Media reform would grant Australian media growth

By Lucy Carroll, Pippa Chambers and Rachael Micallef | 2 October 2015
Communications minister Mitch Fifield

Now that media reform is back on the table following Malcolm Turnbull’s ascension to prime minister and Mitch Fifield coming on as communication minister, there's a chance for the Australian media industry to compete on a level global playing field and finally have the opportunity to grow, according to media agencies.

"It’s not about control, lifting costs or being anti-competitive … it’s about letting the Australian media market grow again,” Carat's CEO Simon Ryan said.

“The numbers tell the story. Digital spend growth is out-growing other mainstream media. Allowances by the ACCC need to evolve through media reform to allow Australian media to take advantage of these growth areas as enjoyed by international competitors."

The government this week insisted it is only a matter of time before antiquated ownership laws change, possibly without consensus among media bosses – something that had previously held up media reform.

"To some extent, media reform is a bit like people focusing on railway gauges while planes are starting to fly overhead," communications minister Mitch Fifield said in an interview with News Corp.

A shake-up of the Keating-era cross-media ownership rules could see the anti-siphoning list re-examined and the “two out of three” and reach rule abolished, potentially triggering a wave of takeovers and mergers.

But media analysts are questioning the plausibility of reforms given the likelihood of Senate blockades.

“We question how much political capital Turnbull wants to tear up on media reform versus other reforms which are probably more important,” Citi's lead media analyst, Justin Diddams said. “Media reform makes sense, but the politics are tough.”

“If the TV industry can agree on a package of reforms and take that to the government then we may get some reform in the industry, but it will require all sides to give a little.”

He said Nine Entertainment and Southern Cross Media could be winners if they pursue a merger in the case that the television reach rule is scrapped, which stops a broadcaster reaching more than 75% of the population.

Managing director of ZenithOptimedia Melbourne, Nickie Scriven, said big players will be ready to act as soon as ownership laws are relaxed. 

“We predict a future of the 'big three': Nine Entertainment Company, Seven West Media and a merged News Corp/MCN offering. It also makes sense that Fairfax will also move into Nine Entertainment Company or Seven West Media,” she said. “Importantly, it will allow these groups to compete with Facebook and Google offerings – evening out the balance of power.” 

She said from a marketing point of view, media ownership laws are obsolete and largely irrelevant.

Ten Network's boss, Paul Anderson, agrees regulations are “outdated, ineffective and actively hampering our ability to compete in this dynamic market”.

He welcomes discussions with Senator Fifield about “holistic” reform of media as the business transforms in an environment where the free-to-air television industry is “burdened with layers of regulation that our competitors don't face, including licence fees, which are far higher than anywhere else in the world”.

Unsurprisingly, the network supports the anti-siphoning regime, Anderson said, which guarantees iconic Australian sporting events remain on FTA television.

Similarly, a Seven West Media spokesperson told AdNews that consumers are the winners from the current anti-siphoning rules.

"It is critical that Australians do not end up paying to watch the sporting events they currently see for free," the spokesperson said.

"In our view the current rules work well.  They have delivered the best sports shown live and free, record rights fees to rights owners and wall to wall coverage on payTV.

"We are very happy to sit down with the Minister to discuss the list and the other important issues he has flagged.  Viewers are the winners from the current anti-siphoning rules.  We need to be careful they don't end up losers from any changes that might be proposed."

However, Citi's Diddams maintains that any review of the anti-siphoning list – one of the longest in the world – is unlikely to have any serious impact, particularly on the advertising industry.

“For most politicians anti-siphoning is a no-go zone, but if it was part of a package of reforms that were there to reduce red tape and improve competition, then I think it would be accepted.”

Most items that would get taken off the list would not pull huge audiences and any minor changes are just a “sideshow relative to the cyclical to and structural pressures facing the TV broadcast industry today. It's like they are squabbling over a piece of cake when it's all just falling through their hands,” he added.

The massive NRL and AFL broadcast rights deals are evidence the anti-siphoning list isn't protecting FTA networks against rife inflation.

While the two out of three rule probably faces the most opposition, according to Diddams, any cross-media mergers would be borne out of necessity to increase scale rather than being used as a tool to extort more money out of advertisers.

“Advertisers shouldn't be viewing media consolidation as a bad thing. This is about survival against foreign-owned media companies expanding into this market,” he explained

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