Supplementary memorandum submitted by
SMG
1.0 EXECUTIVE
SUMMARY
As a successful and ambitious media company,
with a unique UK media profile, encompassing television, radio,
press, magazines, online, outdoor and cinema advertising interests,
SMG welcomes the Government's commitment to reforming UK media
ownership rules, which we regard as inconsistent, archaic and
counter-productive.
Our fundamental view is that it would be in
the best interests of viewers, listeners and readers—in
addition to media owners—for UK media ownership regulations
to be dispensed with, in favour of conventional competition rules.
However, we recognise that such a proposition does not satisfy
the Government's concerns regarding plurality of ownership and
diversity of content.
Therefore, we propose a new regulatory framework
that is simpler to administer; is consistent across television,
radio and press; prevents over-domination of individual media
sectors or across the UK media market as a whole; recognises the
special significance of the UK's most important media assets;
yet provides for reasonable growth among UK media owners.
Based on the principle that media revenue =
media power and vice versa, and overlaid by a schedule of Prime
Media Assets whose concentration of ownership would be limited,
SMG's media ownership proposal represents a pragmatic, workable
solution that protects plurality of voice and diversity of content,
whilst significantly reforming and simplifying existing regulations.
The proposal also has the merit of providing certainty for media
owners whilst being sufficiently flexible and robust to accommodate
any technological or economic changes in the long term, without
resorting to further changes in primary legislation.
The BBC, as the largest single broadcaster in
the UK should be regulated by OFCOM in order to ensure that its
role as a public service broadcaster is regulated in the same
manner as its commercial competitors, thereby ensuring a level
playing field for all UK media owners.
The BBC's influential position within the UK
television and radio markets must also be considered by OFCOM
when it is considering issues relating to concentration of media
ownership. This issue is accounted for in SMG's media ownership
proposal.
The Government should acknowledge that different
media are not substitutable by advertisers and that viewers, listeners
and readers consume media in different ways across the day, thereby
ensuring the independent existence of each media sector.
SMG notes the Government's expressed views on
plurality of voice and diversity of content and we agree that
these are important aspects of the media market when considering
issues of influence and democracy. However, we believe that to
impede the development of UK media in pursuit of such goals would
be against the interests of UK consumers and of democracy itself.
2.0 INTRODUCTION
2.0.1 UK media are the envy of the world.
The quality and diversity of content presents the highest standards
of information and entertainment to UK viewers, listeners and
readers. Meanwhile, the range of media owners and plurality of
voice reflected in that content helps to ensure that democracy
is protected and freedom of speech maintained.
2.0.2 However, this is achieved against
a background of one of the most regulated media environments in
the world. An environment in which regulations are inconsistent
across different media, are based on outdated views of the media
world and which actively constrain the development of UK media
companies.
2.0.3 SMG, as a successful and ambitious
UK media company, has a unique cross media profile in terrestrial
television, radio, newspapers, magazines, online, outdoor and
cinema advertising. We recognise the value of our media's independent
voice and are committed to editorial independence. We further
understand the need to invest in high quality infrastructure and
content (see Annex 1) in order to compete for the attention of
our viewers, listeners and readers.
2.0.4 We believe that for the Government
to achieve its aim of creating the most dynamic and creative media
market in the world, that UK media companies must be allowed to
achieve sufficient scale to compete not only with each other,
but also with their European and global counterparts. Only with
scale can media owners invest sufficiently in new content and
infrastructure, thus ensuring that the UK media market retains
its reputation for high quality and independent content backed
by extensive and appropriate consumer choice.
2.0.5 It is our fundamental view that UK
competition law is sufficient to protect the interests of consumers
in an environment in which technological advances are providing
an increasing range of consumer choice and lowering barriers to
entry.
2.0.6 However, we note the concerns expressed
in the Government's consultation paper and have proposed an alternative
media ownership regulatory structure which recognises the Government's
wish to retain some level of control over plurality of ownership.
Our proposal is based on the principle that turnover, derived
from advertising, subscriptions and other sources, is directly
linked to the power and influence of the media. The stronger the
media brand, the more revenue and influence it commands, providing
the ability to invest in content and infrastructure and thereby
attracting increasingly large audiences.
2.0.7 This proposal also provides for meaningful
growth by UK media owners allowing them to compete effectively
in the modern media world.
2.0.8 The Government also raises a number
of single medium ownership related issues, and we have set out
our views on these further on in this submission.
2.0.9 In constructing our proposals, we
have considered whether the BBC should be taken into account within
media ownership rules. Our media ownership proposals are also
predicated on the principle that different media are not substitutable.
These points are discussed in more detail below.
3.0 BBC
3.0.1 In the annexes to this submission,
we have excluded the BBC's revenues from our analyses as we have
no means of objectively determining how those revenues should
be allocated across television and radio. Notwithstanding this,
we believe it is imperative that the strength and position of
the BBC be taken into account by OFCOM as part of its assessment
of relevant markets when implementing media ownership rules, regardless
of whether the BBC is wholly regulated by OFCOM or not.
3.0.2 The White Paper proposes the creation
of "a more level playing field, that is fair between different
broadcasters, taking account of their differing missions and funding
sources" (5.4.1). Under the proposals for OFCOM, the BBC
is still regulated through its Governors and reports to the Secretary
of State for Culture, Media and Sport. (5.4.1, 5.8.6 and 5.8.7
Securing Quality).
3.0.3 The White Paper states in section
5.8.7 that OFCOM will "give formal advice to the Secretary
of State on the, often important, market impact of both proposals
for new BBC public services and for material changes to existing
ones, before he reaches a final decision". This is not independent
regulation and is not compatible with the "more level playing
field" to which the paper refers.
3.0.4 The exclusion of the BBC from OFCOM's
regulatory power is, in our view, in conflict with the Government's
aim to create a more equitable, transparent and coherent regulatory
system. We strongly recommend that OFCOM's backstop powers should
apply to the BBC. This does not threaten the regulatory functions
of the Governors, nor does it affect the BBC's editorial independence.
3.0.5 We believe that the Governors could
continue their role in interpreting the BBC Charter and report
to OFCOM, which would also take on the responsibility of approving
new licence-funded, or subsidised, radio or television services
and changes to the existing services.
3.0.6 We believe that a strong and well-resourced
BBC should set the standard for public service broadcasting in
the UK.
3.0.7 The increasingly commercial nature
of state-owned public broadcasters, in particular the BBC, means
that these broadcasters can use their privileged and protected
positions to cross-subsidise their commercial activities. This
represents unfair competition for a commercial sector funded solely
by revenues it is able to generate.
3.0.8 Furthermore, this impacts on the entire
public service broadcasting ecology in the UK, ultimately damaging
public service broadcasting. The BBC is the benchmark that sets
the standard. An increase in its commercial activities and in
ratings-chasing creates a reaction in the commercial terrestrial
broadcasters as they in turn become increasingly commercial in
their activities. It is inevitable that public service broadcasting
will suffer as a consequence.
3.0.9 It is also worth examining the operations
and behaviour of the BBC compared with commercial competitors.
The BBC:
— has guaranteed income of more than
£2 billion
— is not required to return money to
shareholders
3.0.10 The BBC currently also has an ability
to behave in a way that the commercial sector cannot. For example,
the recent shift in programming emphasis conducted by Radio 2
is an advantage not afforded to the commercial sector where radio
operators are required to comply with fixed format guidelines.
3.0.11 Similarly, the BBC has the scope
to drive audiences from TV to radio and magazines, and vice versa,
enabling a significant level of cross-promotion not afforded to
the commercial sector.
3.0.12 Consequently, we firmly believe that,
in recognition of its influence and position in the UK media landscape,
and its increasingly commercial activities, the BBC should be
regulated by OFCOM. Furthermore, as stated in 3.0.1, the BBC should
be included in any assessment of relevant markets.
4.0 NON-SUBSTITUTABILITY
OF MEDIA
4.0.1 Consumers want to be informed and
entertained, how, when and where they choose and their specific
circumstances at any given time dictate the appropriate medium.
For example, they cannot substitute television for radio when
they are driving their cars. Advertisers also want to have access
to consumers when they are most receptive to advertising and in
a format that is most appropriate to carry their message. Therefore
the laws of supply and demand, and the distinctive characteristics
of each medium, preclude the substitutability of individual media.
4.0.2 It is acknowledged that different
media are appropriate for specific types of advertiser and product.
For example, financial services companies have not used radio
or television extensively as a main advertising medium for complex
financial products due to the requirement to include financial
"health warnings" on all advertising. However, radio
has proved popular with dot.com companies, due to the demographics
of the radio audience and because radio can be consumed while
accessing the internet.
4.0.3 Further evidence that media are not
generally substitutable is that little or no cross-selling exists
across different media, even where there is common ownership.
Indeed, the structure of advertising agencies generally works
against anything other than a strictly sectoral approach to advertising
sales.
4.0.4 It is also worth noting that rulings
in recent media merger investigations referred to the Competition
Commission have recognised that different media sectors are not
generally substitutable.
5.0 PLURALITY
AND DIVERSITY
5.0.1 However, the Competition Commission's
views on this issue scrutinise only the commercial aspects of
media ownership and do not address the Government's concerns on
plurality, diversity and media influence. Consequently, any media
ownership proposals must deal with these concerns.
5.0.2 We agree with the Government's view
that existing media ownership legislation in the UK is outdated
and requires review. We further recognise that the question of
ownership is vital to democracy and therefore warrants careful
consideration.
5.0.3 However, we are firmly of the view
that to impede the growth and development of UK media and media
owners in the name of plurality and diversity is against the interests
not only of UK media consumers, but also of the process of democracy
itself.
5.0.4 As a result of the above points, our
media ownership proposal has been refined to take into account:
the BBC; that media are not generally substitutable by advertisers;
and the Government's expressed concerns about plurality, diversity
and media influence.
6.0 MEDIA OWNERSHIP
6.0.1 In our submission in response to the
Government's White Paper, "A New Future for Communications",
SMG proposed that existing media ownership rules be replaced by
competition rules—a principle to which we still subscribe.
However, the Government has subsequently made it clear that it
believes that competition law alone is insufficient to ensure
plurality of voice and diversity of content.
6.0.2 In anticipation of resistance to immediate
change of this nature, SMG had suggested a transitional proposal,
based on financial turnover, in recognition of the strong correlation
between financial revenue and the ability of media owners to invest
in content and therefore attract and influence audiences. However,
the Government has also indicated that neither does it believe
that financial measures alone are sufficient to protect plurality
and diversity.
6.0.3 SMG has therefore developed and refined
its transitional media ownership proposal, to take into account
the Government's views. We believe that this proposal addresses
the Government's concerns about plurality and diversity and that
it safeguards democracy whilst encouraging an open and competitive
market.
6.0.4 The Government's stated aim is to
ensure that the citizens of the United Kingdom continue to receive
a diverse range of views from its media. This is vital to the
process of democracy and it is the view of Government that market
forces alone are insufficient to ensure that this continues.
6.0.5 We believe that this proposal offers
a practical and holistic structure that meets the Government's
objectives and takes into account a changing media landscape.
It will also encourage competition and economic growth whilst
safeguarding the role of the media in public debate and opinion-forming.
6.0.6 Our proposal is based on the general
premise that a media owner's ability to invest in content (including
content capable of and liable to influence the thoughts and actions
of the general public), directly corresponds to that media owner's
financial clout i.e. the higher the level of revenue, the more
the ability to invest in content and, indeed, infrastructure,
thus attracting larger audiences, which in turn equates to media
power. In its purest form, revenue equals influence and power.
6.0.7 We recognise that account may need
to be taken of assets which have relatively small financial turnover
but have significant media influence albeit these are intrinsically
exceptional.
6.0.8 However, we accept that there are
special media assets which, due to their size of audience, profile
of audience or their public perception, are particularly influential
and therefore may be worthy of overriding ownership regulation,
in order to prevent undue concentration of power, at least in
the short/medium term. We have defined these as Prime Media Assets.
6.0.9 Furthermore, in London in particular,
and in the South East in general, there is a high concentration
of media and of population. It is our view that our proposal deals
with these anomalies in a transparent, practical and workable
manner.
6.0.10 In setting out how this proposal
would look in detail and work in practice, we have modelled the
existing UK media landscape in financial turnover terms, both
in relation to each media sector and across all sectors. This
analysis also sets out the regulatory headroom available by sector
and in total for the main UK media players. We have also documented
national circulation statistics for newspaper owners (and associated
headroom) as well as listing current ownership of key UK national/London
media assets which we have designated as the Prime Media Assets,
based on the broad parameters that follow, or on other realistic
but essentially subjective criteria.
6.0.11 In constructing this proposal, we
have omitted the BBC from UK television and radio markets and
have included only the commercial sector, but we would re-iterate
our final point in 3.0.1 that it is imperative that the BBC is
included in any analysis of the UK market, regardless of whether
the BBC is wholly regulated by OFCOM or not. The key components
of the proposal are as follows:
No one company can control more than 30 per
cent by financial turnover of any one regulated media sector,
namely television (including advertising, subscription and licence
fee revenues), newspapers (principally advertising, sponsorship
and circulation revenues) or radio.
No one company can control more than 25 per
cent of total UK media financial turnover across all sectors.
In respect of certain key UK national/London
media assets, no one company can control more than five "Prime
Media Assets" and, of these five, no more than two can relate
to the London market.
N.B. We do not propose that these criteria
be applied retrospectively.
6.0.12 For the avoidance of doubt, we contend
that when considering concentration of ownership issues in the
television and radio sectors, a proportionate allocation of the
BBC's turnover, including licence fee revenues, should be included
in the assessment of that relevant market.
6.0.13 The limits and key assets noted above
would be reviewed regularly to ensure that the regulations are
flexible over time as the UK media landscape develops, whether
in respect of new entrants, market/sector size, ownership concentration
or technological innovation.
6.0.14 Our proposal also has the advantage
of applying equal limits across all sectors with the common currency
of financial turnover measures allowing for ease of aggregation
across sectors.
6.0.15 Set out below are the implications
of our suggested proposal for each media sub-sector, as well as
total UK media. We have also commented on how Prime Media Assets
are/could be defined.
6.1 TELEVISION
6.1.1 Turning firstly to the UK TV market
(Annexes 2 & 3) it is clear that a 30 per cent financial turnover
limit would broadly allow the UK TV sector to consolidate over
time to a number of main players, namely:
— BSkyB as the main satellite player
— NTL and Telewest could merge into
one Cable company
6.1.2 The ability to own both Channel 3
and Channel 5 does not currently exist, nor would it initially,
based on the system and figures shown in Annexes 2 & 3.
6.1.3 It is worth noting that the figures
we have used will be distorted in relation to wholesale platform
revenues between Sky and other TV operators. However, given the
limitations of our information sources, we are unable to break
this down further. Also, the NTL and Telewest figures we have
used will contain some telephony revenue which should be excluded
from this market analysis.
6.2 NEWSPAPERS
6.2.1 Moving on to the UK newspaper market,
(Annexes 4, 5 & 6), it is clear that four main players currently
exist across both national and local/regional press: DMGT (18
per cent); News International (15 per cent); Trinity Mirror (15
per cent); Newsquest (10 per cent). A financial turnover limit
of 30 per cent would provide all of these players with significant
room to grow, albeit subject to the Prime Media Asset test. However,
national and regional newspapers should be treated as separate
markets.
6.2.2 In relation to the national newspaper
market, we considered whether, to ensure plurality and diversity,
we should introduce an additional national newspaper circulation
threshold (say 35 per cent). However, we took the view that, given
that we have introduced a Prime Media Asset test and the fact
that competition rules would ensure that an over-concentration
in the national newspaper market would be prevented, then this
additional national circulation test could be dispensed with.
6.3 RADIO
6.3.1 In the UK radio market (Annexes 7
& 8) it is evident that a 30 per cent revenue threshold would
enable all major players to grow. This would also allow for a
significant level of consolidation with a number of permutations
possible. In short, following any consolidation, three large players
could emerge, with the remainder of the sector owned by either
one organisation or a number of small players.
6.3.2 Radio is a much smaller medium than
newspapers or television in the UK and we are conscious that there
are other proposals to increase ownership limits to 50 per cent
of the commercial radio sector. However, our proposal to limit
single ownership to 30 per cent of total radio market revenues
(including, say, £300 million of BBC licence fee revenues)
has a broadly similar result to the joint CRCA/RA proposal. In
addition, our proposal takes into account both the strength of
BBC radio and the fact that most commercial radio operators are
music rather than speech-based.
6.3.3 This would move closer to the level
of liberalisation proposed by the CRCA & RA, with the added
benefit of being less complex and simpler to regulate.
6.4 TOTAL UK
MEDIA MARKET
SHARE
6.4.1 Annex 9 lists the key UK media players
and their associated market share across TV, radio and newspapers
and also in total market terms (the latter shown by bar chart
in Annex 10). Of the 37 companies listed, News International would
currently be the most constrained but would still be able to grow
its UK media business by close to £600 million of financial
revenue. This figure would increase over time as markets develop,
subject to sector and turnover limits and Prime Media Asset tests.
All other UK media companies would be able to increase UK media
revenues by approximately £2-3 billion, again, subject to
the above parameters.
6.5 PRIME MEDIA
ASSETS
6.5.1 This test relates to key UK national/London
media assets and addresses the Government's concerns re plurality
of ownership and concentration of national broadcast assets as
well as advertisers' concerns over the London market place.
6.5.2 Annex 11 lists suggested Prime Media
Assets, together with their current ownership. Prime Media Assets
include those that:
— have UK national reach; or
— have significant influence over the
population at large; or
— have significant influence over specific
niche audiences.
6.5.3 The list is intrinsically subjective
and would require periodic review by OFCOM who would have the
power to initiate a review. In recommending any changes to the
PMA list, this could be done by way of a statutory instrument
allowing Parliament to debate the issue, if required. The Secretary
of State would be responsible for making the announcement post
the Review with the obligation to explain the change.
6.5.4 As part of any announcement, the Secretary
of State would be required to explain the reason for the change
in Prime Media Assets in order to ensure transparency. This would
provide flexibility and allow the addition of new Prime Media
Assets (eg a new entrant taking significant market share or a
publication gaining a significant readership on a new technological
platform) or the removal of existing ones.
6.5.5 The concept of identifying Prime Assets
that cannot be held by one owner is not a new one: relevant precedents
include key ITV licences and Sporting Listed Events. In relation
to how Prime Media Assets are defined, an initial list could be
drawn up based on a number of broad parameters, such as:
— TV—national UK analogue reach
or pay/free (bundle) digital subscribers of > 2 million households
— Newspapers—UK national titles
with circulation of > 350,000
— Radio—analogue reach or listening
hours (more appropriate than purely reach) per quarter of >
20 million hours
6.5.6 The parameters suggested above would
only be guidelines as to what might constitute a Prime Media Asset
but the designation would ultimately be determined by Government.
For example, if the Financial Times' circulation fell below the
above figure, it would remain a Prime Media Asset, unless the
process outlined above stipulated otherwise. This would allow
the system to capture assets which have an ability to influence
a powerful niche audience.
6.5.7 Consideration would also need to be
given as to how the ownership and tactical use of influential
equity stakes would be incorporated into the ownership regime,
in particular with regard to Prime Media Assets.
6.6 MERITS OF
THE SMG PROPOSAL
6.6.1 In considering the merits of the proposal
set out above, the following points are relevant:
6.6.2 The Government's objective of maintaining
plurality of voice and diversity of content would be upheld with
each media sector requiring at least four players. Given the additional
Prime Media Asset test, key UK national/London media assets could
not be concentrated in the hands of fewer than seven media owners.
6.6.3 For advertisers, in addition to the
financial turnover market share thresholds, the Prime Media Asset
test, incorporating both London ITV franchises, the largest selling
London newspaper and the biggest London radio station (in revenue
terms), would effectively prevent one player dominating the London
market place. Should the Government feel that certainty is required
in this regard, given the importance of the London advertising
market, a further refinement could be added which would stipulate
that within the limit of five Prime Media Assets, only two could
relate to London.
6.6.4 The threshold of 30 per cent of market
share by financial turnover results in a minimum of four players
by media sector, similar to the Competition Rules 25 per cent
trigger for investigation. For the media sector as a whole, the
25 per cent threshold of total advertising revenue prevents an
over-concentration of influence and media power. As such, these
provisions could enable a smooth transition to Competition Rules,
should the Government consider this desirable in the future.
6.6.5 The Government could also show that
in adopting this proposal, it has moved to a system of national
regulation and had dispensed with convoluted and illogical local/sub-national
cross-media regulations, thereby liberating UK media businesses.
6.6.6 Similarly, it could also be demonstrated
that legislation had paved the way for one ITV.
6.6.7 In regulating this system over time,
OFCOM could simply design a pro-forma revenue return, as is currently
used within the existing TV Licence agreements, which all (TV,
Newspaper and Radio) media owners would complete at each calendar
year end. Using financial turnover has the advantage of being
easily measurable and is objective, transparent and easy to comply
with, as companies already prepare turnover figures.
The system would also be self-regulating in
that companies would file the return, with OFCOM having a right
of audit with severe penalties encouraging compliance (eg licence
withdrawal and/or heavy fines).
6.6.8 Our proposal provides media owners
with well-defined, quantifiable ownership rules, allowing them
to plan, against a background of clarity and certainty. It also
has the merit of being sufficiently flexible and robust to accommodate
any technological or economic changes in the long term.
7.0 GENERAL PROHIBITIONS
7.0.1 Whilst SMG supports the liberalisation
of media ownership rules, we believe that there is potential for
serious conflicts of interest should local authorities and/or
advertising agencies be permitted to become media-owners. Local
authorities are to some extent held accountable by their local
media, and are often heavy advertisers in local press in particular.
Advertising agency-owned media could lead to various anti-competitive
practices.
7.0.2 We concur with the Government's view
that the existing ban on media ownership by political organisations
should be retained.
7.0.3 Notwithstanding SMG's views on liberalisation
of media ownership regulation, we note that, in view of existing
regulations preventing UK media companies from owning media in
certain other non-EU countries, the Government proposes to retain
existing restrictions on non-EU media ownership in the UK. While
we regret the protectionist nature of such regulations, we regard
them as equitable in the face of similar stances elsewhere.
7.0.4 In the current multi-channel environment,
where television viewers have access to a wide choice of specialist
programming and channels, the ownership of broadcast media assets
by specific religious organisations is no longer an issue for
primary legislation. It is our view that, so long as existing
regulations concerning taste and decency are observed, and there
is transparency of ownership and of intrinsically partial views
being expressed, the need for regulation of ownership of such
broadcast licences does not exist.
8.0 TELEVISION
8.0.1 We support the Government's proposal
to remove the restrictions that currently prevent the single ownership
of the two London ITV licences. However, we note also that, in
the short term, due to the importance of the London market in
ITV's revenue, such a proposal would currently present significant
competition issues requiring examination by the competition authorities.
8.0.2 In the Communications White Paper,
the possibility that the 15 per cent limit in share of audience
would be replaced by another measure was suggested. We welcome
the decision to remove the limit completely as it recognises that
it is a barrier to the growth of successful and ambitious broadcasters,
who wish to gain scale in the market place. Removal of this limit
and the change proposed in Section 6.2.1 will effectively lift
the barriers that prevent the creation of a single ITV. This is
a sensible development given the viewer choice that now exists
and the competition faced by the traditional terrestrial broadcasters
for viewers and advertisers in a multi-channel world.
8.0.3 Whilst we do not regard the creation
of a single ITV as inevitable or essential, we nevertheless believe
that it is sensible to place the approval of any further consolidation
in the hands of the Competition Commission.
8.0.4 With such a dynamic market place,
we welcome the removal of regulation from primary legislation
and believe strongly that OFCOM should have the power to decide
on such matters in the future, subject to the approval of the
Secretary of State. This will help achieve the Government's aim
of a dynamic market place but with in-built flexibility in the
regulation of the market.
8.0.5 ITV and C5 together will account for
approximately £2 billion of advertising revenue in 2002.
ITV has an audience share of 27 per cent and C5 has an audience
share of 6 per cent. In terms of their share of total audience
at 33 per cent across all-day and 41 per cent in peak-time, it
is not dissimilar to the combination of BBC1 and BBC2. The combined
share of advertising, however, at 63 per cent of total TV advertising
revenue will currently cause problems with the Competition Commission
and advertisers and could constitute a dominant position. This
is likely to change over time and, if the intention is for this
legislation to "stand the test of time", we would propose
that any such consolidation is not expressly prevented in the
Act, but could be permitted at some time in the future given the
right market conditions. BBC and C4 are both financially protected
to varying degrees. Neither has to pay a spectrum tax or provide
returns to shareholders, thus placing them in a very privileged
position. Furthermore, BBC's income is guaranteed. This is not
the case with the free-to-air channels, such as ITV and C5 that
rely upon advertising revenue alone. Allowing the combination
of ITV and C5, when the conditions are right to do so, would create
a commercial competitor with two mainstream channels to challenge
the BBC, and provide the scale to compete against the multi-channel
offering.
8.0.6 We welcome the decision to allow OFCOM
to revoke the Nominated News Provider status for ITV and advise
when it is appropriate to do so. ITV is a broadcaster that does
not own and manage its own news operation. This is an anomaly
in the digital world, when consumers are able to gain access to
news and information 24 hours a day from across the world. ITV,
as a main-market popular channel, is more than capable of providing
the resources required to deliver this service direct to the viewers.
The case for an independent news supplier to ITV is no longer
sustainable.
8.0.7 In keeping with our views on the Nominated
News Supplier system, we welcome this change but would propose
that, under the same guidance from OFCOM, the Government goes
further and allows ITV eventually to own and manage the news service.
8.0.8 With competition from BBC, Sky and
all other news channels on a multitude of platforms, ITV would
require to resource its own news service at the level of quality
currently delivered by ITN or risk losing a valuable commercial
news-watching audience.
8.1 RADIO
8.1.1 We believe that the existing points
system should be abolished and replaced by a regime that allows
UK radio owners specifically, and media owners in general, to
achieve appropriate scale.
8.1.2 We also recognise the commitment of
the regulator to ensuring plurality of voice and diversity of
content for the listener.
8.1.3 We believe that any proposed market
measurement systems should also include all local commercial services
available to the listener, including Access Radio.
8.1.4 We note the CRCA/Radio Authority position
of ensuring a minimum of two commercial radio owners in any given
market with the largest group controlling no more than 50 per
cent of the potential audience market as measured by aggregated
station Measured Coverage Areas. However, within the context of
our overall cross-media proposal based on financial turnover,
we believe 30 per cent of radio revenues overall (including the
BBC) would represent a more appropriate threshold.
8.1.5 For the reasons outlined in 8.1.4
above, we also support the removal of the limit of ownership of
one national station per group.
8.1.6 We believe that the ownership proposal
for a given market provides a workable solution, which can be
extended to the digital service provider market.
8.1.7 In common with the CRCA position,
we believe that content regulation based around maintaining an
agreed format, will maintain the character of the service and
therefore believe that there is no need for regulation to prevent
the onward sale of radio licences.
8.2 THE PRESS
8.2.1 Our overall media ownership proposal
overrides some of the issues raised specifically under Press in
the Government's discussion paper but there are a number of specific
points that are important.
8.2.2 Whilst we believe there are strong
arguments in favour of normal competition law regulating newspaper
ownership we do recognise the uncertainty such an approach may
generate in protecting plurality. Within the context of newspaper
mergers we would therefore welcome, as an alternative, the "lighter
touch" approach, if complete abolition is not judged appropriate.
8.2.3 We welcome the comments (Consultation
on Media Ownership Rules paragraph 6.4.4) that the continuation
of the newspaper regime could be rationalised and better targeted.
We would contend that the concerns as to freedom of expression
are less acute for the regional press and note that since 1980,
only three cases out of 170 have been refused. We therefore welcome
the recognition of the need for, and benefit from a distinction
between national and local/regional press and the implementation
of a lighter touch approach to the regulation of regional/local
press mergers.
8.2.4 We welcome and endorse the proposal
to remove local newspapers from the regime entirely since we regard
the incidence and cost of compliance with current regulation to
be disproportionate. Adequate safeguards arise from the reality
imposed unremittingly by the market, namely that a local paper
carrying the views of a remote "proprietor" will all
too quickly be shunned by local communities, served as they are
by an abundance of other competing media, many of which will be
part of and reflect the needs of their locality. We recognise
that such an approach would demand a clear definition of what
constitutes a local newspaper.
8.2.5 It is our view that the definition
be based on geographical concentration of circulation. A local
newspaper for these purposes would be a title (the editorial and
commercial content of which was common across each edition, as
published on each publication day) where no less than 75 per cent
of its circulation, paid for or free, was confined to one homogenous
and discernible area of the UK. So, for these purposes, it is
likely that The Scotsman or Yorkshire Post would be local newspapers.
We make this recommendation solely in the context of a "lighter
touch" regime applying to the merger/acquisition of local/regional
newspapers.
8.2.6 In determining which press titles
are excluded from the regime (if it is not abolished), we believe
that our definition offered above is preferable to one based on
frequency of publication (Consultation on Media Ownership Rules
paragraph 6.4.8).
8.2.7 The interests of a level competitive
arrangement in such a light touch regime (Consultation on Media
Ownership Rules paragraph 6.4.11) would justify extension of this
regime to all qualifying acquisitions, irrespective of whether
the potential owner is a newspaper proprietor or not.
8.2.8 In light of our comments in 8.2.3
above, we believe that a workable definition of local newspapers
can be arrived at and that this should be the criterion rather
than excluding titles with limited circulation or production,
or reliance upon the general merger regime thresholds. Such an
approach offers the prospect of defining "local" by
reference to an identifiable community of shared interest or shared
sense of identity which we regard as beneficial.
8.2.9 Subject to the exclusion of local
newspapers (and therefore the adoption of a definition of local),
we would endorse the repeal of special newspaper provisions and
the creation of exceptional public interest gateways, allowing
the Secretary of State to call in any merger which gave rise to
concerns over freedom of expression (Consultation on Media Ownership
Rules paragraph 6.4.14). We think it is essential, given the importance
of such decisions to the democratic process, that a Minister answerable
to Parliament should take the ultimate decision.
8.2.10 We regard criminal sanction as unprecedented
and unnecessary.
Annex 1 (see p. Ev
177)
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