Memorandum submitted by SMG plc (continued)
NEWSPAPERS
EXECUTIVE SUMMARY
Current ownership controls on newspapers, requiring
approval for newspaper acquisitions by existing newspaper owners
prior to sale place these businesses at an unfair disadvantage.
These controls should be replaced by normal competition-based
rules, providing a level playing field for newspaper owners and
other potential buyers.
The UK newspaper market is highly competitive
and provides wide diversity of content for readers and broad choice
for advertisers. This underlines the case for a move to competition-based
regulation of ownership.
We do not believe that the Advertising Standards
Authority, nor the Press Complaints Commission, should be brought
under the jurisdiction of OFCOM. We strongly believe the current
process of self-regulation to be effective, worthwhile and worthy
of protection.
1.0 INTRODUCTION
1.0.1 SMG Newspapers was created in 1996
with the acquisition by Scottish Television plc of Caledonian
Publishing Limited, with interests in the following businesses:
newspapers; magazines; online design.
1.0.2 The newspaper business comprises three
newspapers: The Herald, a broadsheet newspaper published in Glasgow
since 1783; the Evening Times, the largest evening newspaper in
Scotland, serving Glasgow; the Sunday Herald, launched in 1999—a
broadsheet Sunday newspaper. All titles have online editions.
1.0.3 The Scottish newspaper market differs
markedly from the English market in that there are a number of
"city state morning newspapers", for example the Dundee
Courier, and the Press & Journal in Aberdeen. The Herald,
formerly know as The Glasgow Herald, circulates predominantly
in Strathclyde, although it is available throughout Scotland.
The Evening Times is Glasgow's evening paper, circulation serving
Greater Glasgow, and the Sunday Herald, whilst having a more even
spread in its distribution footprint, sells most copies in the
West of Scotland.
1.0.4 The Herald is published daily Monday-Saturday,
as is the Evening Times, and the Sunday, as the name suggests,
is published as a Sunday newspaper. In terms of circulation, we
await the issue of ABC audited circulation figures for the six
months ending December 2000. We estimate that the audit bureau's
figures will show:
— Herald weekday circulation 93,000
copies
— Sunday Herald 55,000 copies
— Evening Times weekday circulation
104,000
1.0.5 SMG Newspapers employs 675 people
(full time equivalents) including around 130 working in its newspaper
printing business. Following a move of all editorial and non-production
staff to new offices, adjacent to the TV Studios of Scottish Television,
SMG Newspapers has recently embarked on the building of a new
printing plant scheduled for completion in summer 2002—this
is a project involving an investment of £38 million.
2.0 NEWSPAPER
MERGERS
2.0.1 We welcome the stated intention of
considering a lighter touch approach for newspaper mergers. In
framing these comments our primary, but not exclusive focus is
upon the local and regional newspaper sectors—hereafter
"regional newspapers"—within the United Kingdom.
2.0.2 Unlike most other sectors of the economy,
including other media and communications sectors, regional newspapers
are subject to industry-specific regulation. The case for regulation
of newspaper ownership (and indeed for media ownership more generally)
has been predicated on the grounds of plurality. The argument
is advanced that the power of regional newspapers to direct and
influence opinion makes it unique. Accordingly, increases in the
concentration of ownership per se have been seen to be
unwelcome. Such concentration would reduce, so it is argued, the
plurality of sources of information and opinion.
2.0.3 These ownership controls are to be
found within: specialist newspaper sections of the 1973 Fair Trading
Act (which covers transfers of ownership within the newspaper
(industry) and the 1980 Broadcasting Act (as amended by the 1996
Broadcasting Act) which focuses upon cross-media ownership.
2.0.4 The general position in the wider
economy is that businesses are free to agree the transfer of assets
before the outcome of any Competition Commission reference is
known. Clearly, such actions would inevitably be taken knowing
that divestment may be required following the recommendations
of any Competition Commission inquiry. Within the newspaper industry
such transfers are not permitted until the Secretary of State
has given approval. This is the case even where a transaction
gives rise to no competition or plurality concerns. We regard
the position of newspaper businesses to be disadvantageous. It
distorts the competitive marketplace. The inability of a newspaper
group to purchase another newspaper prior to permission being
granted places those businesses which are caught by the provisions
at a disadvantage to others which are not caught by the provisions,
not to mention the entirely anomalous position of purchasers from
outside the newspaper industry or the country.
2.0.5 Furthermore, the discretion of a Secretary
of State to approve mergers is reduced as compared to the discretion
available in regard to all other mergers. The Secretary of State
is unable to approve a merger between newspapers without reference
to the Competition Commission, except in restricted cases.
2.0.6 Under the Broadcasting Act (and this
is a matter more fully covered in our comments in relation to
cross-media ownership), regional newspapers may hold a controlling
interest in radio licences within their area of circulation, subject
to limits and to satisfying a public interest test as implemented
by the relevant regulator.
2.0.7 Any assessment of regional newspapers
must take account of the dynamic changes taking place within the
media and communications industry. Our earlier comments in relation
to the advances in technologically enabled media illustrate this
process vividly. These developments in technology, and in particular
the growing availability of digital technology, have had and will
continue to have a dramatic effect. The traditional distinctions
between the various media will increasingly be blurred. In a digital
environment content, whether moving images, sound, text or data,
will be freely transmittable across any medium. Currently many
of us have the benefit of electronic versions of newspapers from
around the globe delivered to our PC, palm-top, or television
set, 24 hours per day.
2.0.8 It is not our view that such competition
inevitably means the end of regional newspapers. Regional newspapers
retain a number of attractive advantages. Paper retains characteristics
of durability and portability, that cannot be currently matched
by electronic media. Most importantly of all, regional newspapers—or
at least successful regional newspapers—possess strong links
with their local communities that make them well placed to serve
the demand for local news and information.
2.0.9 The impact of these dynamic changes
on regional newspapers remains uncertain. Regulation will however
play a significant role in these future developments. Like any
other sector within the communications industry, the ability of
regional newspapers to adapt to these changes of convergence will
to a significant extent be determined by sector specific and general
media regulations. Most, if not all of the issues regarding the
effects of convergence on competition and plurality, are identical
to those faced by the broadcasting and telecommunications sectors.
2.0.10 As noted, the current system of newspaper
ownership regulation is predicated on the grounds of the protection
of plurality. The effectiveness or otherwise of the system can
only properly be determined by its success at protecting plurality.
Media convergence, consumer and advertiser choice, together with
changed social trends, suggest that regulation of media ownership
by specific media types will not foster the existence or growth
of the regional newspaper industry.
2.0.11 The newspaper specific provisions
of the Fair Trading Act have generated a considerable number of
references to the Competition Commission. In many of these referrals
neither competition nor diversity issues have been raised. This
fact alone suggests a need for change. The very large proportion
of such references cleared by the Competition Commission similarly
suggests that the references serve only to distort a market process
with no compensating benefits despite an unnecessary burden on
the industry and taxpayers.
2.1 Plurality
2.1.1 We believe that both issues of plurality
and media ownership concentration can be adequately addressed
by the application of general competition policy and/or legislation
as it applies to all parts of the economy.
2.1.2 Regional newspapers compete in a highly
competitive media market where consumers are faced with a surfeit
of choice for news, information, comment and advertising, from
other printed and non-print media. It is important to note that
this competitive environment applies not only to the battle for
readers but also the competition for advertising.
2.1.3 The majority of regional newspaper
advertising categories are, and are likely to remain, exposed
to effective competition. The competition authorities when assessing
the likely competitive effects of newspaper mergers have properly
considered the effects such mergers might have on post merger
advertising rates. The issue to be addressed being that a post
merger regional newspaper group will have the dominant power to
increase advertising rates in the titles concerned.
2.1.4 We believe that the price of advertising
in regional newspapers is subject to effective and competitive
constraints from other printed media and the explosion in media
sources available within the marketplace. Indeed, these potential
future trends are a serious matter for regional newspapers. The
growing range of advertising outlets and the growth in the sources
of news and information raises the prospect of reducing regional
newspapers readership and therefore their ability to fund editorial
content.
2.1.5 New media has the potential to become
tomorrow's dominant classified advertising marketplaces. Where
classified advertising revenue goes, display advertising revenues
may follow. In commenting in their report of April 2000 News Communication
& Media Plc and Newsquest (Investments) Limited/Johnstone
Press Plc/Trinity Mirror Plc, the Competition Commission stated:
"Our view therefore is that the market
for regional and local advertising remains competitive and now
extends beyond newspapers. The local and regional press competes
with nationals. . . The new electronic means of communication
are already beginning to establish themselves as credible advertising
media and the signs are that they will grow as a competitive force".
2.1.6 Any concerns over the potential anti-competitive
effects of mergers as they apply to the advertising market are
adequately addressed by the non-substitutability of the various
and competing advertising platforms, together with the application
of general competition policy.
2.1.7 If then there is no justification
for the current ownership controls on the basis of competition
what of the objective of protecting plurality? We consider plurality
to encompass the issues of access to news and opinion and the
centralised control of news so as to present a single interpretation
of issues of public interest. Protecting and nurturing a diversity
of opinion, comment and interpretation is properly regarded as
a vital element of the democratic process. The maintenance of
plurality of ownership has been regarded as the optimum way of
preserving this diversity.
2.1.8 We do not consider that any increase
in common ownership of regional newspapers would lead to a reduction
in diversity of news, comment or opinion. We believe there are
two fundamental reasons for this view: firstly, there is a large
and increasing range of alternative sources of regional news and
opinion, one need only consider the BBC, Internet and the regional
editions of national newspapers; and secondly, the economic imperative
linking a regional newspaper's sales and advertising revenue to
its ability to be and remain in step with, and reflect the interests
of its region, rather than the prejudices of a remote owner.
3.0 FCOM
3.0.1 We have noted the recommendations
for the establishment of OFCOM with powers over telecommunications,
broadcasting and communication industries, and in particular,
proposals that OFCOM would have specific powers in relation to
broadcast advertising and programme content.
3.0.2 Whilst the integration of a number
of existing regulators to provide one consistent source of regulation
and guidance is both welcome and sensible, we consider within
the context of regional newspapers other issues are of importance.
3.0.3 We do not believe that any case has
been made for an extension of regulation to cover those areas
not currently regulated. Moreover, we see no benefit or justification
for replacing effective self-regulation with regulation by OFCOM
or any other similar organisation.
3.0.4 The Government has recently expressed
its support (and rightly so in our view) for the work of the Press
Complaints Commission (PCC) and the Advertising Standards Authority
(ASA). The remit of the ASA includes newspapers and their electronic
or online versions.
3.0.5 In a modern, democratic society, we
believe that the burden of proof rests upon those who propose
an extension of regulation, not those who oppose it. We do not
see any persuasive case for the ASA or PCC, nor indeed their roles
and functions, to come under the jurisdiction of OFCOM. Perhaps
more importantly we see no basis for suggesting that newspapers
or their online versions should come under the jurisdiction of
OFCOM. We believe that the current process of self-regulation,
as applied and developed by both the ASA and the PCC, to be effective
and wholly worthwhile and worthy of protection.
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