Select Committee on Communications Minutes of Evidence


Memorandum by RadioCentre

SECOND CALL FOR EVIDENCE

BACKGROUND

  1.  RadioCentre is the industry body for Commercial Radio. Formed in July 2006 from the merger of the Radio Advertising Bureau (RAB) and the Commercial Radio Companies Association (CRCA), its members consist of the overwhelming majority of UK Commercial Radio stations, who fund the organisation.

  2.  The role of RadioCentre is to maintain and build a strong and successful Commercial Radio industry—in terms of both listening hours and revenues. As such, RadioCentre operates in a number of areas including working with advertisers and their agencies, representing Commercial Radio companies to Government, Ofcom, copyright societies and other organisations concerned with radio, and working with stations themselves. RadioCentre also provides a forum for industry discussion, is a source of advice to members on all aspects of radio, jointly owns Radio Joint Audience Research Ltd (RAJAR) with the BBC, and includes copy clearance services for the industry through the Radio Advertising Clearance Centre (RACC).

SUMMARY

  3.  This second submission to the committee's inquiry begins by outlining the regulatory and market backdrop to the committee's ongoing inquiry, before addressing the questions listed in the call for evidence issued on 13 December 2007.

  4.  We devote particular attention to question 3, since RadioCentre believes that current media ownership legislation relating to plurality is providing an unnecessary impediment to continued consolidation in the Commercial Radio sector, creating a clear and pressing rationale for the Government to remove the existing sector-specific ownership restrictions governing radio. Our core arguments in support of this are as follows:

    —  It is unfair for radio to be singled out for mono-sector ownership rules when other media such as press and television are not subject to equivalent restrictions.

    —  Other options exist for the delivery of plurality policy objectives.

    —  Mono-media plurality rules are of decreasing importance in a multi-media, multi-platform world and therefore plurality policy should be determined on a cross-media basis.

    —  Consolidation could create genuine benefits for listeners as well as the industry.

  5.  It is important to stress that in calling for the removal of radio-specific ownership rules, RadioCentre is not suggesting that plurality should not be protected through legislation. There are additional safeguards over and above the existence of radio-specific rules which ensure that public policy objectives can be secured.

  6.  In particular, it is our firm belief that plurality should be determined on a cross media basis, and accordingly we believe that the existing local cross-media ownership rules and Government right to intervene in mergers of special public interest are sufficient in securing plurality objectives within radio and the wider media ecology.

  7.  In summary, RadioCentre believes that:

    —  The radio-specific rules on concentration of ownership should be removed;

    —  Local cross-media ownership rules should be retained;

    —  The Government should continue to retain the right to intervene in mergers of special public interest; and

    —  Competition law should continue to provide the means of addressing economic and competition concerns in relation to media ownership.

INTRODUCTION

  8.  This is RadioCentre's second submission to the committee's inquiry into media ownership and the news. In our first response, submitted in September 2007, we outlined the current economic and regulatory context in which Commercial Radio stations are delivering news to their listeners and argued in favour of relaxations to current media ownership rules.

  9.  Our argument was supported by research showing that Commercial Radio continues to provide a significant volume of local news and information but that consumers currently have more competing sources of news than ever before. We suggested that this presented two challenges for regulators and stations themselves:

    —  Firstly, there is increasing pressure on broadcasters to distinguish themselves, something which local stations can only do by focusing on what makes them local.

    —  Secondly, it is less important to secure plurality within radio so much as within the media sector as a whole.

  10.  We argued that consolidation can allow Commercial Radio groups to seek superior economies of scale through the sharing of resources. This enables them to maximise their investment in the content which listeners value most at a time when competition for advertising revenue has never been fiercer. In particular, our response argued that concentrating resources and expertise within news hubs has allowed stations under common ownership to broadcast news which is fairer, more accurate, more impartial and more compelling.

  11.  The evolving composition of the Commercial Radio industry is demonstrated by comparing the current breakdown of Commercial Radio listening with equivalent data from just over three years earlier. Figures 1 and 2 show what has changed in that time:

Figure 1. Breakdown of Commercial Radio listening by group, 2004


  (% listening hours by Commercial Radio group, RAJAR Q3 2004)

Figure 2. Breakdown of Commercial Radio listening by group, 2007


  (% listening hours by Commercial Radio group, RAJAR Q4 2007)

  12.  One important factor to bear in mind in considering this data is that it does not take account of the largest player in UK radio—the BBC. According to the most recent RAJAR data, the BBC accounts for 55.4% of all radio listening.[9] By way of comparison, and despite the consolidation which has taken place since the 2003, the largest Commercial Radio player, GCap Media, only accounts for 12.8% of all radio listening. In other words, the BBC accounts for over four times more listening than the next biggest player within radio. This contrasts strongly with the situation in television. Concentrating solely on analogue share, the most recent BARB data shows that BBC television accounted for 32.5% of all television viewing, just under one and a half times the share which ITV PLC's portfolio of channels achieved, with 22% of all viewing.[10]

  13.  In national radio, the disparity between BBC and Commercial Radio is even greater, with the BBC accounting for 80% of listening (45.4% of total listening is to a BBC national station, compared to 11.3% to a national Commercial Radio station). This suggests that the degree of existing plurality within national radio is particularly poor.

  14.  It remains very likely that there will be further consolidation in the coming years, which may well test the limits of current media ownership legislation. We believe that existing market data suggest that in general, it may be in the public interest for Commercial Radio groups to continue to merge in order to redress the plurality imbalance which currently exists. There are naturally also significant economic drivers for consolidation, which we outline in paragraphs 53 to 59 of this submission. Each of these factors places a significant degree of urgency on the timetable for a new Communications Act.

  15.  In our last submission, we updated the committee on recent market activity, highlighting the acquisition of Chrysalis by Global Radio. The situation has developed further since then. Most notably, the second largest UK Commercial Radio company Emap Radio has this month been renamed Bauer Radio following its acquisition by the German publisher. Speculation continues to surround Virgin Radio, with GMG Radio and UTV amongst those reported to be interested. Later this year, Channel Four will also enter the radio sector as the lead partner in the 4Digital Group. Potentially most significantly of all, Global Radio made an approach for GCap Media in December, and has until 5 March to indicate a firm intention to make a revised bid or refrain from any further approach for six months.

  16.  Against this background, the committee's decision to investigate media ownership and the news was clearly a timely one. This inquiry provides an important opportunity for this issue to be debated within a Parliamentary context ahead of possible new communications legislation, and we look forward to having the opportunity to do this further when RadioCentre's Chief Executive Andrew Harrison joins a Commercial Radio panel to give oral evidence on 27 February.

RADIOCENTRE RESPONSES TO THE COMMITTEE'S QUESTIONS

Q1.  Are the requirements in the Communications Act 2003 relating to the quality, quantity, scheduling and impartiality of national and regional broadcast news appropriate? Are they sufficient? Will they be appropriate and sufficient after digital switchover?

  17.  We believe that the requirements laid out in sections 319, 320 and 321 are more than sufficient in regulating editorial and advertising in radio. Commercial Radio makes an important contribution to overall UK news provision, particularly within local areas, and these requirements go a long way towards protecting the credibility of stations, just as they serve the public interest.

  18.  Having said that, the explosion of listener and viewer choice across traditional and digital media has undoubtedly fragmented audiences and arguably undermined the importance of ensuring that each service provides "common spaces" which serve every taste and interest. The committee's question about digital switchover focuses this discussion on television, yet the growth in content available online or which originates from overseas is another significant driver of change, since such content may not bound by the same editorial requirements.

  19.  Over the coming years, we believe that consideration should be given to whether specialist "community of interest" stations should be required to adhere to impartiality rules in every circumstance. We note, for instance, the rise in specialist cultural and religious media services, for whom a degree of subjectivity may in fact be an important and valued component of their editorial output. Within radio, the audience for services such as Premier Christian Radio is likely to expect that the news will be reported from a Christian perspective.

Q2.  Are the public interest considerations for media mergers set down in section 58 of the Enterprise Act 2002 strong and clear enough to protect a diverse and high quality news media? Are the conditions under which the Secretary of State can order a public interest investigation appropriate?

  20.  As we have already outlined, RadioCentre believes that the existence of the Secretary of State's right to intervene in mergers of special public interest means that it is unnecessary to maintain additional radio-specific ownership rules. However the existence of the radio-specific rules has meant that there has not been much need to apply the public interest investigation regime to radio mergers.

  21.  Nevertheless we note that section 375 of the Communications Act and Ofcom's guidance for the public interest test for media mergers specify a range of public interest considerations. These public interest considerations are divided into a newspaper test for mergers involving newspaper enterprises and a broadcasting and cross media test for mergers involving broadcasting enterprises or mergers between broadcasting enterprises and newspaper enterprises. The broadcasting and cross media test assesses whether any of the following are relevant to a consideration of the merger:[11]

    —  the need for there to be a sufficient plurality of persons with control of the media enterprises serving that audience in relation to every different audience in the UK or a particular area/locality of the UK;

    —  the need for the availability throughout the UK of a wide range of broadcasting which (taken as a whole) is both of high quality and calculated to appeal to a wide variety of tastes and interests; and

    —  the need for persons carrying on media enterprises and for those with control of such enterprises to have a genuine commitment to the attainment in relation to broadcasting of the standards objectives set out in Section 319 of the Communications Act 2003 (eg due impartiality of news, taste and decency).

  22.  We believe that these public interest considerations do indeed constitute the relevant factors for the Government and Ofcom to consider and believe that they provide sufficient scope to ensure a diverse and high quality news media in radio.

  23.  We also agree that the conditions under which the Secretary of State can order a public interest investigation, as laid out in the Enterprise Act 2002, are appropriate.

Q3.  Do current national and local cross-media and single sector media ownership rules set out in UK legislation do enough to ensure a high quality and diverse news media? Or now that most news organizations are moving towards multi-platform operations, have these rules outlived their usefulness and relevance? In this context are there effective actions that can be adopted by news organizations to protect the public interest?

  24.  The provisions discussed above provide an opportunity for all significant media mergers to be scrutinised in relation to plurality considerations, over and above the local cross-media rules. Yet exclusively amongst other media, radio is also subject to detailed mono-sector concentration of ownership legislation. RadioCentre believes that this anachronistic approach is impeding the pace of consolidation within the Commercial Radio sector, which still consists of over 70 separate owners. Even without including competition law, there are already three layers of media ownership legislation which impinge upon Commercial Radio, and we believe that there is clear scope for simplification. Accordingly our view is that:

    —  The radio-specific rules on concentration of ownership should be removed.

    —  Local cross-media ownership rules should be retained.

    —  The Government should continue to retain the right to intervene in mergers of special public interest.

    —  Competition law should continue to provide the means of addressing economic and competition concerns in relation to media ownership.

  25.  Our rationale for this belief is as follows:

    —  It is unfair for radio to be singled out for mono-sector ownership rules when other media such as press and television are not subject to equivalent restrictions.

    —  Other options exist for delivering plurality policy objectives.

    —  Mono-media plurality rules are of decreasing importance in a multi-media, multi-platform world and therefore plurality policy should be determined on a cross-media basis.

    —  Consolidation could create genuine benefits for both listeners and the industry.

  26.  We will shortly go on to provide further detail and evidence in support of these arguments, but before we do so, it is worth outlining where the opportunity for reform lies. Under the 2003 Communications Act, Ofcom is required to conduct a triennial review of the media ownership regime. In 2002, the Joint Scrutiny Committee suggested that "the first such review, three years after the coming into force of the Act, could be of crucial importance, given the knowledge of media markets and their regulation that Ofcom will by then have acquired".[12]

  27.  This proved accurate, with Ofcom's November 2006 "Review of Media Ownership Rules" concluding that "options ... exist for a more radical overhaul of the radio rules".[13] It proposed two possible routes for further exploration as part of Ofcom's review of "The Future of Radio":

    1.  Combining the rules for local analogue and digital services.

    2.  Abolishing the rules for local analogue and digital services altogether.

  28.  In its April 2007 and November 2007 consultations on "The Future of Radio", Ofcom recommended the first option to the Government for further consideration. Although we welcome Ofcom's general agreement that the existing radio ownership regulation merits reform and liberalisation, we believe that the available evidence points towards the second option as being the best way to proceed.

  29.  Under Schedule 14 of the Communications Act 2003, Ofcom only has power to make recommendations which the Government may wish to take forward. Given that primary legislation is unlikely before 2010 at the earliest, we believe that the Government has scope to take a fresh look at the media ownership regime.

  30.  RadioCentre's firm view is that the onus is on Ofcom and Government to provide a clear rationale for retaining radio-specific ownership rules. We believe that any sensible arguments for doing so must be grounded in plurality considerations. If no clear reasons for intervening can be found, we believe that the Government's bias should always be against intervention. In this case, we believe that the Government should streamline the media ownership regime with a view to bringing radio into line with other media.

Current media ownership rules are unfair to radio

  31.  Although Ofcom says (rightly, we believe) that "ownership rules are an imperfect proxy for plurality, as they do not ensure plurality of sources of news, editorial or viewpoint diversity",[14] local radio's provision of news, and the importance which listeners attach to it, continue to be cited as a reason for securing plurality within local radio.

  32.  Our first argument in favour of abolishing the sector-specific ownership rules governing radio is that it is unfair to single out radio when other media such as newspapers and television are not subject to equivalent restrictions. As Ofcom notes, Commercial Radio is subject to more restrictive ownership controls than other media such as newspapers and television.[15] In its April 2007 Future of Radio report, Ofcom did acknowledge that radio does not necessarily merit special attention, saying that "Local radio is ... significantly diminished as a source of local news and information".[16]

  33.  Unfortunately, the regulator appears to have failed to have acted upon this insight due to uncertainty as to what it ought to measure in order to understand the contribution of radio to the delivery of plurality. At one point in its April 2007 report, Ofcom attempts to compare data about the extent to which radio functions as a primary news source with separate findings about the value placed on local news delivery by Commercial Radio listeners. Ofcom notes that "Local radio is not most people's primary source of local news ... Yet the majority of people say one of the most important things for radio to provide is local news".[17] From this, the regulator concludes that the "evidence of the importance of plurality in radio per se is contradictory".[18]

  34.  RadioCentre firmly disagrees that these findings are contradictory and believes that each insight has clearly separate policy implications. That people tend to agree when asked whether they believe that it is important for radio to provide local news demonstrates that they value it. The implications of this relate to content regulation; there is clearly a public interest in local news provision. Yet Ofcom's report cites the level of demand for local news and information as one of the key arguments against removing the radio-specific restrictions, saying that "to abolish the rules at a time when over half the population still listens to commercial local radio every week seems inappropriate".[19].

  35.  We believe that this approach incorrectly links local radio's contribution to securing plurality to the total level of listening. We do agree that the level of consumption is relevant, but to assess local Commercial Radio's importance it is necessary to determine how much local news consumption actually occurs on radio compared to other sources, and how much of that consumption is "unique" (with listeners accessing local news from no other source).

  36.  The most compelling evidence for retaining radio-specific ownership rules would be if Ofcom discovered that a significant proportion of the population relied exclusively on two or more local Commercial Radio stations (under separate ownership) for the majority of their local news and information. However, if as we suspect, the vast majority of consumers regularly concentrate their local listening on a single local Commercial Radio service—whilst also regularly reading one or more local newspapers and community newsletters, accessing a regional TV news service, and checking online community websites—then we believe that the evidence base does not exist for retaining the rules.

  37.  There is considerable evidence to support this supposition, including within the Ofcom research which informed its 2006 "Review of Media Ownership Rules":

    —  Ofcom found that the number of people citing radio as the primary source of local news declined from 14% in 2001 to 10% in 2005.[20].

    —  Local newspapers clearly also meet Ofcom's criteria of being "sufficiently important" to the local news mix, with Ofcom's research finding that 29% identified newspapers as the most important source, compared with 10% for radio.[21]

    —  Over 12 million adults read a regional newspaper but do not read a national newspaper, further suggesting that local newspapers provide a very important means for consumers to access news and information.[22]

  38.  Taken together, this data shows that listeners are not solely reliant on radio for local news and information. This demonstrates that local Commercial Radio's role as a viewpoint provider is largely secondary, and suggests that current plurality regulation is disproportionate. RadioCentre's view is that the radio ownership legislation should be aligned with the liberalised regime for newspapers introduced by Parliament in 2003.

Other options exist for delivering plurality policy objectives

  39.  It is important to stress that in calling for the removal of radio-specific ownership rules, RadioCentre is not suggesting that plurality should not be protected through legislation. Our second argument for abolishing the current restrictions is that there are additional safeguards over and above the existence of radio-specific rules which deliver public policy objectives.

  40.  The most obvious point to make in this regard is that there is a residual power under the Enterprise Act 2002 to intervene in media mergers where plurality concerns arise. The threshold definitions are sufficiently flexible to potentially catch all significant mergers within local radio and the public interest considerations are suitably robust to address concerns related to plurality. Rather than applying an automatic blanket restriction on all local consolidation above a certain level, this public interest test allows each case to be considered on its own merits.

  41.  In addition, we believe that plurality objectives can be delivered through a variety of other mechanisms. We have included legal advice from Clifford Chance on this matter in Annex A,[23] which was obtained in the context of Ofcom's consultation on "The Future of Radio". It further suggests that Ofcom could have been significantly more radical and wide-ranging in its consideration of the ownership rules. Clifford Chance's analysis also reveals that plurality need not necessarily be delivered through media ownership restrictions.

  42.  In this context, it is worth noting that in many instances there is not a particularly strong link between ownership and plurality. A considerable proportion of Commercial Radio news is provided by Independent Radio News (IRN) and Sky, such that overlap in the news output of nearby stations may already be considerable, regardless of whether they are under common ownership.

  43.  Yet accepting the inadequacies of using ownership as a proxy for plurality, perhaps the most obvious point to make is that rules are already in place to protect plurality at cross-media level in local markets. We believe that these provide the most obvious tool for tackling relevant policy objectives and will address them now in more detail.

Plurality should be determined provided at cross-media level

  44.  Alongside its consideration of the radio-specific ownership restrictions, Ofcom's "Review of Media Ownership Rules" in 2006 also analysed the efficacy of the cross-media rules, recommending "no change ... at this stage".[24]. However, the report suggested that the cross-media rules could be considered further in the context of the Future of Radio report. For whatever reason, Ofcom's April 2007 Future of Radio report failed to do this, which may explain why its proposals focused on retaining radio-specific ownership restrictions, rather than identifying whether plurality amongst local media outlets would be better secured on a cross-media basis.

  45.  This is unfortunate because there is clear evidence that what is now important is securing plurality across all media. In 2007, RadioCentre undertook the largest ever survey of Commercial Radio listening, called The Big Listen. In Phase 3 of this project, over 10,000 Commercial Radio listeners completed an online poll which found that:

    —  88% thought there were more different places they could get their local news and information than there were five years ago.

    —  Half or more of Commercial Radio listeners are able to access local news and information from TV (50%), newspapers (53%) or the internet (58%), as well as radio (79%).

    —  Less than half of those surveyed (43%) said that radio provided content which they could not get elsewhere whereas almost three quarters (74%) attributed that characteristic to the internet.

  46.  This research, added to that which we have outlined in paragraph 37, suggests that plurality should be measured on a cross-media basis, and regulated accordingly.

  47.  In countering this argument, Ofcom suggested in its April 2007's Future of Radio report that "the current rules were only put in place three years ago, when many of the other media that offer alternative sources of information were already in place"[25]. However, we believe that this should not necessarily be an obstacle to reform, for two reasons.

  48.  Firstly, in making this argument, Ofcom chose to concentrate on the availability of platforms rather than the way in which their impact on traditional media consumption patterns has developed over the last few years. This approach is particularly incongruous given that elsewhere in the same report, Ofcom asserted that the relevant factor in determining the timing of regulatory change in relation to another issue (digital radio), is the amount of listening accounted for by digital platforms, rather than the availability of those platforms.

  49.  Secondly, we suggest that the recentness of regulation has no bearing on its effectiveness, beyond determining whether sufficient time has elapsed to test its efficiency. Instead, we prefer to judge the appropriateness of regulation in terms of five Principles of Good Regulation established by the Better Regulation Taskforce: proportionality, accountability, consistency, transparency and targeting.

  50.  In fact it is now nearly seven years since the 2001 Government `Consultation on Media Ownership Rules' which informed the local radio concentration rules included in the 2003 Communications Act. The intervening years have witnessed rapid growth in convergence and the acceleration in Internet usage across the UK. In fact research by Jupiter in the UK, France, Italy, Germany and Spain published in November 2006 showed that time spent online doubled in just two years between 2004-06.[26]

  51.  As such, it is entirely appropriate to conclude that the current rules date from a radically different era and that a new approach is needed which is not only more relevant to the current media landscape but also accounts for possible future developments as technology continues to drive change. It is likely that new legislation will take several years to implement, and the revised media ownership rules which it introduces will therefore need to be significantly more forward-thinking than those which Ofcom proposed in "The Future of Radio".

  52.  By Ofcom's own admission, its proposals are not future-proof, since "If new technologies, such as Digital Radio Mondiale, are introduced, then the ownership rules may need to be revised".[27] This underlines our belief that it is increasingly anachronistic to consider media ownership on a platform- or medium-specific basis.

Consolidation could create genuine benefits for both listeners and the industry

  53.  The Future of Radio's final argument against removing all radio-specific concentration of ownership rules was that "there is still scope for a considerable amount more [consolidation] without any changes in the rules".[28] We have been very careful to frame our arguments in terms of plurality considerations, since the public policy interest in delivering diversity of viewpoint is what provides the rationale for media ownership restrictions. Economic and competition considerations are therefore relevant only in so far as they can provide an indication of whether media ownership regulation is proportionate, in view of its commercial impact.

  54.  In Ofcom's defence, "The Future of Radio" does also point out that media ownership rules "exist for plurality reasons rather than economic competition reasons".[29] Yet the logic underlying Ofcom's observation about the existing scope for consolidation appears to be that if a regulation is not having a demonstrably negative impact it might as well be left in place. This seems to us to be the wrong approach. Ofcom has a duty to remove unnecessary regulation, and as we have already suggested, we do not believe that mono-sector ownership regulation continues to serve a useful function.

  55.  In general, RadioCentre agrees with the analysis presented in Ofcom's "Annual Plan 2007-08" which identified the increase in inter-platform competition as a key change in the communications market, and suggested that current developments are undermining mono-sector regulatory approaches[30]. Our industry's experience is that it is extremely difficult to compete with content providers on other platforms if they are subject to looser regulatory rules.

  56.  In contrast to the situation within radio, the comparative ownership freedoms in local newspapers have allowed over £7.4 billion to be spent on regional press acquisitions and mergers since October 1995. According to the Newspaper Society, there are now 87 regional newspaper publishers, 36 of whom own a single title. The top 20 publishers account for 88.3% of all regional and local newspaper titles, and 96.5% of the total weekly audited circulation. The benefits of this consolidation have been substantial, with the industry now in the hands of regional press "specialists" who have been able to reinvest heavily in their core newspaper businesses[31].

  57.  RadioCentre's membership records reveal that there are over 70 different owners of Commercial Radio licences in the UK. In some markets a single owner can operate an extremely effective and profitable service. However in others, as we outlined in our first response, local stations need much greater flexibility in how they use their resources, something which flows from common ownership.

  58.  In addition, common ownership helps stations to gain better access to external content, revenue and marketing opportunities. A high profile figure, such as a politician, is more likely to provide a station with an interview if s/he knows that they may be heard across a number of stations serving a whole region, something much easier to achieve if those stations are under common ownership. Similarly, a business with a significant regional presence may wish to get their message out efficiently across a wider area than a single station is able to offer. Stations under shared ownership can also benefit from combined marketing initiatives, such as community initiatives, music festivals and other local events.

  59.  It would appear that Ofcom's approach recognises this, having allowed companies such as Town and Country Broadcasting, kmfm, CN Radio and Tindle Radio to establish concentrations of ownership within specific regions. In acting in this way, Ofcom has clearly balanced the advantages of shared ownership against the plurality of viewpoints which would have resulted if, for instance, the new FM licence for Warwick and Leamington were operated by someone other than CN Radio, the company which already owns licences for Coventry, Stratford and Rugby. This approach appears to acknowledge that cross-media competition within given areas can be fierce, with Commercial Radio needing concentrated ownership in order to compete for a sufficient share of local media consumption and advertising revenue.

  60.  There are also several key listener benefits which can flow from consolidation of ownership:

    —  It is generally accepted that a reduction in the number of owners of overlapping stations results in an increase in the diversity of the output of those stations, resulting in increased choice for listeners. Good examples of this are springing up across the UK including West-Central Scotland, London, Manchester and Oxford.

    —  Common ownership of stations in similar areas results in operational efficiencies, enabling greater investment in quality content (as touched upon above and as outlined in our first submission).

    —  The strength afforded to more consolidated companies allows innovation and risk taking, such as that being demonstrated by GCap Media which has launched theJazz, as a sister station to Classic FM, and is supporting the children's station, FUNradio.

Q4.  Do any problems arise from having four bodies involved in the regulation of media markets (the OFT, Ofcom, the Competition Commission and the Secretary of State)? Are there any desirable reforms that would improve the effectiveness of the regulatory regime?

  61.  The existence of four bodies involved in the regulation of media markets has not created any problems within radio as far as we are aware. The Competition Commission and Office of Fair Trading primarily interact with media markets in the context of competition matters. Most recently, these bodies have been involved in the inquiry which has followed the merger of the transmission providers Arqiva and NGW. Our impression is that they have worked well together in the context of this process.

  62.  We do however believe that there may be grounds to rethink the relationship between the Government and Ofcom in future Communications legislation. Digital and internet developments have created two streams in the media. Firstly, those operators whose business models have been developed independently of legislation, and who therefore need abide only by the rules which govern all business. The other stream contains traditional players, TV, radio and press, who have been established long enough to draw attention from regulators and legislators. Yet both want, and need, to attract consumers and advertisers who are often unable to tell the difference between the two.

  63.  We believe that, in the future, a new approach should be taken. Parliament must be the rightful place to set policy about the principles which underpin regulation of the media. But, if any kind of level playing field between "new" and "old" media is to be achieved, Ofcom must be entrusted with greater flexibility to adapt to market changes in the interests of citizens, consumers and the industries which it regulates.

  64.  This may appear to contradict our concerns about the quality of Ofcom's recent work on the media ownership regime for local radio. However, we believe that Ofcom may have addressed this piece of work with more vigour if its objective was to immediately alter the regime rather than simply make recommendations. In addition, we note that devolving greater responsibility to Ofcom would allow for much faster implementation of any media ownership proposals from the regulator.

  65.  In addition to passing greater responsibility to Ofcom, we believe that media businesses need room to take decisions which will allow them to deliver the best possible services to citizens and consumers. We believe that new legislation should revise the statutory duties for Ofcom in Clause 6 of the Communications Act 2003 to include additional encouragement for Ofcom to consider the extent to which TV and radio regulatory objectives can be furthered or secured by effective self-regulation.

Q5.  Has the lifting of all restrictions on foreign ownership of UK media affected the quality and independence of the UK news media, or will it affect it in the future? Has the UK industry benefited, or does in stand to benefit in the future?

  66.  Foreign owners have only recently entered the Commercial Radio sector, and as such, their impact remains relatively untested. Nevertheless, we believe that the decision to remove all restrictions on foreign ownership of UK media was the correct one, since it provided a means for fresh investment and ideas to come into the sector. This in turn provides a means of ensuring that UK radio news exhibits high quality journalistic values.

  67.  Commercial Radio in the UK has traditionally been dominated by UK owned companies. At the turn of the decade it consisted of companies such as Capital Radio, Chrysalis Radio, Emap, GWR, Lincs FM, Radio Investments Ltd, Scottish Radio Holdings, The Wireless Group and UKRD, many of which were regionally focused and regionally owned businesses which had been built up through the Radio Authority's licensing process throughout the 1990's, rather than through acquisition. None of these companies were under foreign ownership.

  68.  Since then, a number of these groups have become part of larger consolidated groups. GCap Media, UTV Radio, Global Radio and The Local Radio Company have been created following mergers and acquisitions within the sector. Emap Radio also successfully acquired Scottish Radio Holdings. More recently, foreign investment has started to come into the radio industry at a time when advertising revenues are coming under increasing pressure and the BBC is continuing to command a majority of all radio listening. At the time of writing, the takeover of Emap Radio by the German publisher H Bauer has recently been formally completed. A new entrant has also come into the market under foreign ownership: CanWest MediaWorks UK Ltd, a subsidiary of the Canadian corporation CanWest, which won its first licence in September 2005.

  69.  The UK ownership of Commercial Radio has traditionally been trumpeted as a strength, since it means that the industry has autonomy to make its own decisions and shape its own future. RadioCentre and its predecessor organisations, the CRCA and the RAB, have provided a productive forum for coordination of UK Commercial Radio strategy. However, with advertising revenues currently under significant pressure, and Commercial Radio facing the challenge of adapting to the digital media age, there is an increasing realisation that the various companies within the industry need to look beyond their existing business models and embrace a multi-platform, cross-media strategy.

  70.  This shift in approach requires new investment, and relies on the companies concerned having sufficient scale to develop new online revenue streams. The advent of the internet and spread of high speed broadband also means that it is also increasingly anomalous to view the media landscape within the confines of national borders. Self-evidently, a UK-based radio station can broadcast across the world via online streaming, subject to holding the necessary content rights. These developments together provide further indications of the idiosyncrasy of requiring that a country's media outlets be exclusively owned within that country.

February 2008






9   Source: RAJAR Q4 2007 Back

10   Source: BARB December 2007 Back

11   "Ofcom guidance for the public interest test for media mergers", pg 5 Back

12   Joint Committee on Draft Communications Bill-Report, July 2002, para 225 Back

13   Ofcom, "Review of Media Ownership Rules", November 2006, pg 33 Back

14   Ofcom, "The Future of Radio", April 2007, pg 77, para 4.179 Back

15   Ofcom, "Review of Media Ownership Rules", November 2006, pg 33 Back

16   Ofcom, "The Future of Radio", April 2007, pg 76, para 4.177 Back

17   Ofcom, "The Future of Radio", April 2007, pg 75, para 4.166 Back

18   Ofcom, "The Future of Radio", April 2007, pg 75, para 4.166 Back

19   Ofcom, "The Future of Radio", April 2007, pg 77, para 4.183 Back

20   Ofcom, "Review of Media Ownership Rules", November 2006, pg 13, figure 6 Back

21   Ofcom, "Review of Media Ownership Rules", November 2006, pg 13, figure 6 Back

22   Source: BMRB/TGI 2006 Back

23   Please refer to http://www.parliament.uk/parliamentary_committees/communications/wehlcommunications.cfm Back

24   Ofcom, "Review of Media Ownership Rules", November 2006, pg 41, para 6.10 Back

25   Ofcom, "The Future of Radio", April 2007, pg 77, para 4.183 Back

26   Andrew Edgecliffe-Johnson, "Web use overtakes newspapers", Financial Times, 8 October 2006 Back

27   Ofcom, "The Future of Radio", April 2007, pg 83, para 4.208 Back

28   Ofcom, "The Future of Radio", April 2007, pg 77, para 4.184 Back

29   Ofcom, "The Future of Radio", April 2007, pg 74, para 4.157 Back

30   Ofcom, "Draft Annual Plan 2007-08", December 2006, pg 3 46 Back

31   The Newspaper Society, "Ownership, Mergers & Acquisitions". http://www.newspapersoc.org.uk/Default.aspx?page=302, accessed February 2008 Back


 
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