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"
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.
MEDIA PLURALITY AND THE PUBLIC INTEREST
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was subsequently withdrawn by NewsCorp in the wake of the phone-hacking
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. If the
Secretary of State intervenes, he will then be able to consider
- 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
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?
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
- 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
- Whether 25% would be the right threshold for
invoking the public interest test in cases of organic growth;
- 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
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 groupswhich were seeking 25%, even more, in the
good, buoyant years of the 1990s, whereas we would get along with
10% or sohave 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."
155. Currently the OFT reviews information relating
to proposed mergers and, where necessary, refers any relevant
mergers to the Competition Commission.
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."
This had significant bearing on a recent attempted local media
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."
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."
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."
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."
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."
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.
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
THE NATIONAL CROSS-MEDIA OWNERSHIP
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
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."
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."
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.
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
(iii) Coverage of Parliamentary proceedings and
(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,
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."
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
Enterprise Act 2002, Part 3, Chapter 2 Back
Jeremy Hunt's letter to Ed Richards, Ofcom CEO, on 'Ensuring Media
Plurality', October 2011: http://www.culture.gov.uk/images/publications/CMS_188245_Ensuring_Meda_Plurality.pdf
Communications Committee, 1st Report (2007-08): The ownership
of the news, (HL Paper 122-I) Back
Q 348 Back
Enterprise Act 2002, Part 3, Chapter 1 Back
Principles governing an LMA in the Memorandum of Understanding
between the OFT and Ofcom on Local Media Assessments, November
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
OFT news release, OFT refers Kent newspaper merger to the Competition
Commission, 18 October 2011 Back
Q 543 Back
Q 544 Back
Q 691 Back
The Media Ownership (Radio and Cross-media) Order, 2011 No. 1503,
June 15th 2011 Back
Communications Committee, 1st Report (2007-08): The ownership
of the news, (HL Paper 122-I) Back
Q 57 Back
Ofcom Public Service Broadcasting Report 2011: Annexes: Information
Pack E-background and methodologies; 21 July 2011 Back
Q 322 Back