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Sydney, 25 May 1999 ( 432.8 SPARK AND CANNON Telephone: Adelaide (08) 8212-3699 TRANSCRIPT Melbourne (03) 9670-6989 Perth (08) 9325-4577 OF PROCEEDINGS Sydney (02) 9211-4077 _______________________________________________________________ PRODUCTIVITY COMMISSION INQUIRY INTO THE BROADCASTING SERVICES ACT 1992 PROF R. SNAPE, Presiding Commissioner MR S. SIMSON, Assistant Commissioner TRANSCRIPT OF PROCEEDINGS AT SYDNEY ON TUESDAY, 25 MAY 1999, AT 9.06 AM Continued from 24/5/99 Broadcast 201 br250599 PROF SNAPE: Welcome back to the resumption of the Sydney hearings. I shan't go through the introductory spiel that I give at the beginning of each city; simply to say that the terms of reference for the inquiry are available on the table outside. There is also the issues paper, if anyone isn't familiar with the issues that we're covering. It is transcribed and the transcripts will be normally available about three days after. They appear on the Web site, as well as being available on hard copy. At the end of today's hearings I shall be inviting any people to make oral presentations, should they wish to do so. With that introduction I now turn to Network Ten, who have two representatives today, and I would ask each of you to identify yourselves for the transcription service, please. MS ODDIE: Susan Oddie, general manager, business affairs, Network Ten. MR McALPINE: John McAlpine, CEO, Network Ten. PROF SNAPE: Thanks very much. We have your very thoughtful and helpful submission in which you have attempted to address some of the important issues that are here and we're grateful for you doing that. I am not sure who is going to speak to it first. MR McALPINE: I have an opening gambit, thank you, professor. Network Ten welcomes this opportunity to contribute to these hearings. Network Ten owns and operates commercial television stations in Sydney, Melbourne, Brisbane and Adelaide. Ten also has shareholdings in its two regional broadcast affiliates, Southern Cross Broadcasting and Telecasters Australia. Following a difficult time in the 80s, the company was bought out of receivership in 1992 by a group of investors. The majority shareholding interests of 85 per cent are principally held by Australians. One of the original consortium members, a Canadian broadcaster, CanWest Global Communications, holds a 15 per cent shareholding interest and a 57 and a half per cent economic interest in Ten. The 1998 listing of Ten Network Holdings Ltd has enabled more Australians to share in Ten's success. In the past decade Ten has carved a particular niche in the Australian media landscape as an independent contributor to media diversity. We attract our target younger audience with a mix of innovative Australian and international programming and manage costs through strong relationships with independent production houses. Popular Australian programs on Ten include The Panel, Good News Week, E News and Totally Wild. Internationally exploited Australian programs include Neighbours, Medivac, Breakers, Big Sky, Never Tell Me Never and Day of the Roses. Ten's submission to this inquiry is based on our concern to ensure a competitive, diverse broadcasting industry in Australia with genuine diversity of views and with room for independent players such as Ten to continue to innovate and adapt. For this 25/5/99 Broadcast 202S. ODDIE and J. McALPINE reason, our submission deals with the importance of plurality of ownership in Australian media. Other industry issues are covered in detail in our faxed submission of yesterday and the detail is in hand. New technologies are changing the way media companies operate. Our competitive strategies must take into account new services such as the Internet and datacasting, increased interactivity with consumers, potential economies of scale and other changes associated with convergence. In this changing marketplace it is important that media companies have the opportunity to grow, innovate and compete. Nevertheless, changes in technology do not lessen the need to uphold the public interest objectives of broadcasting legislation. These objectives require that there be more than one or two voices that reach and have the capacity to influence all Australians. Without this diversity, freedom of speech and democratic accountability are not assured. The traditional mode of restricting cross investment in television, radio and newspapers is no longer a feasible solution, yet at the same time convergence is increasing the likelihood of increased ownership concentration. Ten proposes the introduction of a more objective diversity test which gives greater flexibility for corporate growth and innovation, while ensuring that there is an appropriate level of concentration in mass media. All types of media can entertain, inform and influence the views of individuals in the community. Mass media is unique, however, because it reaches a large proportion of the community at any one time. The very reason why advertisers choose to spend substantial sums of money advertising in the mass media is because of the potential to simultaneously reach and influence large numbers of people. Ten's submission proposes the introduction of a hybrid diversity test, combining objective measures such as revenue, together with a geographic market restriction. In Ten's view, ownership across influential media would be permitted subject to a threshold test of say controlling no more than a designated percentage of the national advertising market, television, newspapers, magazines and radio combined, and a designated percentage of the advertising revenue for newspapers, magazines, radio and television in any given geographic market. To focus on the geographic test, the second threshold test, we can use the Sydney market as an example. If PBL, which owns Nine in Sydney and also the stable of ACP magazines, were to acquire Fairfax - being one of the two major newspaper publishers in Sydney - then based on our estimates of market share, it would control close to 40 per cent of the influential media, excluding classifieds. Further, we estimate that if News Ltd were to acquire the Seven Network then in Sydney alone - which is the smallest market for news - it would control over 30 per cent of the Sydney market. On this scenario you potentially have two players in control of over 70 per cent of the influential media in Sydney. If you include a classified revenue in this market share this would be well over 75 per cent. This same scenario applies in Melbourne, with different levels attributable to each player. How could that situation be defined as "media diversity"? 25/5/99 Broadcast 203S. ODDIE and J. McALPINE We consider that in any individual geographic market any proprietor should control no more than 25 per cent of influential media. This kind of model gives greater flexibility for growth than the existing rules. Any proprietor could choose which kinds of media to invest in rather than being artificially limited by media type. Importantly, this regime would provide real opportunities for participants other than the two major existing proprietors to own influential media in any Australian market. The exact thresholds are difficult to estimate at this point because most of the information is not currently publicly available. However, collation of the information required would not be onerous. While still in concept form, we believe this kind of model warrants further study and we would be happy to work with the commission in further developing it. There are two other major recommendations in our submission. Firstly, in our view the time has come to liberalise foreign ownership restrictions. Foreign investment is the best protection against ownership concentration, as well as offering the benefits of expertise, international exposure and increased capital for growth. Secondly, our second major recommendation is that the 75 per cent audience-reach limit applying to free-to-air broadcasters should be abolished. There is no real reason why free-to-air broadcasters should be more limited in potential audience reach than any other media. Thank you. PROF SNAPE: Thank you very much, Mr McAlpine. As I said, that was a helpful submission and very interesting that you are addressing the diversity question in the way that you have. As you would know, we had asked in industry visits with the major players, including Channel 10, that they address that diversity test if they were to be considering any relaxation of existing rules. It is very nice that you have in fact addressed them in this way and we thank you for it. Miss Oddie, were you going to speak at this stage? MS ODDIE: No, we will just rely on answering your questions. PROF SNAPE: Thank you. If I may just pursue that diversity test: the influential media that you mention - and it would be not more than 25 per cent in any one market of the revenue; that is, the advertising revenue, I think - would that apply to regional areas, as well? MR McALPINE: We really concentrated for the exercise in our initial stages - because some of the information is difficult to collate - on basically the Sydney-Melbourne scenario. There would have to be a test for those markets and I am assuming that the same principle would apply. The percentage may vary. I haven't done the homework on that, but I am assuming that something similar would apply. PROF SNAPE: Yes. I guess, as you say, it is very much in the concept stage, as one would have to work around some things as to how you measure the revenue when it's nationally-based advertising, for example, and you allocate it to one particular market within the country. 25/5/99 Broadcast 204S. ODDIE and J. McALPINE MR McALPINE: The clarification of that, I think, is that the companies could declare quite clearly to an independent body, such as the ABA, individual market shares of revenue, excluding classifieds, etcetera.
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