Ofcom Consultation: Media Ownership Rules Review Response From

Ofcom consultation: Media Ownership Rules Review

September 2009

1. General evidence

. We agree with Ofcom’s assessment that economic pressures are particularly severe in, though not confined to, local and regional markets. Our own experience confirms this. We are particularly concerned about the questions surrounding the economic sustainability of quality news provision by commercial players.

. GMG supports the principle of plurality in news provision, but believes that in regulatory matters issues of plurality must be seen in the context of an increasingly fragmented media landscape and extreme economic pressure on commercial providers of quality news and other content.

. GMG supports the general deregulatory thrust of these recommendations, and makes two overarching observations:

1. The benefits of cross-media ownership at the local level are not currently sufficient to trigger mass consolidation in the UK media sector, although any deregulation is to be welcomed (see specific response to Q3). 2. Ownership rules, and other kinds of public interest intervention, still have an important role to play in ensuring plurality of voice at the national level, especially where dominant media platforms are involved (see specific response to Q4).

2. Recommendation to remove the local radio service level ownership rules

. GMG supports Ofcom’s proposal to remove rules that regulate ownership of local radio broadcasters. These rules were introduced with a view to safeguarding the plurality of provision of local radio services, reflecting the important role that radio stations played in their communities.

. The commercial radio industry has advanced significantly since this point, including the launch of national and regional stations. There are now more than 300 commercial stations in the UK. However, listening has been stagnant over the past decade and industry revenues have been declining for the past five years. Furthermore, these smaller revenues have been shared among an ever-increasing number of stations.

. The global economic recession has had a marked effect on the fortunes of the radio industry. The cyclical impact of recession has been compounded by a structural diversion of spend to other platforms, notably the internet.

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. Removing local ownership rules for the radio industry will, as Ofcom accepts, enable radio groups, which typically have high fixed costs, to achieve greater economies of scale by co- locating production and merging sales teams. There will also be benefits for advertisers, who will be able to target local markets more efficiently, where stations with complementary audiences are co-owned. The consequence of these actions could result in greater diversity of station content, as two stations under single ownership would be incentivised to seek out different audiences. Additionally, combining news operations could reduce duplication and enable greater breadth and quality of coverage.

. The maturity of the local radio market will ensure ongoing plurality of provision by commercial radio operators. Failure to remove ownership rules is likely to result in further radio station closures and could subsequently result in an extreme reduction of competition in local markets.

3. Recommendation that the local cross-media ownership rules be liberalised

. We are pleased that Ofcom has recognised the pressure on local and regional news providers resulting from a combination of recession and longer-term structural market changes. Any steps to reduce regulatory burdens and encourage owners to consider M&A activity within the local media sector are welcome, and we support the recommendation to liberalise local cross-media ownership rules.

. However, this partial liberalisation of local cross-media ownership rules will present only limited opportunities for synergies – and therefore limited commercial benefits to media owners. It is a helpful and positive step, but will not transform the position of local media organisations.

4. Recommendation to retain the national cross-media ownership rules

. The consideration of the relevance of cross-media ownership at a national level differs from that at a local level in two key respects.

. Firstly, national media, while undergoing similar structural change to local and regional media, is not threatened in an as immediate and direct a way as local media. As operators of local, regional and national media we are able to state with confidence that while consolidation both within and across media will be important in supporting the survival of local media models, at a national level it will be possible to sustain a diverse range of editorial voices both within and across media for the foreseeable future. The structural threats from online and changing consumption patterns are serious but the scale effects of spreading costs over a much larger audience mean that more players can survive. A more appropriate regulatory response at the national level would be to address the more serious structural issues arising from the BBC and online aggregators.

. Secondly, the influence of national media outlets and platforms is significantly in excess of local media, and therefore the risks of a monopoly of editorial voice are more extreme. In contrast, co-ordinating an editorial stance and approach across a multitude of local media companies, each serving distinct audiences, would be extremely complex.

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. We therefore support the retention of restrictions on cross-ownership of Channel 3 and national newspapers, as ITV retains a major share of viewing and significant influence. However, the national cross-media ownership rules, which are designed specifically to prevent a single organisation or owner wielding undue influence, should be broadened to take account of the changed media landscape and the growth of non-traditional media players.

. Currently, some cross-platform owners may, through their various holdings, acquire an unhealthy share of voice across all media, despite operating within current regulatory rules. For example, although News International would not be able to make further national newspaper acquisitions (because of its existing newspaper market share), its parent company’s control over the UK’s largest pay-TV provider would not itself, currently, be an impediment to further newspaper ownership.

. Similarly, because regulatory frameworks currently focus on ‘traditional’ media such as TV and newspapers, some types of organisation (eg Google, which now has overwhelming dominance of search in the UK), could fall outside their scope altogether. This may not appear to be of immediate concern in terms of cross-media ownership because firms like Google have shown no appetite to acquire TV or other ‘traditional’ media assets. However, given the rapidly changing nature of the media market, the convergence in media consumption and technology, and the growing role of services such as Google News, the potential impact of such organisations in terms of share of voice should not be underestimated.

. These issues are of particular importance in areas where single companies already hold positions of dominance – for example in the case of ITV, Sky and Google.

5. Recommendation to remove the national multiplex rules

. GMG supports Ofcom’s proposal to remove restrictions on the ownership of national radio multiplexes.

. The government’s Digital Britain report proposes a series of changes that will redraw the UK’s multiplex maps and create a second national multiplex network comprising existing regional multiplexes. We consider the creation of this second national multiplex network as a crucial factor in the planned upgrade of radio transmission to DAB, which the government proposes be completed by the end of 2015.

. The restrictions on multiplex ownership, which were aimed at maintaining plurality of voice, have proven unnecessary, given the utility-like nature of these technology-focused companies. Any ownership restrictions which could potentially jeopardise the creation of this second national multiplex network must be removed.

6. Recommendation to retain the restrictions on broadcasting licences

. N/A

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7. Recommendation to retain the appointed news provider rule

. N/A

8. Recommendation to retain the media public interest test in its current form

. It is important in matters of the media with both consumer and citizen impact that government takes a view based on the wider public interest. This requirement should, however, be weighed against the need for media owners to have certainty in M&A activity to allow them to plan. It would therefore be helpful for the government to provide greater clarity as to the circumstances under which the public interest test would apply – for example in the case of a potential acquisition of a major UK media company by an international online player.

About GMG Guardian Media Group plc (‘GMG’) is one of the UK’s leading multimedia businesses. Our portfolio includes national, regional and local newspapers, a range of websites, radio stations, magazines and business-to-business media.

GMG divisions and joint venture companies:

Guardian News & Media publishes the Guardian and Observer, two of the UK’s leading newspapers, and guardian.co.uk, the internationally successful website. GMG Regional Media publishes the Manchester Evening News and its website, and a number of weekly newspapers and websites in the North West and South of England. It also includes Channel M, a TV station for Greater Manchester. GMG Radio operates regional stations across the UK, predominantly under the Real Radio and Smooth Radio brands. GMG Property Services operates software providers to independent estate agents. Trader Media Group publishes Auto Trader, the leading motors classified website and magazine, along with a number of other titles and websites. Trader Media Group is jointly owned by GMG and Apax Partners. Emap is a leading international business-to-business publishing, events and information company. It is also jointly owned by GMG and Apax Partners.

GMG is wholly owned by the Scott Trust, which was created in 1936 to secure the financial and editorial independence of the Guardian in perpetuity.

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