The future of investigative journalism - Communications Committee Contents

CHAPTER 4: Ownership and its significance

143.  Ownership matters. It is well understood, for example, that a proprietor or proprietary structure can have a significant impact on the journalistic culture of a news organisation. Dame Liz Forgan DBE, Chair, the Scott Trust, talked in her evidence about the way "The Times is heavily subsidised by Rupert Murdoch. He has ... [his own] priorities for his subsidy"[115] and these priorities can have an effect on the owner's portfolio of titles. More significantly perhaps, ownership can have an impact on the sheer economic viability and survival of media organisations; regulations either restricting or enabling mergers have recently proven to be life or death matters for struggling businesses. In addition, plurality of ownership across a nation's media is clearly a vital issue for its democracy and governance. In the light of the phone-hacking scandal, for example, the value of a media able to scrutinise itself has become undeniable. This chapter will examine the significance of ownership for the future of investigative journalism.


144.  The issue of media plurality has returned to the forefront of media and public attention following the proposed acquisition of the remaining shares in BSkyB by NewsCorp, which was subsequently withdrawn by NewsCorp in the wake of the phone-hacking scandal.

145.  If a proposed media merger passes a threshold of a UK turnover of £70 million or over being acquired or the merger creates or enhances a 25% share of supply in the UK or a substantial part of the UK, it falls within the terms of the Enterprise Act 2002. This Act permits the Secretary of State to intervene in proposed mergers if appropriate on public interest grounds.[116] If the Secretary of State intervenes, he will then be able to consider whether to:

  • Refer the transaction to the Competition Commission (CC) for examination of any media public interest considerations together with any competition issues that are identified by the Office of Fair Trading (OFT) (in the case of mergers meeting the standard jurisdictional criteria);
  • Clear the merger; or
  • Direct the OFT to seek undertakings in lieu of a reference.

146.  If the Secretary of State enacts this power, he must seek advice on the matter from both the OFT and Ofcom. Ofcom would conduct a public consultation and report its findings to the Secretary of State on the impact of the transaction on the media public interest. One of the factors which Ofcom would consider is how the proposed merger would affect media plurality.

147.  This issue is currently being considered by Ofcom which has been asked by the Secretary of State for Culture, the Olympics, Media and Sport to undertake some work into the feasibility of measuring media plurality across platforms, and recommend the best approach. In particular, Jeremy Hunt MP has asked Ofcom to consider the following issues:

  • What are the options for measuring media plurality across platforms? What do you recommend is the best approach?
  • Is it practical or advisable to set absolute limits on news market share?
  • What could trigger a review of plurality in the absence of a merger, how might this be monitored and by whom?
  • Could or should a framework for measuring levels of plurality include websites and if so which ones?
  • Whether or how it should include the BBC?[117]

148.  Ofcom's report, which is due to be published in June, will provide input into the considerations of Lord Justice Leveson who will consider this issue in Module 3 of Part One of his inquiry. The issue will also be subject to Parliamentary scrutiny as part of the House of Commons Culture, Media and Sport Committee's inquiry into media plurality which was launched in December 2011.

149.  We encourage Ofcom, Lord Justice Leveson and the House of Commons Select Committee on Culture, Media and Sport to consider carefully the following issues as part of their inquiries:

  • Whether the criteria for application of the public interest test should be extended to include cases of organic growth as well as in proposed mergers;
  • Whether the decision to invoke the public interest test in media mergers should remain solely with the Secretary of State; and
  • The application of the 'fit and proper person' test and whether this should be extended to cover newspaper mergers.

150.  With regard to the public interest test, we believe that there may be a case for legislation to allow for this to be invoked in cases where a news organisation develops over a 25% share of the national newspaper market through organic growth, rather than just in cases of proposed mergers, as is the case at present under the Enterprise Act 2002.

151.  In assessing this, we encourage Ofcom, Lord Justice Leveson and the House of Commons Select Committee on Culture, Media and Sport to consider the following issues in more detail:

  • Whether 25% would be the right threshold for invoking the public interest test in cases of organic growth; and
  • How would market share be determined? For example, would Ofcom be required to conduct a regular review of the newspaper industry in order to determine whether this threshold in terms of market share had been reached?

152.  Given the importance of ownership, we wish to repeat the recommendation made in the 2008 ownership of the news report by our Committee that the Communications Act 2003 should be amended to enable the public interest test to be invoked at the discretion of either the Secretary of State or Ofcom.[118]

153.  Finally, we encourage the relevant inquiries examining this issue to consider whether or not it may be appropriate to extend the 'fit and proper' test, currently determined by Ofcom before awarding a broadcasting licence, to include potential newspaper proprietors. If this is deemed appropriate, we believe that as Ofcom currently conducts this process with regard to broadcasting it may be best placed to set the criteria and carry out the test in cases of proposed newspaper mergers as well.

Media ownership at a local level

154.  As highlighted in Chapter 3, local newspapers are facing enormous economic pressures at present. As a result, there has been much consolidation of local newspaper ownership in recent years. This has had the effect of enabling many local newspapers to share resources more widely and to continue to operate in some local areas. However, with less money available, many local newspapers are no longer able to conduct the same amount of investigative "accountability journalism" stories, including those covering events at local council and town hall level. This was highlighted in evidence by Eric Gordon, Founder and Editor, Camden New Journal. He said that:

"What has happened with local newspapers is that they have been slimmed down by large groups in order to cut overheads ... in my opinion, in order to maintain a good net return the large groups—which were seeking 25%, even more, in the good, buoyant years of the 1990s, whereas we would get along with 10% or so—have cut overheads by slimming down the editorial staff, which in turn means that local courts and councils are no longer covered as well as they should be. Sometimes they are not covered at all."[119]

155.  Currently the OFT reviews information relating to proposed mergers and, where necessary, refers any relevant mergers to the Competition Commission.[120] In November 2010 the OFT and Ofcom agreed on a Memorandum of Understanding setting out the relationship between Ofcom and OFT in relation to Local Media Assessments (LMAs). The Memorandum of Understanding requires that the OFT takes account of Ofcom's assessment in its final decision on local media mergers, but it clearly states that: "The final conclusion on all aspects of the competitive analysis of the relevant local media merger case remains one for the OFT."[121] This had significant bearing on a recent attempted local media merger.

156.  In September 2011, Ofcom conducted an LMA on the proposed acquisition by the Kent Messenger Group (KMG) of Northcliffe titles in Kent. Ofcom concluded in this instance that: "The evidence available to us suggested that the target business and the regional newspaper business of KMG would struggle to achieve profitability in their current form, which might lead them to respond by closing newspaper titles or reducing quality (or both). In light of this, we considered that a merger may provide the opportunity to rationalise costs, maintain quality and investment, and provide a sounder commercial base from which to address long-term structural change, for example by expanding the availability of online and other digital local services."[122] However, the OFT decided to refer the proposal to the Competition Commission (CC) on the grounds that: "These companies publish the only local weekly newspapers in seven local areas in East Kent" and that "the monopoly of local newspapers that would result in these areas risks costlier advertising for businesses and higher cover prices for readers."[123]

157.  Geraldine Allinson, President of the Newspaper Society and Chairman of the Kent Messenger Group, was critical of this decision, saying that: "For an organisation of our size the cost is prohibitive to go to the Competition Commission. It would cost us over £500,000."[124] Ms Allinson told us about the consequences of the OFT's decision to refer the merger to the CC:

"We had to withdraw. We told the Office of Fair Trading at the very beginning when we first went to them that if they were going to refer this to the Competition Commission the deal would end up being dead because of the costs associated with it. I fundamentally believe, and I think the industry does, that those titles would have been better off in our ownership because we would be able to provide a better service through better journalists, better quality of service to those communities for longer, including investigative journalism and things like that."[125]

158.  In this case, the local newspaper in this area, the East Kent Gazette, did indeed close following the collapse of the merger proposal. However, in the same week in which this paper was closed, Kent Messenger Group announced that it planned to launch a new title, the Sittingbourne News Extra, which would cover the same area. Nonetheless, this case is an example of the damaging effect which the competition regime can have on the local newspaper industry, which is facing a significant economic threat.

159.  We welcome the comments made by the Secretary of State on this issue when he gave evidence to the Committee:

"I have asked my officials to look at what can be done in those processes and, indeed, whether, if there are any legislative changes to be made, they can be made in the Communications Bill that we are intending to put before Parliament in this Parliament. It is clear to me that the local newspaper sector needs to consolidate. It needs to be able to develop new business models."[126]

In addition, we welcome the Government's removal in June 2011 of the local cross-media ownership restrictions; this should also help support local media outlets by enabling them to consolidate across media platforms.[127]

160.  We note the Government's recent removal of rules relating to local cross-media ownership and hope that this will provide an opportunity for local media organisations to develop a sustainable business model through consolidation in future if they wish to do so.

161.  At a local level, we recommend that Ofcom's role in assessing local media mergers should be strengthened compared to the Competition Commission's in order to ensure that the vital watchdog and informational role of the local media is given greater weight when assessing merger proposals. We welcome the Secretary of State's commitment to look at this issue and we support the suggestion that any legislative changes required should be included in any Communications Bill.

Media ownership at a national level


162.  While we understand that there may be a need for greater consolidation of media organisations at a local level, we believe that, given the important role played by the national media in informing opinion about world events and its impact nationally on the democratic process, a different approach needs to be taken towards the ownership restrictions at a national level.

163.  In 2008, the Committee considered the issue of media plurality as part of its inquiry into the ownership of the news, finding that: "Regulation to ensure a plurality of media ownership [was] still relevant and necessary."[128]

164.  As noted above in Chapter 2 on the economic context, declining advertising revenues and competition from alternative free news sources has had a severe impact on the economic viability of the national press. Mr Alan Rusbridger, Editor of The Guardian, told us: "From my point of view, the economic threat is easily the biggest threat. I think the next five years are going to be extremely sticky for all newspapers." He described how: "Three out of four of the quality newspapers in Britain are losing substantial sums of money."[129]

165.  It is crucial that the existing media ownership rules at a national level are examined to assess whether the correct balance is being struck between the need to protect the plurality of news ownership, essential in a democracy, and securing the financial viability of the industry. Any proposals to amend the cross-media ownership rules should form part of the Government's Communications review.

Public service broadcasting quotas

166.  The Communications Act 2003 sets a range of obligations which the commercial public service broadcasters must meet in return for the financial and other benefits which accrue to public service broadcasters (PSBs). For example, quotas, prescribing the extent to which certain genres of content are represented in broadcasters' schedules, apply to all of the BBC's analogue and digital channels, and also to ITV 1, Channel 4, Channel 5 and S4C in Wales. Some of these quotas are fixed for all public service broadcasters while others vary according to the broadcaster in question. In return for compliance with these and other requirements, such as delivery of current affairs programming, the PSB channels receive benefits including prominence on the electronic programme guide and universal carriage, even on cable and satellite platforms.

167.  In order to monitor compliance with these quotas, in 2006 Ofcom, with agreement from the broadcasters, provided a definition for the genres for which quotas are relevant.[130] The definitions apply for monitoring and research purposes only. Investigative journalism is not spelt out in the Ofcom definitions of news or of current affairs. However, those which are most relevant to investigative journalism are:

  • News, which is defined as:

(i)  Newscast or news bulletins providing national, international or regional news coverage;

(ii)  News magazines which may contain a range of items related to news stories, with comment and elements of general interest;

(iii)  Coverage of Parliamentary proceedings and political coverage;

(iv)  Weather forecasts and bulletins, including reports on air quality, tide times etc.

  • Current affairs, which is defined as:

(i)  A programme that contains explanation and analysis of current events and issues, including material dealing with political or industrial controversy or with public policy;

(ii)  Topical programmes about business matters and financial issues of current interest;

(iii)  Political debates, ministerial statements, party conferences.

168.  Since the Communications Act 2003, all public service broadcasters have continued to deliver beyond the statutory requirements set by Ofcom (and the BBC Trust) with regards to quotas for news and current affairs.

169.  John McVay, the Chief Executive of the Producers' Alliance for Cinema and Television (Pact), said that:

"I think it is really important that commercial broadcasters under their public service licences maintain levels of high-quality current affairs programmes with investigative journalism at the heart of it. As we saw with ITV diminishing its commitment to regional programming and its diminution of regional news, if that is not at the heart of the PSB licence I fear that it will leave the BBC as the only place doing programming like that. I think that is bad for plurality."[131]

170.  In order to encourage continued investment in broadcast investigative journalism, we recommend that Ofcom, working with the public service broadcasters, amends the definition of current affairs in the guidance on public service quota requirements to include, but not expressly require, investigative journalism in this genre. This would provide further stimulus for public service broadcasters to broadcast high-quality investigative programmes which we hope would be replicated by other commercial broadcasters.

115   Q 272 Back

116   Enterprise Act 2002, Part 3, Chapter 2 Back

117   Jeremy Hunt's letter to Ed Richards, Ofcom CEO, on 'Ensuring Media Plurality', October 2011:  Back

118   Communications Committee, 1st Report (2007-08): The ownership of the news, (HL Paper 122-I) Back

119   Q 348 Back

120   Enterprise Act 2002, Part 3, Chapter 1 Back

121   Principles governing an LMA in the Memorandum of Understanding between the OFT and Ofcom on Local Media Assessments, November 2010 Back

122   Ofcom News Release, Local Media Assessment on the proposed acquisition by the Kent Messenger Group of seven Kent newspaper titles from Northcliffe Media, 31 October 2011  Back

123   OFT news release, OFT refers Kent newspaper merger to the Competition Commission, 18 October 2011 Back

124   Q 543 Back

125   Q 544 Back

126   Q 691 Back

127   The Media Ownership (Radio and Cross-media) Order, 2011 No. 1503, June 15th 2011 Back

128   Communications Committee, 1st Report (2007-08): The ownership of the news, (HL Paper 122-I) Back

129   Q 57 Back

130   Ofcom Public Service Broadcasting Report 2011: Annexes: Information Pack E-background and methodologies; 21 July 2011 Back

131   Q 322 Back

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