A Dangerous Dinosaur

An article by the Press Council's Chairman, Prof David Flint, looks at cross media ownership rules from a different perspective.

It is said the purpose of the cross media rules is to make media barons choose between being a "Prince of Print" or "Queen of the Screen". This assumes a compartmentalisation of the media which if it were true in 1987 is now melting before our eyes. Some newspapers can now be read on computer screens. A reader can move freely between text and video, or have both on the screen simultaneously. Newspapers have long debated the possibilities of electronic delivery, and even custom-made newspapers. We are soon going to have more sources of news down the super highway than any of us will be able to handle. The reason? Technological change, not media regulation. Far from achieving diversity, media regulation has held us back. We were very late into TV and one of the last into cable television because of government constraints. As one writer once observed, it was fortunate that when Gutenberg invented printing, governments were not into media regulation - local content rules, cross media regulations etc.

Being outdated is bad, but being dangerous is worse. The rules on cross media ownership and foreign investment offend a fundamental unwritten requirement of any democracy. One of the checks and balances on government is an independent media (print and electronic). Disturbing allegations have been made that:

• the cross media rules were introduced to punish the Herald and Weekly Times and Fairfax;
• Conrad Black would have been permitted to increase his holding in Fairfax after he demonstrated that his reporting of the 1993 election was "balanced"; and
• the proposed amendments to the rules are to "get Packer".

Governments are the last people who should determine who owns what in the media. This is equivalent to putting High Court judges on annual contracts. The temptation for abuse is too great.

Encourage Diversity

Rather than amending the cross media rules we should have laws to encourage diversity and pluralism, which encourage new entrants. They should be:

• flexible - so that, unlike the cross media rules, they are not soon outdated;
• technologically neutral - to allow for the blurring of boundaries between print and electronic which is already occurring;
• transparent - so that their application can be seen to be completely removed from the exercise of political patronage or punishment; and
• rely on quantitative assessment - so that their application removes as much subjective qualitative judgement as possible.

These are in fact the views of the British Media Industry Group contained in a submission to the British government made by Sir Frank Rogers, from the London Daily Telegraph. (A New Approach to Cross Media Ownership, BMIG, 1995.) The submission offers some valuable insights into media policy.

Competition law and policy can provide the framework for media policy, rather than arbitrary cross media controls. Competition law, now being harmonised internationally, requires those in a monopoly or dominant position to behave competitively. Their merger proposals are subject to close scrutiny. These rules, adjusted appropriately for the media, provide ample legal constraints to ensure diversity and pluralism.

One of the difficulties in the application of competition law in Australia has been the compartmentalisation of print from television, and the restriction of markets geographically to state boundaries. While justifiable in the past, there is now a need to consider the media market at the national level as well, and to accept that newspaper, radio and television are converging into a single news market. After all, why did afternoon newspapers die? It was because consumers chose to substitute television as their source of news.

The British Submission

The refreshing approach in the British submission is that it seeks to measure consumer usage, and not merely ownership and control. It relies on the "share of voice" in the market found by measuring shares of newspaper circulation, TV viewing, and radio-listening. (Radio-listening is discounted by 50% because of its perceived lower impact on the "diversity of views issue" - music constitutes a major proportion of broadcast programmes.)

The British submission suggests Parliament determines the maximum "share of voice" that it is desirable for any proprietor to have. We could apply this to Australia by deciding that, for example, a 34% share, nationally and in the states or territories, should constitute a dominant position for the purposes of competition law. (The onus would be then on the proprietor to show he or she was not dominant.) A dominant proprietor would be required to continue to behave competitively. Any abuse could attract legal action. His or her merger proposals would be subject to scrutiny. They would only be approved if they passed a public benefit test. Mergers which would result in 34% share of the national or a state market would also be scrutinised.

Applying to Australia

Using Neilsen ratings, Audit Bureau of Circulation and Press Council statistics, and calculations made by the Communications Law Centre, I have attempted to show how this approach could apply in Australia. They are not meant to be exact, but are tentative examples. For this exercise, Fairfax has been treated as a "shell" in which Conrad Black has 25% of the voting rights and Kerry Parker 17.7%. Channel 7 is also treated as a shell in which Rupert Murdoch has 14.9% of the voting rights. I have ignored convertible debentures - after all they only refer to possible voting rights in the future. They can be dealt with if and when exercised. For simplification, I have only used daily newspapers, not Sundays where the circulation does not differ in any great degree from daily circulation. Suburban newspapers, excellent in providing local community news, but not normally providing national and regional news, are also excluded. I have discounted Regional Dailies by 75% - because their circulation is about one quarter of capital city and national dailies. As for TV, I have used the Neilsen ratings rather than "potential audience reach" because they are a better indicator of consumer usage. As cable and satellite are introduced, these could also be included. Given the lack of interest of the three major players, I have not been concerned whether or not to discount radio by 50%. However, as it remains a significant news provider, I have kept radio in the tables.

The national and regional "share of voice", as it affects those most susceptible to cross media and foreign investment rules (expressed as percentages), appears to be:

Australia

New South Wales

Victoria

Queensland

South Australia

Western Australia

(*WA Newspaper Holdings is a "shell", like Fairfax. There seems to be no dominant shareholder - I include it only for information.)

The national "share of voice" of each proprietor is not as high as one might expect. This is because their concentration is in one medium or in certain geographical areas particularly in those capitals where only one local daily newspaper is viable. The percentages there should be reduced to take account of sales of the national newspapers. Even when we examine the mainland state markets, none, even Rupert Murdoch, has a one-third share. This may change with the proliferation of new sources of news especially cable and satellite TV. (But then there will be a need to separate carriers from news sources - BBC World Television is hardly Rupert Murdoch's, although it will be delivered by his carrier.)

It is interesting to note that under this formula the ABC's "share of voice" nationally would be 16.22% (or 28.72% if radio is not discounted). This is because it seems to be the only significant national radio news network. This is not to suggest the trigger of 34% should necessarily apply to the ABC. SBS, with a TV rating of 3.1, and no English language national news network (but an excellent radio network), would have a share of 0.775%.

The other significant cross media or foreign proprietors are:

• Canwest with 15% of the voting shares and a 57% economic interest in the Channel 7 network.
• Australian Provincial Newspapers (T. O'Reilly) with 31.3% of regional daily newspapers and a 91.7% interest in Westgo Ltd. This owns 5 metropolitan and 3 regional radio stations with a "potential audience" (not rating) of 47.7%.
• Kerry Stokes who owns The Canberra Times (0.9% of capital city circulation) and who has interests in 6 regional TV stations and 20% of the Channel 7 network.
• Rural Press (JB Fairfax) with 12.5% of regional dailies as well as 19 regional radio stations with a "potential audience" (not rating) of 4.9%.

This approach offers a transparent formula to guide the application of competition policy to the media. It will not be rendered obsolete by digital convergence, the creation of multi-media networks and services and cable and satellite TV. It is technology neutral. It would allow media corporations to strengthen, and to play significant roles internationally. Other countries could not stop our companies from entering their markets on the ground that we deny reciprocal access. New Australian entrants into the market could be encouraged.

Above all, the approach proposed takes the question of who owns, for example, The Sydney Morning Herald, The Age and The Australian Financial Review out of the hands of the government - where it never should have been.

David Flint

see also
Index on David Flint's material on the website

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