 per cent stake in BSkyB, announced its intention to buy up the rest of the shares in the satellite broadcaster. Thirteen months later the company withdrew the bid following revelations that the News of the Word had hacked the voicemails of murdered schoolgirl Milly Dowler. And in April this year the head of Sky News, John Ryley, apologised to the Leveson Inquiry after admitting that the channel had accessed the e-mails of John Darwin, the man accused of faking his own death and who was later convicted. Also last month James Murdoch resigned as chairman of BSkyB, but he remains a member of the board. And Ofcom is currently assessing BSkyB’s fit and proper status to hold a broadcasting licence, but the regulator’s not yet indicated when that decision will be made public. Well, to discuss all of that and more I’m joined here in the Gherkin by Jeremy Darroch, chief executive of BSkyB. Jeremy, nice to see you. Thanks for coming in.
JEREMY DARROCH: Chief Executive, BSkyB Evening.
JEFF RANDALL: Was BSkyB ever a sponsor of one of those networking events with Jeremy Hunt?
JEREMY DARROCH: Well we have from time to time held networking events or sponsored networking events at party conferences. That’s one way we can encourage politicians to get into dialogue with people right across the industry, not just with BSkyB.
JEFF RANDALL: With politicians who will end up being in effect in charge of your industry?
JEREMY DARROCH: Well, I think it’s important that we have the right degree of dialogue with politicians. As I say, these networking events were not specifically around BSkyB; they were industry events that happened to be around industry events that happened to be organised around party conferences. I don’t actually think Jeremy Hunt particularly attended the one that we had at the Conservative Party conference.
JEFF RANDALL: So you did sponsor events, but he wasn’t there?
JEREMY DARROCH: As far as I know. Look, generally our interaction with politicians is actually very limited. Occasionally they’ll invite us in on matters of policy – something like online child protection would be a good example of that – and then we’ll engage with them as you would expect as a large company operating…
JEFF RANDALL: Is that right? Because…
JEREMY DARROCH: ….in the media sector [words unclear].
JEFF RANDALL: But surely the Leveson Inquiry has demonstrated pretty clearly that politicians react or interact with media companies all the time.
JEREMY DARROCH: I…
JEFF RANDALL: Excessively so, some would say.
JEREMY DARROCH: Well, you know, that’s not the case for you and us. Our interaction tends to be quite rare. As I say, occasionally there will be times when there’ll be, you know, policy issues that we’ve got a view on, and we’ll make that view known and will be asked for that view. Specifically around the bid, though, it’s important, I think, to remember, just to put this into context, you know, we were subject to the bid. We’re not part of that. It was not for us…
JEFF RANDALL: Yeah.
JEREMY DARROCH: …to either make the case for or against. Our job was to stay focused on the delivery of the business…
JEFF RANDALL: Well, your case…
JEREMY DARROCH: …just by the way as it is now as it was then, and that’s what we’re doing.
JEFF RANDALL: Your job was surely to demonstrate real value and that the Murdochs were in effect trying to buy it on the cheap.
JEREMY DARROCH: Well, when the bid came in, the independent directors, as you know, rejected the initial bid that News Corporation had made. Our job as a management team was to grow the business as well as we could, and in doing so – and I think we did a pretty good job at that – we would create value for all shareholders.
JEFF RANDALL: Precisely so. So wasn’t Jeremy Hunt in effect undermining your job by advising News Corp on how best to buy BSkyB at an undervalued price?
JEREMY DARROCH: Look, my focus through that period of time was not to get distracted by anything that was going on about the bid, but was to make sure that the company was being run as well as possible. And fundamentally that was about delivering…
JEFF RANDALL: Yeah, but surely you must have been dismayed…
JEREMY DARROCH: …for our customers.
JEFF RANDALL: …Jeremy, you must have been dismayed to see, to learn that a senior politician in charge of the whole process was advising the other side>
JEREMY DARROCH: Look, it’s that… it’s not for me to comment on that. My job is to run Sky. That’s what I do…
JEFF RANDALL: Do you have faith in Jeremy Hunt?
JEREMY DARROCH: …and that we do that. I’m sure the Culture Secretary, you know, in my experience has done a good job. You know, he’ll have to go through the various reviews that are going on. Our job is not to get distracted by those events. I was determined at the time not to make sure that happened, and I’m not going to… and I’m going to make that doesn’t happen now.
JEFF RANDALL: All right. What about the assessment by Ofcom of the fit and proper status of BSkyB? Isn’t the real issue here not BSkyB but the fit and proper status of the controlling shareholder, News Corp?
JEREMY DARROCH: Well, I’d say three things about that. First of all, Sky is an independent company. We have a majority of independent shareholders. We have an independent board. Ofcom themselves in 2010, when they looked at Sky as part of the bid, concluded that News Corp did not have full control of BSkyB. And so I think we should be…
JEFF RANDALL: Come on, Jeremy. Let’s not… I’m sorry, I’m going to have to pick you up…
JEREMY DARROCH: No, no, let’s be clear here, Jeff…
JEFF RANDALL: …I’m going to have to pick you up on that…
JEREMY DARROCH: It’s very important… well, we’ll come back to that for a moment, but it isn’t… hasn’t been Sky…
JEFF RANDALL: The… News Corp has a 39 per cent stake. Don’t tell me you believe the myth that the Murdochs are passive investors.
JEREMY DARROCH: Look, they’re a large shareholder of Sky, of course. They’ve been a large-scale shareholder of Sky over 20 years. But we are an independent company. We’re an independent company…
JEFF RANDALL: What? The Murdochs have no influence?
JEREMY DARROCH: No, it’s not to say that as a large shareholder they don’t have influence. They have influence as appropriate to their sharehold, just as other shareholders we listen to and talk to, and they have influence as well. And we’re encouraging all of our shareholders to understand our strategy and to support us as a company.
JEFF RANDALL: But you would appreciate out here in the City when a company gets more than 25 per cent of another company, it is deemed to be a controlling shareholder?
JEREMY DARROCH: Well, you know, News Corporation are not a majority shareholder of Sky. They do not have control of Sky. And Ofcom themselves has only as far back as 2010 themselves concluded that they did not have full control of Sky.
JEFF RANDALL: All right, OK.
JEREMY DARROCH: And I think, well no, there’s a valid point here.
JEFF RANDALL: But they do have some influence. You would accept that?
JEREMY DARROCH: Well, all shareholders have influence and, of course, you know, the bigger the sharehold, then the more interaction will tend to help them.
JEFF RANDALL: All right then. Well, this very influential shareholder has admitted that it’s allowed serial criminality to flourish at its UK newspapers. Doesn’t that disqualify it from being fit and proper?
JEREMY DARROCH: Look, the question about the broadcast licence is for BSkyB as an independent company and broadcaster. What I would say is two things. First of all, I think is our track record stands for itself. I think we’ve delivered better choice for customers around the UK. That’s why our business does well and continues to do well. On the back of that success we are delivering significant contribution into the UK, You know, this year alone we’ll employ 23,000 people in the UK. That’s grown by over 4,000 over the last few years. We’ll contribute more than £1 billion to the Exchequer in terms of tax revenues. Around 75 per cent of our revenues stay in the UK and Ireland. Over the next 12 months £5 billion will flow back into those economies as a consequence of what we do. And so I think those things show that not only are we a strong broadcaster with a strong track record over 23 years of business but our contribution is very, very significant. And I don’t think that should easily be put at risk by activities in another company.
JEFF RANDALL: All right, well, all of which helps explain why the Murdochs, why News Corporation wants to get its hands on all of the company. Now recently on this show I interviewed another BSkyB director Martin Gilbert, and I asked him if the Murdochs would return for a second go at BSkyB and this is what he said. I think we have the clip coming up. MARTIN GILBERT: Independent Non-Executive Director, BskyB [archive clip, 30 April] The problem is or was if he had stayed as chairman, a lot is focused on him. And I think it’s very, very important for the staff and everyone at BSkyB that they can concentrate on running the business, because as I’ve said twice already this is a very good business that is very well-run and they’ve got to… they’ve just got to spend their time running the business. I think if they get through the next year or so, I wouldn’t be surprised if they came back because it’s a great business. They want to own it.
JEFF RANDALL: Do you agree?
JEREMY DARROCH: Well first of all, I notice you cut out the bit where he said they had a good CEO, by the way. So look, it does matter. Yeah, I don’t know whether they’re going to come back. The last bid, I was as surprised as anybody, so there’s no reason why I would know that. The point is our job is to grow the business…
JEFF RANDALL: But now do you…
JEREMY DARROCH: If we focus on growing the business, then we will be in a good place. Our contingency plan is to make this business as successful as it can be and if we keep doing that, then we’ll deliver for all of our shareholders, and that’s what we intend to do.
JEFF RANDALL: All right. Well, you’ve been in this job almost as long as I have been at Sky, nearly five years. During that time the share price has had a very good run. We’ve got that on the screen. But if you look at 2010 along the bottom there, you can see a very sharp jump, and that’s the point at which the Murdochs said they were thinking about bidding for the whole of the company. Isn’t it clear here that without the Murdochs underpinning that share price, it would come straight back down to where it was?
JEREMY DARROCH: No, I think a much more relevant comparison is to look back to 2007 before the bid, before anybody was talking about a bid, to today. And actually over that period of time we’ve outperformed the FTSE, I think, by 25 per cent, something of that order. And I think that…
JEFF RANDALL: Because investors think there’s a bid coming down the line.
JEREMY DARROCH: No, the reason that we’ve outperformed is actually because the business has performed. We’ve grown the revenue base strongly; we’ve grown the earnings and the cash base of the business strongly. And I think what that tells is that sustained performance is reflected in the stock price, and it’ll grow over time, and we can outperform as a business overall.
JEFF RANDALL: So are you saying that BSkyB does not need News Corp or the Murdochs on the share register?
JEREMY DARROCH: Look, we are a public company, right? And my job is to attract as many shareholders to BSkyB as I can, because that’s the way I’ll get the stock price up. The way I’ll do that is I’ll do that by delivering for customers. If I do that, all the good stuff will flow from that, and that’s what we do.
JEFF RANDALL: So all the input that the Murdochs have had into this company over all of those years you’re now saying that the company can live without?
JEREMY DARROCH: No, I think the Murdochs have been… News Corporation have been very strong contributors to BSkyB. They set the business up 23 years ago. They’ve been very responsible shareholders. They’ve supported the business and the management in some of the decision that we’ve taken…
JEFF RANDALL: But have they run out of road?
JEREMY DARROCH: It’s not for me to say. My job…
JEFF RANDALL: In terms of their input. Can BSkyB live without the Murdochs?
JEREMY DARROCH: So they continue to input strongly at the board level, they continue to input in terms of the strategic discussions…
JEFF RANDALL: So they do have influence.
JEREMY DARROCH: …that we have. As all major shareholders do. You know, I don’t just go and talk to News Corporation shareholders. I’ll talk to all of the major shareholders in our register, because I want all of them to understand and input into our strategy and to support us in the delivery of results. So our relationship across all of our major shareholders is essentially the same. It’s one where we want to be inclusive. We want to get more people to invest in Sky, because if we know we can do that, we can continue that stock price performance.
JEFF RANDALL: Now James Murdoch stepped down as chairman because he said he didn’t want to be a lightning rod for attacks on the company because of other issues. But he’s still on the board. I mean, come on. He’s still a lightning rod.
JEREMY DARROCH: And James has contributed a lot to BSkyB both in his time as CEO and then as chairman, and now in a different way as a non-executive character.
JEFF RANDALL: Yeah, but stepping down as chairman was just tokenism, wasn’t it?
JEREMY DARROCH: No, I don’t think so.
JEFF RANDALL: He’s still on the board.
JEREMY DARROCH: Look, I think the role of chairman is different to that of a non-executive director. James, as you said, stepped down because he was concerned that he would become a lightning rod. He’ll continue to contribute as a [word unclear]. And actually board stability over the course of the last two to three years is one of the reasons, I think, where the business has continued to go from strength, and as a management team we’ve been able to focus on the operations of the business, and that’s been a good thing for all of us.
JEFF RANDALL: Let me put it another way. Were the Murdochs told to divest or sell down some of their stake, would BSkyB be weakened by that?
JEREMY DARROCH: Look, I think in… you know, in any situation when a shareholder register changes quickly, you know, there’ll be some period of turbulence. That is inevitably the case. But ultimately our strength as a business will be built upon the business and our contribution: our contribution to customers, the way that we engage with employees, our broader contribution to the media sector in the UK and to the UK more generally. And that’s what we’re focused on, because we know ultimately that’s where the strength of the business will come from.
JEFF RANDALL: All right. You’ve said that this company is fit and proper; we shouldn’t be looking elsewhere. If this company is fit and proper, how come it indulged e-mail hacking? Doesn’t that damage reputation?
JEREMY DARROCH: So, look, I’d say a few things about that. First of all I’m satisfied that the decisions that Sky News took were in the public interest. Occasionally these come… we come up against these rare decisions. They’re very difficult. What’s important in those situations is that we have the right degree of editorial control and process. In this case two people went to jail; we unearthed significant criminal activity; the police themselves said that Sky News’s intervention was pivotal in securing a prosecution. And I was satisfied that the controls around those decisions were appropriate.
JEFF RANDALL: So when would we do it again?
JEREMY DARROCH: Well, John Ryley himself has said it would be very, very rare if he could think of any circumstances where that would be the case. It’s…
JEFF RANDALL: Yeah, I don’t quite get it. If we’re happy with its going on, why would we not be happy with it in the future?
JEREMY DARROCH: Well, I think… so I think we need to, you know, take those individual cases very specifically at the time. As I say, there would be… they are very, very rare in their nature. They absolutely need to have the right editorial control around them. And we will always be in the swell of what is, you know, acceptable public opinion as a broad news service, and clearly there’s a lot of debate going on about that right now.
JEFF RANDALL: Now this is a company rarely out of the spotlight. Another investigation, this time by the Competition Commission, is looking at BSkyB’s grip on the home movie market. Now we are expecting a decision fairly soon. I read in the press that the Competition Commission thinks that there is no case to answer. BSkyB’s in the clear. You must be delighted.
JEREMY DARROCH: Look, I’ve said very consistently over the last few years that I don’t think in this market in particular there is any need for intervention. I think any trip down the high street or look online tells you that there is more competition and it is broadening all the time. And those competitors themselves have said they see a good opportunity to enter the UK and be successful. We’ll be successful as a business if we keep improving and keep getting better in terms of what we do. So we’ll the see the report from the Competition Commission shortly, but our job is to stay focused on improving our service, I think.
JEFF RANDALL: And what about you, Jeremy? You’ve been in the job five years. That’s more than most FTSE CEOs last. How long will you stay? There’s a job going up the road at the BBC, of course, director-general.
JEREMY DARROCH: Really, yeah, I think… yeah, sure.
JEFF RANDALL: Pay not so good, but high on status.
JEREMY DARROCH: So I think the one thing we can rule out is me being the future director general of the BBC. I don’t think that’s likely to happen. No, this is the business that never sleeps. It’s fantastic, it’s interesting. Every day, you know, something different happens. We’re doing a lot great stuff. Our investments in the UK in terms of getting better on screen, our investments in technology, where I think we’re now building a global best-in-class platform, you know, are very significant and starting to come through, and importantly the opportunity ahead of Sky is considerable. You know, we can continue to grow this business for the long term, and in doing so I think we can build a business that we’ll all be proud of and which will deliver for our customers and shareholders alike.
JEFF RANDALL: We’re running out of time, so let me bring you back to where we started, and that’s the position of the Murdochs. I put it to you this way, Jeremy: if any other shareholder – not the Murdochs or News Corp – had been found guilty of serial criminality, you would be horrified to have that shareholder on your register, would you not, exerting influence.
JEREMY DARROCH: Jeff, we are a public company, you know. We have a range of shareholders on our register. News Corporation have been a long and important shareholder in Sky. But ultimately my job as a management… leading the management team is to run the business and to run the business as well as we can. And if we keep doing that and stay focused on it and not be distracted, then we will build a business that is better, more profitable, more valuable for all of our shareholders, and that’s our core responsibility and that’s what we’ll do.
JEFF RANDALL: So when all this blows over, as it one day will, do you see a time when James Murdoch can return as chairman?
JEREMY DARROCH: Well, I’m not going to get drawn into speculation. You know, I’m…
JEFF RANDALL: It’s not speculation; I’m simply asking for your view.
JEREMY DARROCH: No, well, I deal with things of all…
JEFF RANDALL: It seems perfectly reasonable. You said he was a very good chairman. Why would you not want him back?
JEREMY DARROCH: So, you know, what I’m focused on is dealing with all the things I can control and the things that are in front of us, you know, today. And that’s where I put my attention, and that’s one of the reasons why, you know, we intend to keep being successful.
JEFF RANDALL: Jeremy Darroch, always a pleasure. Nice to see you. Thanks for coming in.
JEREMY DARROCH: Thank you.