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Focus: Media control and ownership: (re)starting the discussion

13 June 2014

In brief: A policy background paper on media control and ownership, released by the federal Department of Communications, aims to restart the discussion on media law reform. The paper does not draw conclusions or make recommendations, but adopts a deregulatory tone. Partner Ian McGill (view CV), Senior Associate Matt Vitins and Law Graduate Ben Murphy report.

How does it affect you?

  • The Policy Background Paper on Media Control and Ownership (the Background Paper) is a deregulatory document. It sets the stage for the removal or relaxation of statutory controls on media ownership.
  • While the Government is yet to propose a reform package or begin formal consultation, this Background Paper frames the assumptions and questions on which the Government will base any future policy development.
  • The removal or relaxation of media ownership laws may create opportunities for merger activity and consolidation in the media sector.

Background

The Background Paper is another step in a long (and slow) walk towards media law reform. In 2012, the Federal Government released the Finkelstein Report on media regulation and the final report of the Convergence Review. In response to these reports, the then Labor Government proposed a media law reform package that would have seen substantive changes to media ownership regulation. For the most part, these proposals failed to pass Parliament. In March 2014, the Minister for Communications, Malcolm Turnbull, spoke publically about removing key limitations on media ownership and indicated that the Coalition Government may propose legislation in this area. The issue was not addressed in the Coalition Government's first wave of deregulation efforts. However, the process of reform has been moved gently forward by the release of the Background Paper.

Media ownership rules

The Background Paper addresses each of the five specific rules that affect the ownership of media assets in Australia:

  • the '5/4 rule', which aims to preserve a minimum number of media 'voices' in a particular market (defined by commercial radio licence areas);
  • the '2 out of 3 rule', which prevents a single person controlling more than two out of the three traditional media outlets (daily newspapers, commercial television and commercial radio) in any one market;
  • the '75 per cent audience reach rule', which prevents a person from controlling commercial television broadcasting licenses that reach more than 75 per cent of the Australian population;
  • the 'one to a market TV rule', which prevents a person controlling more than one commercial television broadcasting licence in an area; and
  • the 'two to a market radio rule', which prevents a person controlling more than two commercial radio broadcasting licences in an area.

Limitations of the rules

The current media ownership rules were largely defined by the Hawke Government in 1987, with substantial modifications by the Howard Government in 2006. The Background Paper notes a number of limitations with the current rules. When taken together, these limitations convey a clear impression that the rules are out of date.

The Background Paper notes that the current rules:

  • are weighted towards only three traditional media forms commercial television, commercial radio and certain newspapers and that this weighting reflects Parliament's assessment in 1992 (when the Broadcasting Services Act was passed);
  • do not take account of other sources of news or opinion, such as subscription television, national newspapers, or community and national television and radio broadcasters; and
  • exclude online media, and do not adequately account for the prominence and use of online news services in the community.

From this point, the Background Paper outlines the other areas of law that affect media mergers and acquisitions (competition and foreign investment laws), then notes trends to liberalise media-specific ownership regulations in other jurisdictions, particularly New Zealand and the United Kingdom.

Industry analysis

The Background Paper provides some detailed industry analysis. It summarises the major media transactions since the 2006 media reforms. It provides a snapshot of media diversity in Australia and how certain Australian media groups are affected by the current rules. The Background Paper also considers the rise of online news and asks whether online news enhances media diversity.

Consequences of deregulation

The Background Paper does not put forward a comprehensive proposal for media ownership reform. It does, however, canvass the potential consequences of removing each of the ownership rules. The Background Paper notes that:

  • the Australian Competition and Consumer Commission (the ACCC) would continue to have a role in determining whether media mergers would be acceptable, even if the specific statutory rules were repealed;
  • repealing the 75 per cent audience reach rule would likely lead to consolidation between metropolitan and regional broadcasters, but that this would entail the replacement of one voice with another, rather than a reduction in diversity;
  • repealing the 5/4 rule may not lead to consolidation in metropolitan and larger regional markets, as most have more voices than the minimum threshold; while consolidation could have occurred under the current rule, it has not to date. The Background Paper acknowledges that there would be potential for consolidation and a reduction in diversity in regional and remote areas;
  • repealing the 2 out of 3 rule would allow for consolidation within the established media platforms, but this would be moderated by the ACCC and by the 'broader financial headwinds' facing traditional media; and
  • repealing either the 'one to a market rule' (for commercial television) or the 'two to a market rule' (for commercial radio) would probably have significant consequences in metropolitan markets, although the capacity for consolidation here would be tempered if the other control rules were retained.

Comment

The general trend in media ownership regulation since the 1980s has been one of liberalisation at a very incremental pace. There is a sense among law-makers, in Australia and elsewhere, that ownership laws focused principally on broadcasting are falling behind the reality of media markets and how people inform themselves. There is something in this. Although commercial television, commercial radio and daily newspapers remain important, they are an increasingly diluted part of the broader media picture. We should accept that rules focused exclusively on these platforms will be progressively less capable of appropriately regulating for competition and diversity in media.

The Background Paper develops the case that the sky will not fall in if existing media ownership rules are removed (although the voting public may take some further convincing on this point). It also notes that the Australian Government will consider potential reforms to media ownership rules in 2014, but that it intends to consult widely with stakeholders before developing a specific approach.

The explicit aim of the Background Paper is to (re)start the conversation on media law reform.

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