The timing of the attempt by the Murdoch clan to bail out the struggling Ten Network will be known on or after December 2, which is the deadline set by the struggling company for bids from possible suitors to be lodged. Ten and its advisers want to be in a position to be able to present a deal to Ten shareholders, who will meet in Sydney on December 17. The idea is the for the winning bid to be selected and then for the deal to be sent to key regulators, the Australian Competition and Consumer Commission and the Australian Communications and Media Authority, to start the clock running on the review process.

But the proposed deal, involving Foxtel and possibly American media group Discovery Communications, will face problems with the regulators. Foxtel’s stake in Ten is likely to be kept just below 15%, which is the level at which a company is legally determined to exercise control of broadcasting licensee. Foxtel is jointly owned by News Corp and Telstra, which means News Corp, which also appoints the CEO of Foxtel, would be a controller of Ten. As a result, Lachlan Murdoch would be a controller of a television network, a radio network (via his Illyria company, which owns Nova) and a newspaper in four capital cities, which breaches the “two out of three” rule. Thus, Foxtel will take 14.9% of Ten.

But the Broadcasting Services Act also allows the media regulator, the Australian Communications and Media Authority, flexibility about determining who is in control of a media group. Schedule 1 of the act says:

“Because of the complexities involved in this area, it is not possible to provide rules which will give a definite answer in all cases. Therefore, the ACMA is given a monitoring role over the broadcasting and datacasting industries and suitable powers of investigation in order to reach a conclusion as to whether a person is in a position to exercise control or not.”

But the relevant sections strongly focus on whether a person is “in a position to exercise (whether directly or indirectly) control of the selection or provision of a significant proportion of the programs” — or significant proportion of operations.

And News Corp and Lachlan Murdoch will certainly meet that threshold, even if the company stake is below 14.9%. Much of Ten’s current affairs content already relies heavily on News Corporation — The Bolt Report is now the network’s only Sunday current affairs show, after Meet The Press, explicitly revamped to use News Corporation talent, was dumped. The network draws heavily for programming on its contract with 21st Century Fox-owned production house Shine, which after its merger with Endemol and Core at the end of this year will still be 50% owned by Fox. Shine is by far Ten’s biggest supplier, responsible for The Biggest Loser and MasterChef Australia. And as part of the deal mooted by Foxtel, the advertising arms of Foxtel and Ten would be combined. News Corp would thus clearly be a controller of Ten’s programming and operations for the purposes of the BSA, regardless of whether its ownership stake was above or below the key 15% threshold.

Moreover, signs are that Discovery will be a silent partner in the deal, with the running made by the Murdoch-dominated Foxtel. The benefits to Discovery of buying a stake in Ten remain questionable, except to give News Corp and the Murdochs “cover” and, perhaps, supplying programs to Ten’s digital channels.

Incidentally, if control of Ten changes, Ten could need hundreds of hours of programs for the ONE digital channel, which is co-owned with American giant CBS. Media deals of the type between CBS and Ten usually carry a change of control clause for the partners. If that’s so, then CBS might have the option to quit ONE. CBS is a major program supplier to Ten for its main channel (Madam Secretary is one new program on air), but the Murdoch empire, in the shape of Fox TV, Shine and News Corp Australia, dominate its supply deals.

Australia’s media diversity has been progressively worsening in recent years, with our major national media essentially controlled by a small group consisting of Fairfax, Telstra, the Stokes, the Murdochs, the Gordons, Nine, Ten and News Corp, with James Packer having nearly completed his exit from the industry. The Foxtel-Ten deal would not merely further reduce diversity nationally, but would specifically breach the cross-media rules. ACMA should block it.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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