Memorandum by the Guardian Media Group
(GMG)
SECOND CALL FOR EVIDENCE
EXECUTIVE SUMMARY
GMG is pleased to be offered the opportunity
to comment on the current UK Media Ownership rules and the implications
for provision of news.
GMG is a strong supporter of the general objectives
of plurality, diversity and quality across the news ecology—indeed,
our own unique ownership structure is designed to safeguard similar
objectives for The Guardian.
We suggest that (in order to achieve these objectives)
the scope of the media ownership regulatory framework needs to
be widened, to ensure that the market impact of all powerful
media companies can be properly considered. Currently, the framework
focuses on "traditional media", meaning that some types
of organisation could fall outside its scope. The table below
gives some examples of the consequences of the current regulatory
framework for cross-media ownership and activity:
|
| Examples | Issues arising
| Potential remedies
|
|
Online aggregators (such as Google)
Cross-platform media owners (such as News Corp)
| Online aggregators, potentially, can have a "double negative" effect on high-quality, plural news provision: acting as a gatekeeper to multiple news sources, whilst extracting revenue directly from news content, without re-investing in journalism
Some cross-platform owners may, through their various holdings, have acquired an unhealthy share of voice across ALL media, despite operating within current regulatory rules. For example, although News International would not be able to make further national newspaper acquisitions (because of its existing newspaper market share), its parent company's control over the UK's largest pay-TV provider would not itself, currently, be an impediment to further newspaper ownership.
| — Widen the scope of the Communications Act rules to place some limits on cross-media ownership across all media, to ensure that organisations like Google or News Corp do not have too great a total share of voice
— Raise the current thresholds for cross-media ownership, to ensure that any broadening of scope, suggested above, does not limit cross-media activity per se—an important part of serving today's news consumer effectively
|
| | |
| The BBC | The breadth of the BBC's PSB activities can damage, rather than complement, commercial markets—especially in the radio and online sectors. This can have a direct effect on commercial investment in quality news provision, and may lead to a further negative effect on plurality, with commercial news provision increasingly uneconomic
There is also concern as to whether the BBC's commercial activities, both in the UK and abroad, are appropriate, in the context of commercial British media companies struggling for limited revenues to invest in quality journalism. For example, the decision to accept advertising on bbc.com removes potential revenue from commercial news providers. The aggressive growth plans of BBC Worldwide and their reported desire to partner with private equity firms raises similar concerns
| — Liberalise the rules for intra-medium radio asset ownership, to help to enable effective competition to the BBC (as part of a wider programme of radio regulatory liberalisation)
— Ensure that the BBC Trust is diligent in monitoring the scope and effect of BBC public service and commercial activities, and commits to full publication of its research
|
|
We also welcome this opportunity to suggest that the radio
regulatory regime is overly burdensome and, in particular, acts
as a disincentive to commercial investment—with, therefore,
a potential impact on both plurality and quality of news provision.
Finally, we would highlight the current challenges to the
historic newspaper business model, all of which make it increasingly
uneconomic to provide quality news, eg: internet competition for
advertising revenues, the impact of free sheets on cover price
revenues, and BBC competition for eyeballs. These concerns are
most clearly illustrated by reference to local markets, where
the effects have been most keenly felt.
GUARDIAN MEDIA
GROUP'S
SUBMISSION
1. 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 will they be sufficient
after digital switchover?
1.1 GMG supports regulation that seeks to maintain quality,
quantity, scheduling and impartiality of broadcast news.
1.2 As news consumption is increasingly a cross-media
activity, we have considered the impact of these regulations across
the whole media sector, with a specific, separate focus on national
and regional/local effects.
1.3 National
|
| Dimension | Comments
|
|
| 1. Quality | GMG notes, with concern, the increased reliance of national broadcasters on third parties for, in particular, foreign coverage, with a consequent reduction in foreign bureau staff; this mirrors the pattern seen in most national newspapers (with the exception of The Guardian) which may reflect less editorial priority being given to foreign news. Between 2002 and 2006, in the US, the number of foreign newspaper correspondents is estimated to have fallen by 30%.[1]
Although "quality" is a subjective test, GMG shares the common perception that there may have been some "dumbing down" of broadcast news. Although quantities of political and foreign coverage are sometimes used as a proxy for quality—for example, in Ofcom's survey for New News, Future News—this approach may be unreliable because of dominant stories such as the war in Iraq.
We are also concerned that visually-spectacular, first-world news stories—such as the aftermath of Hurricane Katrina—receive more substantial coverage than equally significant stories from less accessible parts of the world.
|
| |
| 2. Quantity | No substantive concerns
|
| |
| 3. Scheduling | No substantive concerns
|
| |
| 4. Impartiality | In New News, Future News Ofcom suggests that impartiality regulations may be less enforceable in a digital environment. In our view any move towards more opinion-led news provision relies on the continued presence of the PSBs as "ballast", and on a range of such services, with different opinions, being made available.
Without a requirement for impartial news from the PSB channels, the UK could risk creating a situation where major broadcasters take commercial decisions to provide opinion-led news (as has happened with Fox, in the US, after the removal of the Fairness Doctrine in 1988).
At a time when plurality of opinion has grown significantly, the impartiality obligations on PSB broadcasters remain vital. In 2007, there were over 100 million blogs globally, with 100,000 new blogs being created, and 1.3 million posts daily. The broadcasters remain an important source of fact, helping to ensure that opinions can be put in context.
|
|
1.4 Regional
|
| Dimension | Comments
|
|
| 1. Quality | The BBC provides a quality local news service; however, the scale of its local activities impacts on the viability and, therefore, quality of commercial regional and local news. BBC local websites and radio stations attract audience, especially where the BBC cross-promotes its activities between various channels, lowering the revenues of the commercial sector and, therefore, limiting the resources commercial providers are able to commit to quality local news and journalism.
|
| |
| 2. Quantity | GMG is concerned about ITV's wish to reduce/abandon its regional coverage; this would significantly cut the quantity of regional broadcast news available in the UK. At a regional level, the main consequence would be to diminish both the plurality of supply and choice for consumers, who would be increasingly dependent on the BBC.
|
| |
| 3. Scheduling | No substantive concerns
|
| |
| 4. Impartiality | No substantive concerns beyond those expressed in "national" section
|
|
1.5 Following DSO, we believe that the situation may
change, both locally and nationally:
1.6 National
1.7 Following DSO, there may be a wider number of potential
broadcast news sources able to reach a wider audience. The impartial
PSB broadcasters, however, should act as fixed point in the news
eco-system, complementing the increasing plurality of opinion-based
news in print, online and the wider broadcast market. PSB broadcast
impartiality rules should be maintained.
1.8 Local
1.9 GMG is concerned by the lack of comfort given to
investors in quality local journalism, when considering the "digital
dividend". Local TV services, such as GMG's Channel M (a
dedicated city TV station broadcasting to the Greater Manchester
area), are under threat given the considerable uncertainty around
their spectrum allocation post-ASO. A purely market-led approach
to the award of spectrum would, in all probability, lead to a
market failure in the provision of local TV.
1.10 We would also note some specific issues relating
to radio. There is a long list of onerous regulatory requirements
for commercial radio providers, including, for example, the threshold
for eligibility for programme-sharing and co-location. Taken in
aggregate, these act as a disincentive to commercial investment,
especially in local radio, potentially affecting both the quality
and plurality of news provision. We note Ofcom's recent relaxation
of certain regulations and regard this as a step in the right
direction.
2. 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?
2.1 In general, current "public interest" considerations
are robust and clear—we strongly support their role within
the general competition law framework.
2.2 The "plurality of media" provision is particularly
important in sustaining a diverse, high-quality news ecology.
2.3 Given the cross-media ownership rules in—and
derived from—the Communications Act, we are concerned that
"public interest" questions regarding plurality might
be thought only to arise in merger situations involving TV, radio
and newspaper assets. With consumption of news becoming an increasingly
cross-media activity, "public interest" considerations
should apply explicitly to all media, including, for example,
the internet, which may not currently be covered.
2.4 This could help to ensure that concentration of voice
(across all media) is not a threat to plurality. We expand on
this argument in our answer to the next question.
3. 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?
3.1 GMG believes that quality of and diversity in news
provision are fundamental contributors to a healthy democracy.
The current rules—focused on newspaper, TV and radio ownership—are
in danger of becoming anachronistic, as their scope, for example,
does not cover (fully) some key cross-media players.
3.2 Cross-media rules
3.3 Current cross-media rules can result in the wrong
outcomes. Activity that should not be constrained—for example,
shared ownership of major local radio stations and newspapers
(where constraints can impact on the commercial viability of these
sectors, and as such owners' ability to invest in quality content)—can
be blocked, whereas the activity of large online providers (such
as Google) is relatively unconstrained. These asymmetries have,
potentially, negative effects on both quality and diversity.
3.4 Quality
3.5 The main quality issue arises because of the diminishing
ability of many companies to re-invest advertising revenue into
journalism. News has historically been a "subsidised"
activity, especially for newspapers, ie has been dependent upon
cross-subsidies (from, for example, classified advertising) within
a business. Traditional news business models are now under threat,
mainly from the internet, reducing organisations' ability to invest
in quality journalism.
3.6 A significant amount of classified advertising—a
major source of GMG revenue, effectively used to help pay journalistic
salaries—has substantially migrated online. The yields generated
by online classified advertising are far lower than for conventional
offline advertising. Content is also widely available free online,
putting cover price revenue at risk. In this context, there are,
at least, two major challenges from types of organisation not
constrained by current cross-media ownership rules.
3.7 News aggregators, such as Google News, commercialise
news without having to create any content. They do this by "scraping"
the proprietary content of organisations, like GMG, and then presenting
it to their own audience. With very significant audiences, these
sites take advertising revenue away from companies like GMG, reducing
the potential return on investment in journalism (and, therefore,
probably reducing the incentive to invest). The lion's share of
UK online advertising revenue (estimated to be c 80%) goes to
a handful of US organisations, Google, Yahoo, MSN and AOL, all
of whom provide news but none of whom invest (substantially) in
journalism.
3.8 The BBC's activities can have an unintended,
detrimental effect on quality, plural news provision: the high
quality, and wide scope, of their online offerings take eyeballs
away from commercial providers, again reducing advertising revenue
and, potentially, removing the incentive to invest in quality
news-gathering and provision. This is particularly true at a local
level, where our operations (and others') are trying to stay relevant
by making output available online; competing with the financial,
technological, cross-promotional and brand resources of BBC Online
is, however, extremely difficult. In summary, the BBC has begun
to displace, rather than complement, commercial providers at the
local level.
3.9 We also note that Ofcom has, in our view rightly,
begun to give consideration to promoting public purposes in the
arena of digital interactive participative media. However, we
are not wholly convinced by the argument that public purposes
are at present under threat given the general growth of
provision by commercial and non-commercial players, and believe
that any consideration of a Public Service Publisher as floated
by Ofcom should take into account the impact an over-funded PSP
could have on online plurality.
3.10 Diversity
3.11 With news consumption increasingly becoming a cross-media
activity, concerns about plurality of ownership—and, therefore,
diversity of voice—should cover all media. The current framework
does not take sufficient account of the concentration of voice
from any one organisation across all types of outlet.
3.12 This is partly because the current ownership rules
have focused on specific, "traditional" media—ie
radio, newspapers and free-to-air TV. Whilst, historically, those
media may have had the widest reach (and, therefore, provided
the greatest challenges to plurality through shared ownership),
this is increasingly no longer true. Ofcom's work has demonstrated
how people now garner news from a variety of sources; we would
note that the UK reach of some online news providers is, already,
almost at the same level as TV (and far greater than newspapers).
Exhibit 1
REACH OF SELECTED COMPANIES ACROSS MULTIPLE MEDIA (MILLIONS)[2]
3.13 Their high levels of reach mean that online companies
should be brought within the regulatory framework and some quantitative
limits should be placed on their ability to acquire media companies
(beyond any potential public interest concerns voiced by the Secretary
of State).
3.14 Similarly, as we approach DSO, pay-TV businesses
should be counted within any future cross-media ownership thresholds.
Currently, while News International would not be able to make
further national newspaper acquisitions because of its existing
newspaper market share, its parent company's stake in the UK's
largest pay-TV provider would not be an inhibition on its newspaper
ownership. This seems particularly anomalous, as Sky News, for
example, is currently available free-to-air on Freeview and in
basic satellite packages, and has a very high audience reach.
3.15 Single sector rules
3.16 In general, the specific sector ownership rules
for TV and newspapers seem to us to be reasonable. Radio rules,
however, are problematic: extensive barriers to ownership of multiple
local franchises make it very difficult to achieve economies of
scale. In an embattled commercial environment, this could lead
to unintended consequences—a fragmented marketplace with
multiple under-resourced providers struggling to service, effectively,
their listeners, or to compete with the BBC. Cumbersome regulation
can be a disincentive to commercial investment—in the local
radio sector, generally, and by extension in quality local radio
news. If the framework and rules are not updated, we would expect
some operators not to survive, leading to less plurality—a
concern reinforced by the potential withdrawal of ITV from regional
news provision.
3.17 These problems are, again, exacerbated by some of
the public service activities of the BBC. Its mainstream services
compete directly with much of the UK commercial radio sector,
but have a substantial competitive advantage as they do not carry
advertising. At a local level, BBC radio services sometimes have
a similar effect to BBC online services, ie reducing the audience
available to commercial stations and cutting their ability to
invest in quality news provision.
3.18 We also believe that the challenges to traditional
news business models highlighted above mean that, in order to
ensure continued diversity and quality within the local press,
a more flexible approach towards consolidation within that sector
is merited.
3.19 Potential suggested actions to protect the "public
interest"
Cross-media ownership rules
3.20 Widen the scope of the rules to take account of
cross-media ownership across all media—perhaps looking at
share of voice and revenues (especially advertising) across all
media, to ensure that organisations like Google or News Corp cannot
acquire too big a share of voice across all media.
3.21 Raise, however, the current thresholds for cross-media
ownership to ensure that cross-media efficiencies can be harnessed
on behalf of the consumer.
Single-sector ownership rules
3.22 Liberalise the rules for intra-medium radio asset
ownership to enable more effective competition to the BBC (as
part of wider programme of radio regulatory liberalisation).
3.23 Add intra-medium rules for online and pay and multi-platform
TV.
Other regulation
3.24 Ensure that the BBC Trust is diligent in monitoring
the scope and impact of BBC public service and commercial activities.
4. Do any problems arise from having four bodies involved
in the regulation of media markets (OFT, Ofcom, Competition Commission
and Secretary of State)? Are there any desirable reforms that
would improve the effectiveness of the regulatory regime?
4.1 At least two aspects of the current regime should
be considered: first, the efficiency of the current processes
and, secondly, the effectiveness of the regulatory regime in delivering
against its objectives.
4.2 Efficiency
4.3 GMG views the current processes as generally working
well.
4.4 The outcome of the BSkyB-ITV review has demonstrated
that the processes can be relatively swift and simple, whilst
providing an opportunity for all relevant stakeholders to provide
input.
4.5 A key contributor to the success of the current regime
has been Ofcom's market knowledge: this is in marked contrast
to the situation in some other countries, where competition authorities
alone must resolve media competition and ownership issues. The
result is frequently lengthy and cumbersome processes, which are
often, also, highly politicised.
4.6 For example, in Spain, the competition authority
(Servicio de Defensa de la Competencia) has expressed its frustration
with having to investigate three complex, inter-related media
competition issues—historical dominance of the football
rights market, cross-selling and rights acquisition collaboration—
without the necessary media expertise.[3]
4.7 Effectiveness
4.8 GMG would highlight two issues which suggest that
the current regulatory regime may benefit from additional reform.
4.9 GMG believes that the "Public Interest"
considerations, set out in the Enterprise Act, are crucial to
maintaining a healthy market for news and that competition law
alone may not suffice. In the case of BSkyB and ITV, GMG noted,
like Ed Richards (CEO of Ofcom), that the OFT's concerns ultimately
focused on competition aspects and not on the impact on plurality.
It may be necessary to issue further guidance on public interest
and plurality.
4.10 In the absence of specific rules governing online
aggregators, it is important that the current flexibility, enjoyed
by the Secretary of State, to trigger "Public Interest"
investigations is maintained and, where appropriate, used.
4.11 As previously discussed, under current competition
rules, a Google acquisition of a major UK media asset might not
automatically trigger an investigation. Such a move would raise
genuine "public interest" concerns—with Google's
share of voice in the online world reaching levels similar to
that of the analogue terrestrial broadcasters on television. GMG,
therefore, believes that the "Public Interest" test
should be used by the Secretary of State when considering acquisitions
by large online companies, such as Google and Yahoo!
4.12 Continued flexibility in this area would also help
to make the legislation and regulatory regime future-proof, by
enabling the Secretary of State to respond to the evolving market
for news.
5. 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 it stand to benefit in the future?
5.1 GMG believes that ownership rules play a very important
role in safeguarding the quality and independence of news. Some
forms of commercial ownership prioritise cost-cutting over investment
in quality journalism; some forms of, in particular, private ownership,
may give rise to undue prominence to the proprietor's politics.
5.2 GMG has an ownership structure unique in the UK media
industry: we are privately owned by the Scott Trust, which was
created, in 1936, to safeguard the journalistic independence and
liberal values of The Guardian. The core purpose of the
Scott Trust is clear—to secure the financial and editorial
independence of The Guardian in perpetuity: as a quality
national newspaper without party affiliation; remaining faithful
to its liberal tradition; as a profit-seeking enterprise managed
in an efficient and cost-effective manner.
5.3 Put simply, The Guardian exists to create
public value, not private gain. Its unique ownership structure
means that the wider Guardian Media Group does not seek profit
for the financial benefit of its owners or shareholders, but to
sustain journalism that is free from commercial or political interference,
and to uphold a set of values laid down by our former Guardian
editor, CP Scott, and now enshrined as the Scott Trust values.
5.4 A fundamental tenet of governance is that the Scott
Trust Trustees have no role in the day-to-day management of The
Guardian or in the day-to-day editorial control of news and
content, nor do the Board of Guardian Media Group plc. The day-to-day
editorial control of news content is the sole responsibility of
the Editor and his staff.
5.5 The integrity of the newspaper is further protected
by the readers' editor, a role created by The Guardian in
1997. The role of the readers' editor is to "collect, consider,
investigate, respond to, and where appropriate come to a conclusion
about readers' comments, concerns, and complaints in a prompt
and timely manner, from a position of independence within the
paper".[4] Readers'
editors are now in place in several international newspapers,
including The Washington Post and The New York Times,
which made its first appointment in the wake of the 2003 Jayson
Blair affair.
5.6 In summary, GMG believes that there can be "good"
and "bad" owners of news organisations, irrespective
of nationality.
7 February 2008
1
Source: Shorenstein Centre on the Press, Politics, and Public
Policy. Back
2
Online measured in terms of monthly unique users, source: Comscore;
Newspapers measured in terms of adult readership, source: Zenith
Optimedia; TV measured in terms of weekly reach, source: broadcasters. Back
3
Source: Spectrum Value Partners interview with Servicio de Defensa
de la Competencia. Back
4
Source: http://www.guardian.co.uk/readerseditor/story/0,,652390,00.html Back
|
