Select Committee on Communications Minutes of Evidence


Memorandum by the Daily Mail and General Trust plc (DMGT)

SECOND CALL FOR EVIDENCE

  DMGT welcomes the opportunity to respond to the questions contained in the Committee's second call for evidence, dated 13 December 2007, in relation to its current inquiry into "media ownership and the news". As the Committee will know, in relation to the first call for evidence, Mr Peter Wright, Editor of The Mail on Sunday, gave oral evidence to the Committee on 10 October 2007 and Mr Michael Pelosi, the Managing Director of Northcliffe Media, submitted further comments in writing on 20 December 2007.

  We would like to make three preliminary and general points before addressing the five specific questions raised in the Committee's second call for evidence.

  First, it may be helpful for the Committee to have a brief summary of the Group. DMGT plc is a multimedia business, with operational responsibility devolved to our six divisions, as follows:

    —  Associated Newspapers is responsible for our national and London newspaper interests (including the free daily Metro newspaper), Associated Northcliffe Digital (a leading digital publisher of premium content consumer websites) and Teletext (which provides commercial Teletext services on all the ITV channels, Channel 4 and analogue five).

    —  Northcliffe Media is responsible for our local and regional publishing interests in the UK, for the operation of the network of local "thisis" branded websites, and also for East European publishing interests.

    —  DMG Information provides business-to-business information to a variety of sectoral and world-wide geographic markets.

    —  Euromoney, majority-owned by DMGT through Daily Mail and General Holdings Limited, is also a business-to-business media group and is focused primarily on the international finance, metals and commodities sectors.

    —  DMG World Media is an international exhibition and publishing company.

    —  DMG Radio operates ten radio licences in Sydney, Melbourne, Brisbane, Adelaide and Perth through its wholly owned subsidiary, DMGT Radio Australia. DMG Radio also holds a 14.3% shareholding in GCAP Media plc.

  DMGT also holds a 20% shareholding in television news provider ITN. The other shareholders in ITN are ITV (40%), Reuters (20%) and United Business Media (20%).

  Second, the DMGT Group seeks to maintain and encourage a spirit of innovation for all six divisions, with an operational light touch from the centre which we believe helps foster that innovation.

  In our newspaper operations, this approach extends to our long-standing principle of editorial independence. We believe that we are exemplary in this regard in the UK newspaper sector. Further to the written submission that DMGT recently made to the Competition Commission in relation to its inquiry into the BSkyB/ITV transaction, the Competition Commission summarised DMGT's position as follows:

    "The DMGT board and shareholders have no day-to-day influence or control over news content. DMGT's Editor-in-Chief, in consultation with DMGT's Chairman, appoints the editors of individual newspaper titles. These editors control the editorial content (including the selection of stories and prominence of stories) and appointment of journalists in their respective newspapers. The editorial independence of DMGT's newspapers is illustrated by the differing stances taken on major issues, eg the Daily Mall and Evening Standard made opposing party political endorsements before the 1997 and 2001 general elections".

    "The DMGT board could change the editorial stance of all DMGT's newspaper titles by dismissing DMGT's Editor-in-Chief and using the board's approval rights to ensure the appointment of a successor whose editorial stance was likely to be more in line with the board's wishes. However, this is an unlikely set of circumstances: the DMGT board relies on the journalistic skill and judgement of the Editor-in-Chief to ensure that the stance and content of the group's newspaper titles have broad appeal, and therefore lead to commercial success".

    "DMGT's policy on Teletext is that news and current affairs editorial content is politically neutral. As a 20% shareholder in ITN, DMGT has the right to appoint one (non-executive) director to ITN's seven-person board (three of whom are executive directors). DMGT has no day-to-day influence or control over ITN's television news content".

    "Each of ITN's news services (ITV News, Channel 4 News, Independent Radio News, etc) has a separate editor, who works in conjunction with ITN management and the Commissioning Editor at the relevant channel. Commercial and strategic decisions relating to ITN are taken by ITN's senior management and board. DMGT cannot (and has not sought to) control these decisions due to its limited, non-executive, representation on the ITN board".[5]

  This policy of editorial independence applies to both our newspaper divisions. The editors of the individual titles within Associated Newspapers all inherit the policy of individual autonomy once appointed. The appointment of editors for our local and regional titles within Northcliffe Newspapers follows a devolved procedure, whereby regional editorial directors are appointed who are each then responsible for appointing the editors of the individual local titles which fall within their region.

  The Competition Commission has also previously recognised the importance of editorial independence from a commercial perspective:

    "We accepted the commercial argument that, to attract and retain readers, editors must be free to make decisions on the content of their newspapers and on the line they take on local issues. So, if a publisher were to dictate or standardise the editorial content of its titles, or to impose a uniform style or approach, it would risk losing readers, and thus, returns from advertising and, for paid-for titles, circulation".[6]

  DMGT believes that this principle applies to all titles, whether local, regional or national. Reader loyalty must be won and retained on a daily or weekly basis and is not something that can be automatically assumed if particular titles are sold to new owners, particularly those who seek to implement a change in editorial policy. Editorially, therefore, we believe that to succeed each of our titles must be free to maintain a relationship with its readers which is responsive, receptive, reactive and free from proprietorial intrusion. DMGT regards this as a fundamental principle.

  Third, we believe that the operational freedom of all our divisions to innovate is a crucial ingredient for success in a media environment which is becoming increasingly diversified and competitive.

  When the media ownership rules were last amended by the Communications Act 2003, the Government's position was that in general it favoured a simplified and "light-touch" approach, whilst at the same time stating that control of the press remained "a matter of particular public sensitivity, and that increasing concentration of ownership in too few hands could stifle the expression of opinion and argument, and distort the presentation of news".[7]

  In general, our view is that rather than experiencing an overall increase in concentration of ownership, the news media environment is in fact diversifying at an ever-increasing pace. In addition to the range of commercial radio and commercial analogue television broadcasters, the development of digital television, and an increase in the provision of free rather than paid-for newspapers—all of which offer other sources of news media—there has been a major and continuing expansion of internet news sources. The internet offers significant opportunities for further low barrier market entry and has meant that diversity of news content and opinion continues to increase as a natural consequence of the proliferation of media platforms.

  In the news media sector, it is within this increasingly competitive overall news media environment that individual newspaper titles must compete for both readers and advertisers, and must do so, on a daily and weekly basis, constantly sensitive to their readers' interests and views. Overall profitability in the newspaper sector has declined as a result of the increasing trends for consumers to obtain their news and entertainment from a wider range of sources than previously.

  In so far as there have been some significant mergers between media companies, these have been largely in response to the fact that the overall media environment is becoming more rather than less diffuse—and more competitive. In the television broadcasting sector, this was stated as a major factor in the recommendation of the Competition Commission in 2003 to allow the two largest commercial television broadcasters (at that time Granada plc and Carlton Communications plc) to merge. In the radio sector, a number of mergers of commercial radio broadcasters have similarly been approved by the independent competition authorities, such as the merger between Capital Radio plc and GWR plc in 2004. Clearly, the competition authorities have an important continuing role in assessing particular transactions that could raise issues, but overall DGMT believes that the.media landscape in the UK is, in general terms, an increasingly competitive one.

  Moving on to the Committee's particular questions:

1.  Are the requirements in the Communications Act 2003 relating to 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?

  The Committee will note from the summary of our interests above that DMGT does not have significant UK editorial interests in television and we therefore have no comment on these requirements. For completeness, although DMGT has a 20% shareholding in ITN (along with other shareholders who have shareholdings of the same size or greater, as set out above), DMGT has no day-to-day influence in, or editorial control over, ITN's television news content.

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?

  Associated Newspapers' evidence to the Department for Culture Media and Sport prior to the enactment of the Communications Act 2003 urged the removal of all special rules for newspaper mergers on the basis that the application of the normal competition-based merger test under the Enterprise Act 2002 would be sufficient, and that a special regime for newspapers was an unnecessary additional instrument for ensuring freedom of expression and diversity of choice. We continue to believe that as a matter of principle, there is merit in that argument.

  However, DMGT considers that the current procedures as introduced by the Communications Act have to date operated satisfactorily in practice—and that, in line with the "light touch" approach, neither the Government nor Ofcom have regularly sought to intervene on media mergers on public interest grounds.[8] Only one media public intervention notice has been issued so far since the relevant provisions of the Enterprise Act 2002 as amended by the Communications Act 2003 came into force—in relation to the shareholding acquired in ITV plc by BSkyB plc.

  On that case the Competition Commission's report determined that, although the plurality issues were insufficient to give rise to an adverse public interest effect, the competition issues were such that there was likely to be a substantial lessening of competition—and that BSkyB should be required to reduce its shareholding in ITV to below 7.5% solely because of that substantial lessening of competition. The Competition Commission's conclusions were accepted by the Secretary of State. The normal competition test therefore operated—at least in the context of that case—in a more stringent manner than the public interest test.

  Accordingly, whilst it would arguably be preferable in principle for the political element to be removed from the ultimate decision making process so that the views of the Competition Commission, as an independent body, would represent the final decision in all cases (see further the response to Question 4, below), DMGT does not presently have any fundamental concerns with the operation of this aspect of the current regulatory regime in practice. It is also our view that the current regulatory regime has only been in place for a few years since the relevant provisions of the Communications Act and Enterprise Act were implemented—and it is therefore too early to draw any firm conclusions from the limited number of cases which have been examined in this respect under the relevant legislation since that time.

3.  Do the 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 organisations 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 organisations to protect the public interest?

  We supported the removal of many of the former cross-media ownership restrictions by the Communications Act 2003 and we also note and support Ofcom's recommendation in its first three year review of the media ownership rules that the case be considered for further deregulation of local cross-media ownership.[9]

  Given the changing media environment and the increasing competition between traditional and non-traditional outlets, it would seem a useful exercise to re-examine the issue, for example by looking again at the thresholds contained in the current radio "points rules", which limit the number of local analogue radio stations that can be held by any one person in a particular area and the extent to which those persons can also own local newspaper or Channel 3 interests in the same locality.

  We support Ofcom's recent recommendation in its consultation on the Future of Radio to aggregate analogue and digital stations in any analysis of cross-media mergers as a welcome step forward. We also believe that it is sensible for Ofcom and the competition authorities to take into account the role of the BBC in assessing suitable levels of plurality at a local level.

4.  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?

  As stated in response to Question 2 above, DMGT considers that there is a case for there to be no or more limited political involvement in making final determinations in relation to the permissibility of media mergers.

  This could be accomplished either by: (i) removing the ability of the Secretary of State to overrule the findings of the Competition Commission as to media public interest issues and remedies in cases where a media public interest intervention has been issued and a reference to the Competition Commission made, thereby limiting the Secretary of State's powers to the issuing of such an intervention notice; (ii) going further by also transferring to Ofcom the Secretary of State's initial power to issue a media public interest intervention notice and taking the decision to refer to the Competition Commission in light of Ofcom's and the OFT's reports where it is felt appropriate for the Competition Commission to examine plurality issues as well as any competition issues identified by the OFT; or (iii) removing the public interest aspects of the regulatory regime entirely and allowing merger decisions to be made purely on competition grounds, as in all other merger cases except those raising defence or national security issues.

  That said, as stated in the response to Question 2 above, DMGT has not to date encountered any difficulties with the current regime in practice and considers that it has operated satisfactorily and with a relatively light touch. On that basis, DMGT does not have any substantial concerns with the present regime and does not consider any material change is currently necessary.

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?

  The increasing globalisation of business generally is bound to impact on the media environment and there would seem little sense in trying to resist this trend. The DMGT Group itself benefits from considerable East European print interests, significant radio interests in Australia and world-wide activities in other sectors. Ideally, however, reciprocity should prevail in terms of ownership in other geographical markets, such as the United States.

  DMGT recognises that an arguable benefit of the current media public interest regime is that it retains the capability, in genuinely exceptional cases, to consider the implications for news accuracy, freedom of expression and plurality of the acquisition of UK newspaper and broadcasting enterprises by potentially unsuitable owners (whether foreign or UK based), whose ownership of the relevant enterprise in question may jeopardise those values.

  We hope these comments are helpful to the Committee in summarising both DMGT's overall position in relation to media ownership and the provision of news and in relation to the specific questions raised by the Committee.

14 February 2008







5   Report of the Competition Commission on BSkyB/ITV, paragraphs 25 to 27 of Appendix I; published by the Secretary of State for Business and Enterprise on 20 December 2007. Back

6   Competition Commission report on the proposed merger between News Communications & Media plc and Newsquest (Investments) Limited/Johnston Press plc/Trinity Mirror plc, April 2000, paragraph 1.4. See also paragraph 5.8 of the Department of Trade & Industry's 2004 published guidance on the operation of the public interest merger provisions relating to newspaper and other media mergers (http://www.berr.gov.uk/files/filel4331.pdf.Back

7   House of Commons Research paper 02/68, "Media ownership and the Communications Bill", 28 November 2002, Page 39 (with cross-reference to DCMS consultation paper). Back

8   As amended by section 375, Communications Act 2003: "the accurate presentation of news and the free expression of opinion; and the need for, to the extent that it is reasonable and practicable, a sufficient plurality of views in newspapers in each market ..." Back

9   The review by the Office of Communications of Media Ownership Rules in accordance with Section 391 Communications Act 2003, published November 2006. Back


 
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