Media industry consolidation looms

14_Media industry consolidation looms

By Lilly Vitorovich
(Australian Associated Press)

Australian media companies are finally free to marry as the federal government moves to abolish archaic legislation that has stifled the industry.

Communications Minister Mitch Fifield on Tuesday unveiled a package of changes that scrap regulations dating from the early 1990s, before the internet and pay television.

After more than a decade of lobbying by media companies, the government is dumping the so-called reach rule prohibiting a proprietor from controlling commercial TV licences that collectively reach more than 75 per cent of the population.

The two-out-of-three rule – which stops a proprietor from having interests in more than two sub-media industries – will also go.

Fairfax, Rupert Murdoch’s News Corp and the Nine Entertainment Group welcomed the planned changes, but Seven West said the reforms don’t go far enough.

“We believe the removal of these restrictions will provide substantial benefits to all Australians by strengthening local media,” Fairfax boss Greg Hywood said, adding that the changes set the platform for further reform in the future.

News Corp and Nine are expected to lead any industry consolidation because their balance sheets are in much stronger shape than other media players.

News Corp, which has extensive newspaper operations in Australia and owns half of pay TV company Foxtel, is likely to have its eye on broadcaster Ten Network.

Foxtel bought a 15 per cent stake in Ten in 2015, while News Corp’s co-chairman Lachlan Murdoch is a major Ten shareholder.

A News Corp spokesman described the legislation is “a step towards media reform”.

“But as the minister made clear it is crucial the two elements of the package must stay together if consumers and companies are to genuinely benefit,” he said.

He declined to comment on News Corp’s possible interest in Ten, which described the reforms as an important step in dismantling rules that made Australian media companies less competitive.

Nine chief executive Hugh Marks welcomed the changes but urged for more to be done to “compete effectively into the future with the global brands that have entered the market.”

But Seven West boss Tim Worner warned that the proposed overhaul will do nothing to encourage Australian programming unless TV licence fees are abolished.

Nine, Ten and Seven reported combined full year losses of nearly $3 billion in 2015, largely due to massive writedowns on assets including licences.

“The regulatory change that this industry is crying out for is to address the 4.5 per cent gross revenue licence fee that is crippling our ability to invest in local news, live sport, drama and other programming,” Mr Worner said.

However analysts believe the reforms could allow Seven to go on a buying spree.

“Prime Media is a very obvious target for Seven West Media,” Morningstar senior analyst Brian Han said.

Elsewhere, Nine has been linked to Triple M owner Southern Cross Media and reportedly held exploratory merger talks with its regional affiliate broadcaster WIN in 2015.

“Southern Cross is touch and go, it could either be a predator or a target, and don’t discount the scenario whereby Southern Cross does some sort of a merger with another partner,” Mr Han said.


Like This