Powerpoint: The world is not enough for Gates & Murdoch

By EWAN McDONALD

Who is the most powerful man in the world? Trick question, because you're going to say "George Bush" (either of the above-named would do) when the answer is not one man, but two: Rupert Murdoch and Bill Gates. Come on an extraordinary adventure into the future of your living-room.

Rupert Murdoch, the media tycoon whose News Corporation reaches all four corners of the world (yes, very much into this one), and Bill Gates, the Microsoft founder whose software is found in almost every personal computer, are fast becoming business pals.

Their blossoming relationship centres on DirecTV, a US satellite broadcaster owned by General Motors. Murdoch has been trying, so far unsuccessfully, to get his hands on DirecTV and net around 10 million subscribers to complete the missing American link in his global satellite business. Gates can see the potential for a huge Microsoft software deal.

Here's how the pair are understood to be working together, according to London's Independent newspaper:

Microsoft is handing News Corp $NZ6.91 billion to help the broadcasting and publishing empire acquire DirecTV. In a complex transaction, News Corp would purchase 30 per cent of DirecTV for about $115.2 billion.

While the combination of Microsoft and News Corp might strike some as a sensible business partnership, to others it could raise the spectre of "monopoly squared."

Microsoft's run-ins with antitrust regulators (read: people who think competition is part of business) are well known.

News Corp has been known to test the limits around the world of laws restricting the reach of any one media firm (30 years ago, New Zealand passed legislation to limit Murdoch's media ownership here).

Murdoch's vast US holdings already include the Fox TV network, 20th Century Fox movie studios and the New York Post tabloid newspaper. He covets DirecTV because it would complete a valuable link in News Corp's global chain of satellite companies, which includes Britain's BSkyB, Asia's StarTV, Japan's PerfectTV, Australia's Foxtel and New Zealand's Sky.

What's in it for Microsoft is control of what could become "Internet 2" — digital television and the interactive services that digital TV supports. Many industry pundits predict that the TV rather than the PC will eventually reign as the public's favourite online shopping device because people trust the good old telly more.

The promise seems real, with 1.5 billion TV sets installed worldwide. British research firm Ovum estimates that the number of sets with digital connections will surge to 350 million by 2006, up from around 60 million worldwide today. Of those, 226 million will tap interactive services, compared with 13 million today.

None of this will happen without the underlying software. And Microsoft just happens to sell several software products that reside both on the television set-top box and on the computer servers which help to run broadcasting networks.

Counting the various satellite and cable companies that it owns entirely, or parts of, around the world, plus the broadcasters which resell Sky content, News Corp has a hand in some 80 million set-top boxes. Its potential for growth is enormous, with Murdoch expanding globally and bowing to the Chinese Government to loosen restrictions and give him greater access to a potentially huge market.

Could Gates' cash buy him a place on every News Corp TV top? "We are asking the same question: what strings are attached to the [$6.9 billion]?" says Andrew Wallace, marketing director for Pace Micro Technology, which supplies set-top boxes.

And those set-top boxes are at the heart of the debate about Television New Zealand's projected move into digital TV and any arrangement with Sky TV in this country.

And who has the key to your living-room ... and your credit card.