Written evidence submitted by News International
Ltd
INTRODUCTION
1. News International Ltd welcomes the Culture,
Media and Sport Committee's inquiry into the future for local
and regional media.
2. News International's subsidiaries publish
four paid-for national newspaper titles—The Times, The
Sun, The Sunday Times and News of the World—and
the free newspaper, thelondonpaper, which circulates in
London.
3. This inquiry comes at a time when the
newspaper publishing industry is facing both massive structural
change led by the shift to digital media and severe economic challenges
caused by the recession.
4. The national, local and regional press
are all subject to similar commercial pressures as a result of
the burgeoning of alternative means by which consumers can access
similar content and by which advertisers can reach their target
audience.
5. News International wishes to contribute
to this inquiry, not only as the publisher of thelondonpaper,
but also because our national newspaper titles are facing many
of the same challenges and issues under review.
6. News International supports the goal
of sustaining a plurality of media sources. We hope that this
inquiry can provide an opportunity to re-think the approach to
regulation of the newspaper sector [ie not just local &
regional newspapers], which is so vital for the UK economy
and democracy.
7. Our comments focus on three areas: The
impact of digital convergence on the newspaper sector; the desirability
of changes to the regulatory framework; and the appropriateness
of initiatives undertaken by public sector bodies in this area
(in particular the BBC).
THE IMPACT
OF DIGITAL
CONVERGENCE
8. The internet has introduced a new dimension
to the competition faced by newspaper publishers. New forms of
competition for consumers' attention and for advertising revenue
are being developed all the time and many of the companies operating
in this space are not traditional media companies.
9. Furthermore, the pace of change is far
greater than anything envisaged by those who drafted the Communications
Act 2003. In the last six years, new online products and services
have been developed with breath-taking speed.
10. The following are examples of online
offerings, available today, that were unheard of in 2003:
Monthly Unique Visitors Feb 2009
11. As little as five years ago, regulators
may have questioned whether different media platforms were effective
substitutes for each other, in terms of both readers and advertisers.
However, today we know that the converged world provides consumers
and advertisers with genuine choices.
12. The following table shows the growth
in the number of media outlets between 1999 and 2007. It
illustrates not only the increase in plurality and consumer choice
but also the increase in competition faced by businesses operating
in this sector:
| Medium | 1999
| 2007 |
| Multi channel homes | 7,126,000
| 19,490,000 |
| Consumer Magazines | 3,174 |
3,445 |
| Commercial Radio Stations | 235
| 324 |
| Cinema Multiplex Sites | 168
| 243 |
| UK Home Internet Users | 7,470,000
| 32,325,000 |
| National Newspapers | 19 |
20 |
| [Free Daily Dist Newspapers | 1
| 6*] |
| *Includes 10 Regional Metro Editions
|
| |
|
13. The following table shows the extent of cross over
usage between different media:
| TV | Radio
| Online | Press
|
| TV | x | 99%
| 99% | 99% |
| Radio | 69% | x
| 74% | 72% |
| Online | 76% | 82%
| x | 75% |
| Press | 79% | 82%
| 77% | x |
| | |
| |
| | |
| |
(Source: TGInet Wave 18. Read up and across, eg 75% of national
press readers have accessed the internet)
14. We know that more and more people are choosing to
access news, sport and entertainment online. Young people in particular
are more likely to get their news predominantly from online sources,
including public sector offerings such as the BBC and news aggregators
such as Google. A study in America as long ago as 2005 showed
that the Internet was already becoming the primary news source
for young people (Pew Internet and American Life project, author
John Horrigan). And a recent TGI.net survey (TGI Internet Wave
18) shows that 32.3% of 20-24 years old have visited a news site.
The internet is an important part of young people's news seeking
portfolio.
15. The change in consumers' behaviour means there is
increased choice for advertisers seeking those audiences. There
is a wider range of advertising opportunities for advertisers
than ever before.
16. The following table shows the change in adspend share
by medium between 2003 and 2009:
| Medium | 2003
| 2009* |
| Internet | 3.1% | 22.6%
|
| Nat Press | 12.8% | 10.7%
|
| Regional Press | 20.0% |
13.6% |
| TV | 25.1% | 22.3%
|
| Radio | 3.6% | 2.8%
|
| Outdoor | 5.3% | 5.6%
|
| Consumer | 5.3% | 4.4%
|
| B2B Mags | 7.1% | 5.0%
|
| Cinema | 1.0% | 1.0%
|
| D Mail | 16.7% | 12.%
|
| * 2009 Forecast |
| Source: Advertising Association
|
| |
|
17. The Newspaper Society has provided much evidence
of the decline in classified advertising experienced by the local
and regional press. The digital world allows companies to reach
consumers directly through search advertising, rather than through
the traditional media. The overall impact is that advertising
is being diverted away from national, as well as local newspapers,
to new forms of online media.
THE DESIRABILITY
OF CHANGES
TO THE
REGULATORY FRAMEWORK
18. Our comments in this section focus on three areas:
the need for the competition authorities to adopt a wider market
definition when considering media merger cases; the illogicality
of the media public interest considerations; and the desirability
of further relaxation of the cross media ownership rules.
Market definition
19. The print media is not a self-contained market. Newspapers
at local, regional and national level face competition for readers
and advertisers from TV, radio, cinema, magazines, directories,
outdoor and—as we have argued above—ever increasingly
from the internet. Competition comes from both the public and
the private sector.
20. We believe that the relevant market is now wider
than that which was conservatively adopted by the competition
authorities in previous newspaper and other media merger cases.
In future, the competition authorities must not ignore the fact
that in the current converged media market, competition for readers
and advertisers now crosses newspapers, other print media, outdoor,
online content and broadcasting.
21. In particular, the burgeoning area of search advertising
provided by search engines, and all forms of internet advertising
and promotion, divert advertising spend from newspapers.
22. Competition from other media is sufficient to constrain
newspapers from raising their cover prices or advertising rates,
however concentrated the newspaper market may become.
The media public interest considerations
23. News International has consistently taken the position
that the media public interest considerations, which have been
included in the merger control regime, are unnecessary and that
the best way to guarantee plurality and diversity is to protect
competition in the media market.
24. The newspaper-specific public interest considerations
do not distinguish between local, regional and national newspapers.
In particular the consideration in section 58(2B) may be applied
to a market for newspapers in the UK or a part of the UK. This
consideration takes an artificially narrow approach to the public
interest, as its scope is confined to views expressed in newspapers,
in contrast with section 58(2C)(a), which looks at plurality of
control of media enterprises (including, for this purpose, newspaper
enterprises). Consumers have access to many sources of news and
views on international, national, regional and local issues, other
than in newspapers. These sources include television and radio
(provided by "media enterprises" within the meaning
of section 58) and magazines (which are available to all consumers)
and internet sources, both in the public and private sectors (which
are available to a growing proportion of consumers through domestic
broadband connections). It is therefore extremely artificial and
serves no genuine public interest to subject newspaper mergers
to a plurality test by reference to views in newspapers alone.
In News International's view section 58(2B) should be repealed.
The grounds for doing so apply equally to national, regional and
local newspapers. Should any such provision as section 58(2B)
be retained, it should (without subjecting non-newspaper mergers
to any review other than under the general merger regime) take
full account of news and views available to consumers from non-newspaper
sources, whether print, broadcast or internet.
25. In summary, News International considers that the
newspaper public interest considerations in their current form
are not appropriate for newspaper mergers, whether national, regional
or local. They should be repealed, but if they are not they should
be drafted so as to require that due account is taken in the assessment
of the public interest of other sources of news and views which
are available to consumers.
Cross media ownership rules
26. The Communications Act 2003 removed some of
the media ownership rules that were no longer considered justified
at the time. The Government should review now whether the remaining
cross media ownership rules are justified or relevant today. As
we have argued above, much has changed since 2003 and the
media landscape today is more pluralistic and diverse than ever
envisaged at that time.
27. In its 2006 review of media ownership rules,
Ofcom noted that: "As diversity of services and choice of
content from different owners in the market increase, and as the
consumer acquires increasing levels of control over what sources
of news they use and when, the justification and need for specific
ownership rules to guarantee plurality will arguably diminish."
28. We agree entirely with the Government's aim of ensuring
a degree of plurality and providing freedom to companies to expand,
innovate and invest. But we believe that these two aims can now
be met solely by the thorough application of competition law.
As we argued in the consultation phase prior to the Communications
Act 2003:
29. "News International believes that vigorous application
of competition law will prove sufficient to assure that in any
proposed merger—whether it is a merger within one media
sector or across media sectors—neither economic power nor
an undue concentration of sources of information and entertainment
results. Competition rules are an excellent tool for this job.
In contrast to the current system, which is based on arbitrary
and discriminatory thresholds, competition rules are sufficiently
flexible to keep up with changing market conditions and the new
forms of competition that media companies face."
THE APPROPRIATENESS
OF PRINT
AND ELECTRONIC
PUBLISHING INITIATIVES
UNDERTAKEN BY
PUBLIC SECTOR
BODIES
30. Newspaper publishers face constant competition from
a growing range of public sector news and information providers,
most notably the BBC, but also local authorities.
31. An audit by the Newspaper Society in April 2009 found
half of the local authorities surveyed in London published a newspaper
or magazine on a monthly or more frequent basis and 90 %
contained or accepted third party or public sector advertising.
32. Earlier this year the BBC Trust approved a £30.7
million increase in the BBC's online budget over three years—an
increase of 27% over its existing budget.
33. BBC Worldwide has been given approval to launch a
Lonely Planet magazine, creating direct competition for travel
magazines such as The Sunday Times Travel Magazine.
34. We are especially concerned that the interim Digital
Britain report envisages a joint venture between BBC Worldwide
and Channel 4, which would inevitably lead to an aggressive expansion
online in the UK by both brands. We believe that this is a wrongheaded
way of trying to ensure plurality of public service content because
it ignores the powerful contribution made by the commercial markets.
35. Last year the BBC Trust rejected the BBC's proposals
to launch a £68million network of local news websites with
video content. The Chairman of the Trust, Sir Michael Lyons, said
that in reaching this decision the Trust had recognised the negative
impact that the local video proposition could have on commercial
media services. He also said that the decision would mean that
local newspapers and other commercial media could "invest
in their online services in the knowledge that the BBC would not
be intervening in the market".
CONCLUSION
36. Consumers are best served by a robust commercial
newspaper sector, which is able to invest in quality journalism
and reach its customers on whichever platform they choose.
37. As many Members of Parliament recognised in the House
of Commons debate on local and regional media, the transition
to a digital world brings enormous potential for consumers, but
also comes at a cost.
38. Media businesses across the board are still struggling
to develop a sound and enduring business model for the fast-changing
digital age. This challenge has been hugely exacerbated by the
economic recession and shortfalls in advertising. We are already
seeing large-scale loss of jobs and closure of titles.
39. We must ensure that new businesses models can be
developed, even in this difficult economic climate, without being
strangled at birth by an outdated regulatory framework. It is
vital that the Government, the competition authorities and media
regulators focus on how they can support the long-term viability
of a thriving and diverse media in the UK.
May 2009
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