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Cross-Media Ownership – the “Case” for Changes

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Cross-Media Ownership – the “Case” for Changes INDEPENDENT REGIONAL RADIO A response to the Discussion Paper on Media Reform Options March 2006 1 1. Introduction Independent Regional Radio (IRR) is an unincorporated association of licensees of some 73 regional commercial radio services located in 42 of Australia’s 96 regional radio licence areas. Unlike most other regional radio broadcasters IRR members are committed to local service in that local station managements have both the responsibility and the autonomy to ensure the needs of their local communities are effectively served. For this reason, all IRR members’ main programs are produced locally, being neither dictated by, nor delivered from, some remote “hub” or headquarters organisation. This submission on behalf of IRR members is concerned with only one section of the government’s discussion paper on so-called media reform options, namely the section dealing with media ownership and control, and in particular, only those matters which affect regional services. Further information may be obtained from: Mr Des Foster Director Independent Regional Radio Tel: (02) 9975 6746 E-mail: [email protected] 2 2. Executive summary (a) The Government has a closed mind on the issue of cross-media rules in regional Australia, and the process of “consultation” it has adopted reflects this. (b) The real intent of removing the cross-media rules is to enable some existing media companies to increase profits through economies of scale and scope. (c) There is no public benefit in removing cross-media rules in regional markets, but there is serious potential detriment. (d) Removing the cross-media rules in regional markets under present conditions ignores the advice of the Productivity Commission. (e) Protections designed to offset counterproductive effects will not work. 3 3. The consultation process At the outset, IRR is deeply concerned by the lack of consultation on the issue of media ownership in regional areas, and by the process which will lead to a decision. The government’s intentions have been clearly signalled for some time, but at no point has it acknowledged the potential counter-productive outcomes which have been drawn to its attention, nor has it engaged in any dialogue on the subject. A lengthy letter from IRR to the Minister for Communications, dated 13 October 2005, has gone unanswered. A copy of that letter is attached to and forms part of this submission. (Attachment “A” – page 18). It is clear from the discussion paper that the government’s views on media ownership in regional areas have not changed since the introduction of a bill in 2002, other than to recognise that bill entailed “a high degree of intervention”. The government’s “preferred options” are virtually the same as they were in 2002 and are in fact the only options for consideration in this paper. None of the issues here is being referred to independent examination by a body such as the Productivity Commission (which expressed views on the subject in 2000). Instead, submissions are being referred to officers of the Minister’s Department who are already on notice of the government’s preferences. There will be no response to or dialogue with submitters. In these circumstances, IRR has regretfully concluded that the government is not open to persuasion regarding cross media ownership in regional areas, that the 4 invitation to make submissions on this issue has been extended merely for the sake of appearances, and that the process lacks integrity. IRR does not request confidentiality for any part of this submission. 5 4. Cross-media ownership – the “case” for changes According to the discussion paper, the main arguments in favour of removing the cross-media ownership rules are that the rules- 1. increasingly risk growth of new services, 2. limit media companies from obtaining economies of scale and scope, 3. constrain media companies in addressing the challenges of emerging media forms, and 4. foreclose future developments in the market place. The paper claims that as a result, investment and innovation in Australian media is limited and that this risks undermining an objective of the Broadcasting Services Act (Section 3(b)) which is to “provide a regulatory environment that will facilitate the development of a broadcasting industry…that is efficient, competitive and responsive to audience needs.” Each of these broad generalisations, which are utterly unsupported by any kind of evidence, demands a response. “Risk to growth of new services” It is difficult to understand what this actually means. True, the discussion paper alludes to the encouragement of “new entrants, new investments and new services to contribute to diversity in a competitive environment.” But nowhere does it 6 illustrate how the present cross-media rules in regional markets frustrate that objective. The barrier to entry in regional commercial radio and television is not the existence of the cross-media rules, but of quite sensible planning decisions which rule out the possibility, for the foreseeable future, of more licences. The number of regional commercial radio licences has more than doubled since the present legislation was enacted and both the regulator and the government have recognised there are practical limits to the number of stations which a market can sustain if adequate service is to be provided, commercial viability being a key factor. There are no artificial barriers to entry into the newspaper industry or internet- based media, and in the case of internet-based media, established media companies have not been slow to invest or to innovate. So far as regional media are concerned, the assertion of risk is just that, an unsubstantiated assertion. “Economies of scale and scope” The desirability of providing opportunities for existing media companies to achieve economies of scale and scope has been the most persistently repeated mantra in the government’s rhetoric. The benefits of such economies to business are obvious. What the government has never been able to explain is how such economies will benefit the public. 7 In its letter to the Minister (referred to in Section 3 – page 4) IRR gave examples of the effects of economies of scale and scope in regional broadcasting. It pointed out how some regional radio stations had been “converted from local, autonomous operations into mere outlets for programs provided from some remote central point, or hub.” This was a classic example of economy of scale, which is the relative saving realised when the size of an operation is increased. Economy of scope, where the cost of performing multiple businesses simultaneously is more efficient than performing them independently, is exemplified in the media context by sharing facilities or functions such as news rooms and program, accounting and sales departments. It is true that cross-media rules limit regional media companies’ ability to effect economies of scale and scope. However, it also true that such economies offer nothing to consumers unless there is strong competition. Otherwise they are purely and simply means to increasing profit. While the discussion paper pays lip service to competition in this context there is nothing to suggest more broadcasting licences will be issued in regional markets, nor should they be given the economic realities of regional media, including the proliferation of stations which has occurred in recent years, the need for commercial viability and the proportion of stations operating at a loss. “Challenges of emerging media forms” “Emerging media forms” is code for services capable of being provided by digital technology. What the discussion paper fails to explain is in what manner the 8 existence of the cross-media rules constrains existing regional media from dealing with the perceived challenges. “Foreclose future developments in the marketplace” Apart from the fact that retaining the cross-media rules would prevent undesirable media takeovers in some regional markets, IRR has not the faintest idea what this impressive phrase means. 9 5. Consequences of removing cross-media rules In all the rhetoric touting the government’s preferred options there is one clear and unequivocal intent – to enable existing media companies to achieve economies of scale and scope. So far as regional media are concerned, cross-media rules stand in the way of this objective. Removing the cross-media rules would pave the way for companies to take over and merge in various combinations of press, radio and television. If there were a proliferation of such media in regional areas, a case might well be made for allowing combinations of media on the basis that this would promote healthy competition. This point was recognised by the Productivity Commission in its Broadcasting Inquiry Report in March 2000 when it stated: “The traditional media businesses in Australia are concentrated, and could become more so if the cross-media rules are relaxed and no other compensating measures, such as freeing entry, are taken.” The Commission also stated: “Eventually, removing the cross-media rules while regulatory barriers to entry to television and radio are still in place would be counterproductive.” Obviously, for the reasons already given on page 7, creating additional licences is not a practical option for the foreseeable future, but the logic of the Commission’s conclusions becomes abundantly clear in light of an analysis by 10 IRR of Australia’s 96 regional radio markets, showing the potential effect of removing the cross-media rules. This analysis is reproduced as Attachment “B” on page 25. It shows that, because of the low numbers of media proprietors involved in these markets- (a) There would be little likelihood of change in 46 markets. (b) In another 47 markets, one media proprietor could emerge in a position of dominance. (c) Competition between equals would be possible in only three markets. Each of the 47 markets where one media proprietor would dominate would provide the opportunities for effecting economies of scale and scope which is the government’s objective.
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