The key to understanding what the Convergence Review would mean for media ownership laws lies in the idea of moving from clear, simple limits based on numbers of media groups, to an independent regulator making a judgement about how diversity would be affected by a media merger.
Some basics first: media ownership is regulated to protect diversity. But there’s a basic problem: laws can’t guarantee diversity. All they can do is control ownership — and the two aren’t the same. In fact there are arguments — self-interested ones, but anyway — that if one person controls two outlets they will have an incentive to differentiate them, otherwise they will compete with each other. When two competitors operate in the same space, the argument goes, Hotelling’s Law dictates they won’t differentiate.
Our media regulatory framework rejects that. Instead, we take ownership as a proxy for diversity — if two different people own media, we assume that means there will be more diversity of voices than if one person owns both. So we regulate the numbers of owners of media groups. But we only regulate those media considered influential in the 1980s: commercial television broadcasters, commercial radio broadcasters, and major newspapers. Newspapers aren’t licensed like broadcasters and so notionally can’t be controlled by the government, but they’re caught by the Commonwealth’s power to regulate corporations.
As I explained yesterday, the basic unit of media regulation is radio licence areas. Our media laws regulate how many media groups there can be in a radio licence area: in regional areas there must be at least four, in mainland state capitals, five. The groups are composed of whichever radio licensees operate in that area, whichever television licensees operate in the area within which the radio licence area is located (TV licence areas are much larger than radio licence areas), and any newspaper “associated”, via rules about circulation, with that area. In addition to the five/four rule, there’s a “two out of three” rule — you can only own two of newspaper, radio and TV in a licence area, not all three.
Get Crikey FREE to your inbox every weekday morning with the Crikey Worm.
But there are other ownership rules as well: you can’t own more than one TV licence in a licence area, except in certain rare cases involving new digital services; you can’t control more than two radio licences, and if you own TV licences, you can’t have so many that you reach more than 75% of the Australian population.
Remember, these are diversity rules. They’re not competition rules — they’re separately the responsibility of the ACCC, which must investigate if a media merger results in a substantial lessening of competition in a particular market (like advertising, or content rights). There’s a small overlap with diversity issues, but the ACCC ultimately doesn’t address diversity — despite talk about “markets of ideas”.
In spite of these layers of restraint, Australia’s media diversity hasn’t been protected. There are now just six major media groups in Australia: the Murdochs, the Stokes, James Packer, the Gordons, Fairfax and the hodgepodge of private equity firms and investors that control Nine. Moreover, most of them have extensive cross-investments with each other.
That’s because the current rules have a number of flaws:
- there’s no assessment of the national implications of mergers;
- Subscription TV is not considered “influential”;
- There’s no capacity to differentiate between radio licensees that are influential — 2GB, for example — and FM radio or sports stations that have no influence;
- The 75% “reach” rule is meaningless given regional TV broadcasters are in effect “slave” broadcasters that carry the same content, by and large, as the metro broadcasters; and
- National newspapers aren’t counted.
The Convergence Review proposes to address all of those issues. It recommends:
- Dumping radio licence areas as the basic unit, in favour of local areas identified by an independent regulator;
- Regulating based on influence only, not who is licensed, so newspapers, subscription TV and internet content providers are all potentially regulated (and some current licensees could be freed from regulation);
- Keeping the same five/four minimum number of media groups in a local area (as determined by the regulator) but allowing the regulator to exempt mergers if they’d breach the laws but there was public benefit;
- Assessing large-scale mergers based on a “public interest test”, enabling a national approach to be taken to mergers; and
- Dumping the 75% reach rule, the two out of three rule and the restrictions on numbers of radio and TV licences that can be held.
I’ve written extensively about the problematic nature of subjective assessments of media mergers previously, but there is an important context for what the review has recommended: our media diversity is already significantly damaged. There is scope for more mergers of media companies in Australia, but it’s limited: we are down to a core groups of media companies, mostly controlled by ageing patriarchs and their offspring, who work closely with each other even though they’re competitors.
That is, the efficacy of quantitative restrictions must now be questioned, as should their maintenance. The Convergence Review proposes going virtually all the way in the direction of subjective assessment, with a regulator assessing all transactions against principles, with only a single numerical restriction left and even that one potentially omitted from consideration in certain circumstances.
The other context is this: our media companies are under greater financial pressure than ever. Nine is laden with debt; Ten is struggling for ad revenue; even Seven has revised down its profits, while Fairfax and News are both struggling with a failing business model, and Foxtel-Austar’s future appears to lie with cutting costs rather than strong subscriber growth. Until the buoyant consumers of the pre-GFC era reappear, our biggest media companies will face a much more uncertain future.
Between that and the fact that several of the key players in Australia’s dominant media groups — Murdoch, Stokes and Gordon — will die or retire over the coming decade, getting our diversity protections right is more important than ever.