Flood control

Broadcasters and newspaper owners will learn in the autumn whether the Government plans to relax rules on cross-media ownership. A surge of consolidation would follow such a move, sparking fears of rising ad prices and falling media content st

Consolidation is all around. From beer to banking, from advertising agencies to airlines, ownership in different markets is condensing into a handful of players.

UK media owners are distressed that their own industry is controlled by a labyrinth of regulations, limiting ownership of similar media outlets and restricting ownership across media, while the brand owners to whom they sell their advertising space are amalgamating into ever-bigger groups.

Scottish Media Group chief executive Andrew Flanagan is somewhat confused by the rules that regulate ownership of different media outlets.The group, which is one of the UK’s foremost exponents of selling media space across its different interests, claims it is being held back from extending its business by a thicket of regulations controlling cross-media ownership.

“We could not own a digital radio licence in Scotland because we’ve got an ITV licence. But I can put out an Internet radio service, even though there are more PCs in Scotland than digital radios,” Flanagan complains.

He believes such contradictions show that the current ownership rules have been overtaken by technological advances, and are no longer meaningful.

So a story that appeared in last week’s Daily Telegraph claiming that the Communications White Paper, to be published in the autumn, would contain plans to relax cross-media ownership rules in the new broadcasting act, was music to Flanagan’s ears.

However, a spokesman for the Department of Culture, Media & Sport, which is helping to prepare the White Paper, says the story was pure invention, as nobody knows what will appear in the document.

Indeed, the story was unsourced, but most observers believe it is inevitable that the rules – which among other things prohibit newspaper owners whose titles have more than a 20 per cent market share from owning a terrestrial television licence – are to be relaxed. Some believe this could lead to a cascade of cross-media buying and selling, as media owners seek to shore up their positions across TV, radio and print. For the newspaper industry it could mean News International or the Mirror Group being able to buy a terrestrial TV licence, though whether they would want to is another matter.

Brand owners are not best pleased at the prospect. For advertisers, media consolidation means concentration of power and ever-growing price inflation.

Bob Wootton, director of media and advertising affairs for trade body the Incorporated Society of British Advertisers, fears the prospect of advertisers acquiring a significant stake across all areas of the media.

He says: “A 25 per cent ceiling is sufficient for media owners to have the benefit of concentration of backroom facilities to maximise sales. Beyond that they get too powerful. It wouldn’t make for a tremendously free market – just hugely powerful media owners.”

One suggestion for regulating media ownership is to introduce a “points system”, limiting ownership by the total number of points, rather than by market shares. If a points system were to be introduced Wootton favours “share of mind” rather than share of voice, and an extension to cover all forms of media, including the Internet, on a variety of platforms such as TV and WAP phones.

But he doubts whether the relative values of different forms of media can be easily translated into one system, since “otherwise media planners would have been doing it for decades”. Indeed, a study on the feasibility of a points system was carried out before the existing 1996 Broadcasting Act, but such a system was never adopted, as it was considered too complex.

But Telegraph Group managing director Jeremy Deedes is in favour of removing the rules on concentration and cross-media ownership altogether. He says: “I believe in a free market. There’s a sort of nonsense about the rules. There are perfectly good rules that prevent monopolies applying to all other industries. Why do there have to be special ones for broadcasting and print media?

“We obviously can’t allow a situation to develop where someone has such a control over the market that it has an effect on price. But advertisers would be protected by the same rules as other industries, and by the Competition Commission.”

Both Wootton and Deedes agree that the Government, faced with the complexity and enormity of media ownership and consolidation, will only tinker with existing rules.

But Lorna Tilbian, media analyst at WestLB Panmure, says: “I think there’s no doubt that cross-media ownership rules are going to change. From the advertisers’ point of view, by allowing this they are going to be dictated to on price, but this is likely to be passed on to consumers.”

Global market

Yet she expresses concern that UK media owners such as Carlton, which are relatively small in global terms, are forced to fight over areas of the UK while Pearson’s deal with CLT has taken Europe by storm. With globalisation affecting not only media, but other industries, she says: “Ultimately we are going to look at a global market with the likes of Nestlé going to one buying point in Asia, Europe and the Americas and ending up buying the world.

“There will be one major media point in each of three to four core markets as well as lots of little companies. The marketing will change, with the likes of Coca-Cola having to develop local initiatives to achieve growth.”

To help stimulate discussion on the forthcoming communications reform, Culture Secretary Chris Smith and Trade & Industry Secretary Stephen Byers have a team of experts to put forward their individual views on key policy areas. Among them is Damian Tambini, senior research fellow at left-wing think-tank the Institute for Public Policy Research and lecturer on media policy at the London School of Economics.

Tambini says: “Media concentration and cross-media rules are a blunt instrument, but unfortunately not dispensable unless more is done to promote a plural and democratic media.”

The Department of Culture and the DTI are also seeking representations from various industry bodies, among them the Newspaper Society, which represents regional press owners. The society has commissioned the National Economic Research Associates to assess the impact of the current regime.

Preliminary findings include a recommendation for the relaxation of controls covering local newspaper groups owning local radio stations within their circulation area, on the basis that current local radio news provision is limited and radio news services reach different audiences.

It also proposes the abolition of the public interest test by raising the threshold, so that the test would only apply to cross-media holdings involving local newspaper groups with more than 50 per cent circulation in the relevant locality.

A key concern for the regional press is a provision of the 1973 Fair Trading Act, which stipulates that UK regional newspaper owners must obtain consent from the Trade & Industry Secretary to acquire a newspaper where the total paid-for daily circulation of the titles involved is more than 500,000.

Prior approval required

This means, for example, that the Johnston Press would need prior approval to make any acquisitions in regional press, while the likes of US publisher Gannett is able to buy one of the largest regional publishers, Newsquest, without regulatory intervention.

Santha Rasaiah, head of legal and regulatory affairs at the Newspaper Society, says: “All media mergers should remain subject to general competition law. Specialist ownership regimes by media type do not work in a multimedia age.”

It will be some months before the details of the White Paper are published. In the meantime, it will be revealed whether limits on control of advertising revenue for the ITV companies are to be relaxed.

It seems there is a real prospect that many of the restrictions on consolidation in the media industry will soon come tumbling down. But after a week in which ITV was strongly criticised by regulator the Independent Television Commission for the quality of its output, the regulation of content after the new Broadcasting Act will be paramount.

If media owners burst the banks and existing regulations are scrapped, it will need a mighty powerful content regulator to ensure diversity and standards are upheld.

Media ownership regulations

Most people would find it easier to do long division in their heads than decipher the current media ownership rules. In fact, a senior press officer at the Department of Culture Media & Sport says even he has difficulty working them out.

He admits he has only read the 45-page “simple” guide a couple of times and would need to read it at least 50 times to fully comprehend it. He also says he has never been asked to explain whether a company can own a radio station, TV station and a newspaper all at the same time.

All of which raises the question, if the Culture Department doesn’t know, what hope is there for the rest of us trying to work it out.

The media ownership regulations for TV state that holdings are restricted to 15 per cent of the national TV audience, and no one can own more than 25 per cent of the ad revenue generated on all commercial TV channels.

For radio, the limits are set through a convoluted points system, allocated according to the size of the audience. With analogue, no one can own licences which account for more than 15 per cent of total radio points.

Newspaper ownership, for some reason, is carefully guarded by the Competition Commission, with owners forced to obtain permission from the Trade & Industry Secretary to buy a local or national paper where the combined circulations amount to over 500,000. However, there is no limit to the number of magazines a company can own.

But the “simple” guide really comes into its own on the subject of cross-media ownership.

Anyone owning a national ITV licence cannot own a national radio licence and visa versa – but according to part III, schedule 2, Broadcasting Act 1990 (as amended), “there are no restrictions on the extent to which the holder of one such licence may participate in another such licence by way of shareholding below the level of control of a licence to provide a national digital sound programme service”.

Anyone owning a local radio service or local digital radio service cannot own a regional ITV company which covers the same area.

Anyone owning a newspaper which has a national market share of 20 per cent or more cannot hold a licence to own: a regional or national ITV service, Channel 5 or a national or local radio licence, although they can have a shareholding of up to 20 per cent.

Local newspaper groups cannot control a local TV licence if their newspapers have more than 20 per cent local market coverage.

Any questions, you could always try the Culture Department.

By Charles McKelvey>

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