Just when it looks like things can’t get any worse for News Corporation, another scandal is engulfing Rupert Murdoch’s $50 billion media empire. This time the Murdoch pay-TV businesses are under scrutiny. Allegations aired last week on the BBC and published in The Australian Financial Review suggest that News Corp’s former subsidiary NDS, which is now being sold to Cisco for $5 billion, ran an extraordinarily dirty campaign to undermine its rivals. News denies any suggestion of wrongdoing.

NDS is not a broadcaster, but it occupies a critical, and very lucrative, place in News’s global pay-TV business. In competition with a small number of other providers, NDS sells the conditional access systems used to ensure that only subscribers can view pay TV channels. In this game, the integrity of the system is everything: the pay-TV business model depends completely on restricting access to the signal to paying customers. If a conditional access system is hacked, unlocking keys can be posted online, and counterfeit cards can easily be manufactured and sold, with potentially drastic losses to the broadcasters involved.

On the basis of emails obtained by the AFR, it is now claimed that NDS may have used hackers to facilitate the widespread distribution of keys and counterfeit cards for use on competitors’ systems. The alleged aim was to cripple News Corp’s rivals in the pay TV and conditional access industries, thus boosting the market value of NDS and other News Corp businesses.

The leaked emails are posted on the AFR’s website. They paint a disturbing picture, suggesting that NDS set up “honeypot” websites to trick signal pirates into revealing their secrets; put friendly hackers on the payroll and threw others to the wolves; used a shadowy division called Operational Security, run by former British cops and Israeli spies, to conduct surveillance; and paid an army of lawyers to keep a lid on the whole affair.

Phone hacking victims and critics of News Corporation may well feel as though their worst suspicions have been realised. News, and some of the related companies concerned, have denied the allegations. The risk for the company is that these claims, if substantive, will open News to regulatory inquiries, and civil and criminal litigation round the world. If it were shown that the actions of the group at the centre of the NDS story were authorised corporate strategy, it would remove any doubt as to whether the problems at News are down to a few rogue staffers or are the result of a wider malaise.

But there are other lessons to be learned here. News Corp is clearly not the only media company to engage in this kind of skulduggery. Nor will it be the last. Many of the new revelations, while deeply unpleasant, are unsurprising given the amounts of money at stake. Although there can be no justification for the actions described in the emails, it’s useful to take a wider view of the NDS affair.

The events of this week suggest that some of our conventional ways of thinking about the media and piracy are remote from the realities of the business. Seen in relation to the strategies deployed by some of its competitors, News Corp’s hiring of hackers is not unusual. Most companies in information technology industries will reverse-engineer their competitors’ products, taking the code apart to find innovations and vulnerabilities. Hackers are regularly recruited for such tasks.

According to the AFR story, some individuals associated with NDS went a step further, using their knowledge to develop and distribute software that could cripple their competitors’ businesses. But even this case reflects a wider pattern of connections between corporations, spies and pirates that has shaped, and continues to shape, media industries.

*Read the full article at Inside Story