Turnbull’s media reforms might not go far enough for Murdoch’s liking

Malcolm Turnbull reportedly wants to abolish Australia’s cross-media ownership and ‘reach’ rules in a mooted reform package. AAP/Lukas Coch

Earlier this month, reports suggested that Communications Minister Malcolm Turnbull is preparing to take a media reform package to cabinet. The Weekend Australian called it a “surprise move” and reported that media executives were “shocked”.

Turnbull reportedly wants to abolish the cross-media ownership and “reach” rules. He has long been a proponent of the view that these rules are outdated and have limited scope. He is also sympathetic to media companies’ claims that a lack of earnings growth, an uncertain advertising market, audience fragmentation across media platforms and the digital migration of advertisers have severely limited their capacity to grow.

So, what are Australia’s current media ownership regulations, and how do they work in practice?

The ‘two out of three’ rule

Under rules introduced in 2006, a person or company cannot control more than two out of three media platforms – commercial radio, commercial television and newspaper – in the same radio licence area. This rule’s objective is to maintain competition and diversity in the media services available in a particular area by preventing mergers between media organisations.

Cross-media ownership rules were first introduced in the Broadcasting (Ownership and Control) Act 1987 in preparation for the introduction of additional television licences in single-station markets (a process known as “equalisation” or “aggregation”). The rules were carried over to the Broadcasting Services Act 1992.

Prior to 2006, the rules prevented a person or company controlling both a commercial television licence and a newspaper, or a commercial radio licence and a newspaper, or a commercial television and a commercial radio licence in the same licence area. “Control” is defined as owning more than 15% of a company.

The ‘5/4 voices’ test

The “5/4 voices” test, also introduced in 2006 and also relating only to commercial television, commercial radio and newspapers, requires no fewer than five independent and separately controlled media operators or groups in a metropolitan commercial radio licence area, and at least four in a regional area.

The test was designed to ensure that Australians have access to a diversity of media voices – as distinct from a diversity of media channels.

The ‘75% audience reach’ rule

A person, in their own right or as a director of one or more companies, cannot exercise control of commercial television broadcasting licences whose total licence area population exceeds 75% of Australia’s population.

Before 1987, no person could control more than two television licences across Australia. In conjunction with the cross-media ownership rules introduced in that year, the two-licence restriction was replaced with a 60% reach rule. This meant that the population of the licence areas controlled by one person or company could not exceed 60% of the total Australian population.

This rule’s introduction prompted then-treasurer Paul Keating to observe that media companies would have to choose between being:

… princes of print, queens of the screen, or rajahs of radio.

This rule was expanded to 75% in 1992. The practical effect of this rule has been to create separate metropolitan – for example, the Seven, Nine and Ten networks – and regional – Prime, WIN, Southern Cross Austereo – networks. However, the regional networks have negotiated affiliation agreements with the metropolitan networks to screen the latter group’s programs.

Regional and rural broadcasters are required to screen minimum amounts of local news and other locally significant material. This rule’s removal would permit mergers between metropolitan and regional broadcast networks. That could in turn have an impact on local content provision.

‘One to a market’ and ‘two to a market’ rules

A person may not control more than one television licence in a licence area, or more than two radio licences in a licence area.

There are currently 27 television licence areas and 105 radio licence areas in Australia.

Why the reforms might face opposition

When news of potential media reforms broke, News Corp CEO Rupert Murdoch said:

Murdoch, hardly a defender of restrictions on media activity, signalled opposition to a reform plan that had not yet been made public on the basis of a belief that other players had been consulted while News Corp and Foxtel had not. Murdoch’s tweet also implied that historical ties are leading Turnbull to favour free-to-air television interests over those of subscription television businesses such as Murdoch’s.

In the 1980s and early 1990s, Turnbull worked for and with Kerry Packer, the former proprietor of the Nine Network, although their relationship ended badly. Questioning Turnbull’s impartiality in the way Murdoch has done is a provocative move, which could backfire.

Murdoch is less interested in media ownership reform than in changes to another long-standing regulation. News Corp Australia CEO Julian Clarke later restated the company’s expectation that:

… any package of reform includes severely reducing the length of the outdated anti-siphoning list.

The anti-siphoning list – sporting events deemed so important that they must be screened on free-to-air TV – limits Fox Sports’ ability to purchase rights to show sport. It has long been the major bone of contention between free-to-air and subscription television in Australia. Fox Sports is 100% owned by News Corp.

Murdoch’s intervention indicates that the government’s desired consensus among media proprietors is far from assured.

Turnbull’s immediate response suggests that he is not intimidated by Murdoch’s jibes. The day after Murdoch’s provocative tweet, in an exclusive interview with News Corp’s rival Fairfax Media, Turnbull argued that the legislated availability of sports on free-to-air television is “a very Australian arrangement”. The rules, he observed:

… strike a balance between egalitarianism and our sense of a fair go on the one hand and strict economic rationalism on the other.

It remains to be seen whether the same can be said about changes to media ownership rules.

Critics of these rules argue that they are ineffective because they do not apply to subscription television, national newspapers, telecommunications companies or internet services. The rules are also associated with radio licence areas, and so fail to account for emerging regional, national and international services.

As a result, the argument goes, the rules do not account for consumers having an increasing range of choices – and voices – in their media and entertainment diet.