Nine's continued courtship of Southern Cross Austereo (SCA) has the TV industry puzzled for two reasons: the first is there are few signs the 75% reach rule (which at the moment is blocking the deal) is going to be relaxed or abolished by the current government. And secondly, a fix for the 75% rule seems very easy under the present legislation, raising the question as to why Nine doesn't use this to free itself from the rule.
Nine's latest gambit is some proposed amendments
to the Broadcasting Services Act
suggested to the joint parliamentary committee looking at the reach rule, designed to counter canny objections from the Ten Network
to the committee that Nine's earlier promises about regional news levels in the event of a merger are unenforceable.
But Nine's submission can also be read as allowing a cut
in the amount of news in regional areas. It has proposed a minimum of 22 minutes of "regional" news and 16.5 minutes of "local" news between 5pm and 8pm in each regional and local market during the week for entities with more than 75% reach. That's in addition to a "local employment" commitment. Nine claims this will require around 200 regional staff.
But there's no mention of any requirement for the weekend: Sunday evening news broadcasts are among the most watched each week, especially in footy season, with AFL and NRL broadcasts as the lead-in on Nine and Seven and their affiliates. And, based on current programming, it would represent a fall
in the amount of time devoted to the news. At the moment, the regional affiliates broadcast their own 22 minutes of local news at 6pm (although not in all cases, with Southern Cross and Prime both not having local news broadcasts in some markets) and then 22 minutes of metropolitan-based network news at 6.30pm in most cases (e.g., Sydney news for NSW).
The reduction would be more significant if adopted by other broadcasters. Ten's one-hour news is broadcast on Ten and SCA, which then has its own local news in some markets, meaning 90 minutes of news (plus ads) for some areas. Nine either hasn't fully thought this proposal through or is trying it on the committee by effectively suggesting a cut in the amount of news in most regional markets.
The ball is now back in the court of the anti-amendment lobbyists -- primarily Ten, but also Seven. Ten has already put a supplementary submission in, where it made the point about the unenforceability of Nine's news commitment. Perhaps Ten can suggest that Nine's 38.5 minutes of regional and local news be in addition to any metro news licensees that reach more than 75% of the population broadcast.
But this discussion is increasingly moot: any change to the reach rule must be by legislation, and time's rapidly running out for that before the election, especially given the government has withdrawn most of the rest of its media reform package in a huff.
There's talk in the industry that Ten is claiming its finances would be potentially fatally undermined by a Nine-SCA merger. Having lost its current affiliate, Ten could do an affiliation deal with WIN (owned by Ten director Bruce Gordon), but that would cost Gordon money, and he wouldn't pay anywhere near as much as the amount SCA is currently paying Ten.
But, TV analysts wonder, why SCA doesn't sell its northern NSW TV operations (based on the old Northern Rivers TV operation)? Nine would still have coverage in the area through NBN Television. That would reduce SCA's coverage by enough to allow a merger with Nine and keep within the reach rule. There is, however, one big snag: who would buy that business? WIN could, but not without a new affiliation deal (WIN and Nine remain at loggerheads on their affiliation deal, which expired last year). TV executives say it seems as though Nine and its CEO, David Gyngell, are bent on forcing WIN to move to Ten as its affiliate, which would cost WIN a lot of money and make its bankers (NAB) very nervous.
But there's a further problem for Nine and SCA. SCA is a Seven affiliate (yes, regional TV can be complicated) in Tasmania, Darwin and the Spencer Gulf region of rural South Australia. The driver in these markets is the news, programs like Packed to the Rafters
, My Kitchen Rules
(which is beating The Voice
) and Seven's telecasts of the AFL (especially in Tasmania and Darwin). These are profitable markets. It's likely that Seven has some sort of change-of-control clause in its agreement with SCA for Tasmania, Darwin and Spencer Gulf. That means should control of SCA change hands (by merging with Nine), Seven could decline to part with these small but juicy niche markets.
And sources say the driver in the Nine-SCA talks is Macquarie Group, which controls 27% of the regional broadcaster and radio group and wants out of a badly losing position. In strategic terms, the talks with Nine are about lowering operating costs (by cutting the affiliation fee) and boosting revenues and ratings by going with a stronger broadcaster with more successful programming than Ten currently offers. Ten is weak and will be weak well into 2014 and perhaps 2015 if it doesn't find more programs viewers will watch.
And finally, rival TV executives (including the odd one at Nine) wonder how Ten can cry poor when it is bidding $70 million a year for the cricket while Nine (the rights holder) has offered around $47 million and will find it tough to match Ten, which is too much. Paying $70 million for the cricket is too much.