tip off

Removal of ‘two out of three’ ain’t bad for News Corp

A move to to amend media ownership restrictions would be a positive for News Corp, but the ACCC might yet be a hurdle, Bernard Keane and Glenn Dyer write.

Communications Minister Malcolm Turnbull’s revelation that the government is mulling dumping the “two out of three” rule in our media ownership laws is more welcome news for News Corporation — albeit a bit like sending a leaky boat to rescue a drowning man.

Since the election, the government’s initial media policy forays have closely followed the script some of us suggested prior to September 7. In particular, the ABC has been the subject of extraordinary attack editorially — with both Turnbull and Treasurer Joe Hockey inappropriately calling ABC managing director Mark Scott to complain about ABC news content — and reputationally, with the Prime Minister himself engaging in a carefully-structured attack designed to delegitimise the broadcaster.

The ABC now faces an efficiency study controlled by the government (with former Seven West Media chief beancounter, Peter Lewis, to be paid $75,000 in consulting fees for his work). The conspiracy-minded see Lewis as commercial TV’s man in the right spot to neuter the ABC. That’s over the top and in any event the outcome of the review will be tightly under Turnbull’s control.

Turnbull flagged this week that changes to the anti-siphoning laws — which are still betwixt and between following the failure of former Labor communications minister Stephen Conroy’s comprehensive reform package — are under consideration, which opens up potential benefits for News Corp’s half-owned Foxtel — although old hands will know that any changes to anti-siphoning usually harm, not help, pay TV. Turnbull could do worse than run with the guts of Conroy’s package, which introduced an element of common sense into what is in essence a profoundly anti-competitive piece of regulation favouring the free-to-air TV cartel.

But back to two out of three. That’s the rule that says that in any licence area you can’t control a daily newspaper, a radio licence and a TV licence. In major cities, it’s one of two key impediments to further media mergers. There is a “voice count” limit, five in capitals and four elsewhere, below which the number of TV, newspaper and radio media groups can’t fall, but no capital city market is currently at that limit, and the big markets are well above it. No, the other key impediment is the 75% reach rule that in effect prevents the establishment of national television networks, and about which there is growing consensus that it’s an analog-era rule whose time has passed.

Two out of three was originally set to be dumped in 2006 when then-communications minister Helen Coonan introduced her media reform package. In the end, despite constant ego-massaging, the Nationals jacked up about it. To get the reforms through joint party room, then-treasurer Peter Costello suggested restoring two out of three. As a result, only then-Nationals senator Barnaby Joyce crossed the floor to vote against the package; if Coalition Senator Ron Boswell had joined him, as had appeared likely, the reforms would have failed.

The only substantial beneficiary of the removal of two out of three would be News Corp, a company composed of walking dead newspapers animated solely by Foxtel and FoxSports profits. The removal would allow News Corp to convert Lachlan Murdoch’s control of the Ten Network into News Corp control; Ten already has strong content ties with the company, broadcasting (for dismal ratings) Andrew Bolt and “partnering” with News Corp on Meet The Press.

The only regulatory problem for News Corp with two out of three gone would be the ACCC …”

Lachlan is a director of News Corp and an heir of Rupert’s, but the Australian Communications and Media Authority has deemed that does not make him a controller of News Corp for the purposes of the Broadcasting Services Act. Lachlan is also chairman and owner of DMG Radio Australia, which controls a number of metropolitan commercial radio licences. It’s possible that a News Corp interest in Ten could be structured so that Lachlan’s DMG interests are notionally excluded, but the Broadcasting Services Act uses the concept of an “associate” that, inter alia, specifically includes the child of a controller of a company. The “associate” rule would make it difficult for a News Corp role in Ten not to breach two out of three, whereas Lachlan’s News Corp directorship doesn’t at the moment.

What good would Ten be to News Corp? True, at the moment the network is struggling, and there are already some news-related synergies between the companies. A well-managed Ten, however, would potentially be a source of steady, if no longer spectacular, profit for News, and as a free-to-air broadcaster it is a beneficiary of the anti-siphoning laws, unlike Foxtel. Foxtel is no longer a growth company, either: it is solidly profitable, but debt-laden after its Austar purchase in 2012, and then the News Corp grab for ConsMedia and its 25% stake in Foxtel and 50% of Fox Sports. Both deals cemented News Corp/Murdoch control of pay TV in Australia, but pay TV growth has plateaued and online streaming and downloading of content — legal and otherwise — is an increasing threat: piracy of the next season of Game of Thrones is likely to soar in Australia given that Foxtel has exclusive rights to it and it won’t be available legally online until after Foxtel has finished broadcasting it.

But ironically, Lachlan Murdoch’s Ten, in snatching control of the Big Bash Cricket from Fox Sports and Foxtel and boosting audiences, and ad revenues, has effectively undermined the rationale for sport being on pay TV in Australia. This is why Foxtel/Fox Sports have had their worst summer for years, with ratings sliding.

The other thing that Ten would give News Corp is more influence. Despite a fragmenting media landscape, there’s still nothing more politically influential in Australia than a TV network, which is one of the last places where hundreds of thousands of Australians still gather to be told what’s going on. Politicians understand that very well indeed.

The only regulatory problem for News Corp with two out of three gone would be the Australian Competition and Consumer Commission, which waved through News Corp’s acquisition of the other half of Fox Sports and a quarter of Foxtel from James Packer. Chairman Rod Sims has already flagged that a News Corp move into Ten would be looked upon unfavourably. But regulators, and ACCC chairs, change over time — and there are always undertakings that can be made, and then forgotten about as time goes on, in order to get a transaction through.

3
  • 1
    klewso
    Posted Tuesday, 4 February 2014 at 4:51 pm | Permalink

    Malcolm - Rupert’s - “Pitbull”?

  • 2
    Electric Lardyland
    Posted Tuesday, 4 February 2014 at 8:32 pm | Permalink

    Just noticed that on the mobile version of the comments section for this story, that there’s an ad for somebody’s Communication Services. Their web address is http://www.worldwidewhoswhoreleases.com. Now I suspect that it is supposed to be a compressed version of, world wide who’s who releases, but it can be just as easily be read as, world wide who’s whore leases. Or more easily, if you’re me. Anyhow, I’m not sure if it’s a great advert for communication skills.

  • 3
    green-orange
    Posted Friday, 7 February 2014 at 4:10 pm | Permalink

    Disagree.

    If News really wanted terrestrial TV, they could easily have dumped the newspapers - they stopped making money long ago.

    For the past 20 years they’ve been saying that network TV is “dead” and the future is cable. To turn around and buy a terrestrial network now would spook US creditors and investors who see the financial ruin of US network TV.

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