Memorandum by Johnston Press plc
SECOND CALL FOR EVIDENCE
The following paragraphs focus on regulation
of ownership insofar as this applies to the regional newspaper
sector.
1. THE IMPORTANCE
OF INDUSTRY
CONSOLIDATION
1.1 Some commentators regard industry consolidation
within the regional newspaper sector as a negative development,
detrimental to investment in journalism resources and to the quality
of content in local newspapers. There is no evidence whatsoever
to support this view.
1.2 At Johnston Press there is a very clear
and well founded belief that industry consolidation has been and
will continue to be beneficial for the regional newspaper sector
including advertisers, readers and employees. The industry is
facing ever increasing competitive pressures for its audience
and advertising revenues, not least from the rapid growth of the
internet.
1.3 Industry consolidation enables operating
efficiencies to be achieved in the production and administration
processes, thereby resulting in the sector being better able to
survive the increasing competitive challenges whilst maintaining
its heavy investment in local journalism. It should be noted that
other media, especially internet companies, do not invest anything
in local news gathering.
1.4 The regional press is able to invest
in local journalism due to its success in attracting advertising
revenues. The increasing competition faced by the industry is
intent on taking those revenues without making any investment
in local news gathering. If there is perceived to be a public
interest in seeing the regional press maintain its heavy investment
in local journalism, then there is an equal public interest in
permitting further industry consolidation in order to ensure that
such investments are cost-effective.
2. SAFEGUARDING
THE QUALITY
OF EDITORIAL
CONTENT, PLURALITY
AND DIVERSITY
OF VIEWS
2.1 Regional newspaper publishers are acutely
aware of the vital importance of publishing newspapers which appeal
to the local communities they serve and which address local concerns
and aspirations in a manner that reflects local interests. This
is due to the need to attract as large an audience as possible
across the entire community and provides a powerful commercial
imperative based on the importance of enabling advertisers to
achieve high levels of local market penetration. This in turn
acts as a natural restraint against the pursuit of sustained partisan
campaigns which pander to the vested interests of narrow interest
groups within a local community.
2.2 The freedom of editors to edit without
management interference is enshrined in the policies of Johnston
Press and reflects the approach across the industry. Largely as
a result of industry consolidation, professional managers have
replaced the traditional proprietor/independent owners of local
newspapers. This new breed of manager is far less susceptible
to promote an editorial agenda in pursuit of vested local interests.
2.3 Despite both past and present regulatory
regimes permitting the Secretary of State to order a public interest
investigation into matters relating to the plurality and diversity
of editorial content, very few such references have been made.
This calls into question the ongoing need for the special public
interest rules in newspaper transfer cases and whether these should
not be subject only to those provisions relating to mergers in
general.
Within the last 12 years, there have only been
two such instances, the 1996 merger of the Nottingham Evening
Post with Northcliffe titles in Leicester and Derby and the proposed
merger in Northern Ireland in 2000 of the Newsletter with Trinity's
Belfast Telegraph. As such it is plain that the existing powers
of the Secretary of State are entirely sufficient and in practice
are unlikely to be required other than in exceptional circumstances.
This is consistent with the DTI's guidance on public interest
interventions in media mergers which states that:
"The small number of cases that have resulted
in adverse public interest findings other than on competition
grounds under the FTA newspaper merger regime suggest that the
number of cases in which the Secretary of State will find it necessary
to intervene on the basis of newspaper public interest considerations
under the new regime is likely to be small." (paragraph 6.3).
3. CROSS-MEDIA
OWNERSHIP RULES
3.1 The rapid developments taking place
in the media as a result of the huge growth in digital channels
has resulted in the lines between different forms of media organisations
becoming increasingly blurred. Many regional newspaper publishers
are now multi-media businesses with their websites delivering
audio and video content via broadband. Other media organizations
are developing similarly. This is resulting in the proliferation
of channels, increased competition and the fragmentation of audiences.
3.2 Against this background, the existing
regulations as they apply to cross-media ownership are rendered
increasingly irrelevant in that the market developments described
above are in themselves providing a rapid increase in plurality
and diversity across the entire media sector. As such it is suggested
that the current restrictions on the ability of regional/local
newspaper publishers to acquire or be involved in other media
such as local radio stations and channel 3 licences could and
should be considerably eased.
4. KEY PROCEDURAL
ISSUES WITHIN
THE REGULATORY
PROCESS
4.1 For the owners of regional newspapers
contemplating an acquisition of a new title or titles, a key factor
in determining whether or not to proceed is the way in which it
is thought that the regulator (OFT or CC) is likely to view the
proposed merger. To make such an assessment with any confidence
requires a consistency of approach by the regulator. Over many
years there has not been such consistency resulting in undue caution
being applied to merger decisions and a chilling effect on efficiency
enhancing merger activity.
The principal area of inconsistency has been
with regard to both product and geographic market definition.
This has taken many forms including differences in the types of
newspapers (eg paid for vs. free; daily vs. weekly) which are
believed to be part of the market and the extent to which other
media, in particular, the internet, directories, advertising only
publications, and direct mail compete with local newspapers. Moreover,
the way in which the geographic market is identified has similarly
varied, by reference to the footprint of the titles concerned,
their core areas, or the location of the relevant "publishing
unit". These varied approaches continue to be a matter of
considerable concern to regional newspaper publishers and in most
cases markets are being defined far too narrowly. This is also
relevant to plurality issues as the DTI Guidance states that "there
is a recognisable correlation between high levels of concentration
and the potential for newspaper ownership concerns to arise"
(paragraph 6.7). No supporting evidence for this statement is
provided in the DTI guidance.
4.2 The Enterprise Act 2002 gives powers
to investigate a merger in cases where a 25% share of supply of
goods or services of any description is created in the UK or a
"substantial part". The interpretation of "substantial
part" in practice gives rise to considerable uncertainties,
with increasingly small areas being deemed to be substantial (eg
Slough in the context of Tesco's acquisition of a single store
from the Co-op, as determined by the Competition Commission).
4.3 To date there do not appear to have
been any problems arising from the fact that four bodies are involved
in the regulation of media markets, and certainly not as far as
Johnston Press is concerned. The responsibilities of the four
bodies are well defined and clearly understood although it is
worth adding that there have been no public interest references
by the Secretary of State to Ofcom since that body was established
in so far as regional newspapers are concerned.
4.4 The role of Ofcom in periodically reviewing
media ownership regulations is valuable and should be retained.
5. FOREIGN OWNERSHIP
5.1 Foreign ownership of newspapers has
been permitted for many years and in the regional newspaper sector,
the US media company, Garnett, has owned regional newspapers through
Newquest since 1999. Their involvement has had no detrimental
effects whatsoever and their continued investment in the business
and its growth has been beneficial to the UKs regional newspaper
sector as a whole.
1 February 2008
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