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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