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Politics

Dec 2, 2010

Fewer and stronger moguls -- the product of our current media ownership laws

Under our current media ownership restrictions, we've lost a lot of media diversity and our moguls have been allowed to deepen their hold on Australian media. A national media diversity test could still help.

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In just three years, Australia has lost one-third of its national media diversity, and the key media players have significantly strengthened their grip on media assets.

In 2007, in the aftermath of the Howard government’s media ownership changes, there was a brief increase in the diversity of ownership of our most influential media outlets. James Packer began selling out of his television and magazine interests altogether, to private equity outfit CVC, while retaining his interests in subscription TV via Foxtel and Fox Sports. At that stage, there were nine media groups of national significance. News Ltd controlled most of the country’s newspapers, 25% of Foxtel and 50% of Fox Sports; Fairfax controlled the Sydney and Melbourne broadsheets; Nine, Seven and the Canwest-controlled Ten were the major metropolitan commercial free-to-air TV outlets (7, 9 and News Corp via BSkyB also control Sky News on Foxtel); Bruce Gordon’s WIN had the most extensive regional television network and the strongest regional news service; Packer retained influence via Foxtel and Fox Sports; Southern Cross Broadcasting controlled a regional TV network and the key metropolitan talk radio stations 2UE, 3AW, 4BC and 6PR; and West Australian Newspapers, while not a national entity, controlled the only daily in Perth and a string of regional radio stations in the west.

Now we’re at six major national groups: the Murdochs via newspapers, subscription TV and Ten, Packer via subscription TV and Ten, CVC via Nine, Stokes via Seven, subscription TV and WAN, the Gordons via WIN and Ten, and Fairfax via newspapers and Southern Cross’s radio network.

The key acquisitions that have reduced diversity have been Fairfax’s 2007 acquisition of Southern Cross radio assets (Macquarie Bank picked up the TV assets); Kerry Stokes’s acquisition of WAN and, now, the Packer-Murdoch move into Ten.

Moreover, the key players have strengthened their hands, securing deeper levels of control across the industry. Bruce Gordon, who was a long-term investor in Nine as well as WIN, owns a major chunk of Ten, although not enough to be considered in control. He also bought TV licences in Adelaide and Perth, making WIN a metropolitan licence holder (he also sold Select TV to Foxtel). Nine has secured the NBN regional TV licences. In addition to acquiring WAN, Kerry Stokes has secured a chunk of his erstwhile enemy, Foxtel, via Packer’s Consolidated Media Holdings. Lachlan Murdoch also holds a substantial shareholding in the Prime regional media group and owns half of the DMG radio network. The effect of these non-national acquisitions has been to slash the overall total number of separate media groups across the country. Our moguls have spread deeper as well as wider.

Each of these transactions have complied with the current media ownership rules. Some of them, in fact, would have been permitted under the pre-2006 rules. Others have occurred because the last pretence of foreign ownership restrictions were removed in 2006 (apart from the grandfathering of Murdoch’s assets, the rules were something of a joke anyway — Bruce Gordon spends much of his time in Bermuda, and the Asper family’s Canwest circumvented the rules via a legal fiction about their shareholding).

Each of the transactions were assessed under our current licence area-based ownership regime. No concept of national media diversity exists in legislation — indeed, the entire approach of the Broadcasting Services Act is based on regulation according to geography and the distribution of broadcasting licences to minimise electromagnetic interference.

The British have both local licence area-based ownership rules and the concept of national diversity — there are bans on owning major national newspapers and a commercial TV licence (which in Australia wouldn’t have prevented any of the above transactions, except possibly Lachlan Murdoch’s role in Ten). But the Brits also have a media public interest test that enables a media merger to be prohibited on public interest grounds, including the need to maintain plurality, either at the local or national level.

One of the long-term debates in media regulation is about quantitative versus qualitative regulation. Quantitative rules, like cross-media ownership rules, that prevent you owning more than one or (in our case) two types of major media, or reach rules, like the current 75% TV audience rule, are clear, objective and give investors certainty — you can work out before you buy a media asset whether it’s allowed or not. Qualitative rules, like the British “public interest test” aren’t objective, aren’t clear, and don’t provide any investor certainty — they just dump the decision onto a politician, who may or may not be influenced by the capacity for major media companies to make life difficult or nice for him or her.

But a qualitative rule has the advantage that it allows governments to flexibly deal with mergers that may conform to qualitative rules but which reduce notably media diversity — like the Packer-Murdoch acquisition of a controlling interest in Ten, or Fairfax’s acquisition of Southern Cross radio stations. And other industries have to endure uncertainty from qualitative tests — foreign investors, for one, who are liable to find their acquisition overturned by the Treasurer if it is perceived as not being in the national interest, and anyone undertaking an acquisition that might substantially reduce competition — an outcome that will draw the wrath of the ACCC.

But whether you adopt a quantitative approach — generally the approach preferred in media by Australian politicians — or a qualitative approach, any set of laws that allowed a one-third reduction in media diversity over the last three years and which enabled the key players to massively strengthen their grip on the media industry, should be considered to have failed. Major damage has been done over the last three years to our media diversity.

The current cross-media and ownership limits probably won’t allow a further reduction from six major media groups to five, although several of the key players — Rupert Murdoch, Bruce Gordon and Kerry Stokes — are all old men and the future of their companies is therefore less certain. But the laws will allow the six groups to deepen their control of the Australian media by picking off smaller players, and they will continue to allow them to work in concert, where it’s in their interests to do so (no more so than at Ten, where the Murdochs, Packer and the Gordons are all active).

An effective national media diversity test would ensure we don’t lose any further national media diversity and bring an end to the cherry-picking of the major players that is reducing competition on an industry-wide basis. But it’s a test that is in no one’s interest except the public’s.

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2 comments

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2 thoughts on “Fewer and stronger moguls — the product of our current media ownership laws

  1. John Bennetts

    Para 10: Too many qualitative rules?

    “But a qualitative rule has the advantage that it allows governments to flexibly deal with mergers that may conform to qualitative rules but which reduce notably media diversity…”

    Second instance meant to say “quantitative”?

  2. Meski

    The more you tighten your grip on conventional MSM, Murdoch, the more the internet will slip through your fingers.

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