Will the Internet put an end to media ownership law?

How is the Internet and electronic commerce affecting laws in the area of media ownership — and what are governments in Australia and other countries doing about it?

With the majority of Australian media owned and operated by a handful of moguls who seem to be just shuffling the operations amongst themselves, is it too late to be asking questions about who's controlling news and information, and is such debate already redundant with the onslaught of the Internet?

If you listened to the operators themselves — the Packers, the Murdochs, Kerry Stokes et al — Australia has long been weighed down under strict media ownership laws brought in more than a decade ago by the former Labor Government. The crux of which is that those who own a newspaper in a capital city are not allowed to control a television station in the same city, and vice versa. For example, Australia's richest man Kerry Packer, who runs the Nine Network in Sydney and Melbourne, cannot by law control a long-time passion of his, the Sydney Morning Herald and The Age. This has not stopped him owning a stake in Fairfax, or indeed Murdoch buying shares in the Seven Network despite of his control of The Daily Telegraph. Both Murdoch's News Ltd and Packer's Publishing and Broadcasting Ltd (PBL) have managed to stay within the legislation and both are lobbying the current Coalition government to scrap cross-media ownership laws.

There are those within the government who say it's unfair to stop big companies competing with each other, including Prime Minister John Howard, but others think the cross media laws should be maintained. The issue flared up again recently with the opening of the government's Productivity Commission inquiry into media law which is expected to take a year, but Howard, "while he agrees changes should be made, was so badly burnt when he tried to garner support for the abolition of cross-media rule two years ago", he is reluctant to stir the beast. (1)

The obvious concern with more liberal media rules, is that there will be even less operators and as a consequence, "less points of view, a less critical eye on the news, politics and society". (2) Will the newspaper or TV simply become just another outlet for pushing the products of the owners? More to the point, with that already happening, will the Internet only add to that saturation? And will the Internet make these rules obsolete before the government can come to a decision?

As far as Packer is concerned, the answer to the latter is a big "yes". He said recently that he saw signs that both sides of federal politics recognises the "Internet and other technological changes were making Australia's media ownership laws redundant".(3)

Packer, who owns PBL Online which has a half share in the ninesmn Internet site, appears to be taking more of a global view of business recently, probably at the insistence of son James. He made news recently with a backflip on foreign ownership. The comments made by the long-time opponent of liberalising foreign investment laws were seen by some commentators as a means to "cement a relationship" with News Ltd. The now-American citizen Murdoch has long wanted to re-enter the Australian TV industry but has been kept at bay because his "foreign" status on top of his control of around two-thirds of Australia's major daily newspaper circulation. Interestingly, in something of an endorsement considering PBL and News' recent purchase of Seven shares, Packer added that "there's no point in foreign ownership (changes) if Rupert can't go and buy Channel Seven or whatever he wants to do". (4)

Packer's comments however received a cool reaction from Treasurer Peter Costello, who said "our policy hasn't shifted. The government policy has been to limit foreign ownership in newspapers and TV. If we were to shift that policy, we'd need to be convinced there were good reasons for it." (5) His Minister for Communication and the Arts Senator Richard Alston, however, has always appeared more forthcoming. He stated as far back as 1997 that the "rise of new communication technologies such as the Internet has eroded the ability of traditional media, to shape point of view and reduced the need for arbitrary limits on media ownership". (6)

Labor on the other hand has been even more non-committal on the issue. ALP communication spokesman, Stephen Smith, said the Opposition, remained "committed to the cross-media and foreign ownership rules" but had an "eye on the future". (7) While leader, Kim Beazley, has left "open the possibility of Labor agreeing to dilute cross-media ownership rules in the future, but rejected suggestions that short-term changes were needed to address the advent of new technologies." (8)

Despite this reluctance, Packer's comments have raised issues of the relevance of tight controls on an industry which has been blown apart by the Internet. Indeed, will it be worth Packer gaining control of a newspaper group if it is such an outdated medium? According to the Financial Review's Alan Kohler, it is all a matter of timing. He said the comments earmarked some common thought that the "Internet will make such regulation irrelevant by so fragmenting the business that the firms being protected from takeover, like John Fairfax, are themselves irrelevant". "If that happens then the regulations won't need to be removed, they just won't matter: no-one wants to buy a horse and buggy manufacturer when Henry Ford is already producing Model Ts". He said that it is essential for PBL to buy up Fairfax now while the Fairfax strengths are worthwhile to build up its online activities. "In buying Fairfax, the Packer group would be buying Australia's two leading classified advertising brands — the Age and The SMH — plus the leading collection of journalism brands and talent." "In the digital world of fragmented information sources, strong believable editorial brands like the Fairfax newspapers, supported by powerful journalistic resources, will hold the key to success." (9) Kohlar said if the journalists could be convinced to stay (with the help of former SMH editor-in-chief John Alexander who is at The Bulletin), coupled with the ratings success of Nine's news and current affairs brands, it could "withstand even the Internet cyclone". (10)

It would seem Packer's son James has an even wider vision: the "importance of global scale and the reality of the foreign competition that our media already faces now vastly outweighs the benefits of trying to protect our media from foreign ownership". (11) And father concurs: "I think the world changes and you can't just sit there in isolation. You are going to have a breakdown in local ownership anyway." (12)

Media commentators have stated that Packer's easing of his position against foreign ownership corresponds to concerns regarding Murdoch's announcement to start a fourth channel in 2006 when the TV moratorium is lifted. Also with James' more global vision, the family may need some foreign investment themselves. The Australian's Mark Westfield said Packer would rather "News own an established but rundown, network such as Seven...and likely chase the age demographic which watches 10 rather than Nine". (13)

Either way, the Australian Competition and Consumer Commission (ACCC) is also likely to take an interest and ask the intentions of Packer (owning 4.9 % of Seven) and News (up to three % of Seven). This is not the first time the two have joined forces, PBL owns 25% of pay TV group Foxtel, as does News which is the operator. There are reports that the pair are buying up Seven to destabilise chairman Kerry Stokes and ultimately for News to re-enter Seven as a controlling shareholder. As Westfield said: "Seven is shaping as the next testing ground for the foreign ownership rules limiting individual foreign owners to 15 % of TV, and 20 % in aggregate, and the cross-media rule which prevents News going to about 15 % because of its newspaper interests. Although CPH controls PBL, it can go as high as 15 % providing it has no directors." (14)

Packer's concerns are a little different, whose ownership comes under the Broadcasting Services Act of one-to-a market rule. This concern was raised and a verdict given recently by Australian Broadcasting Authority (ABA), in favour of Packer, after allegations he secretly called the shots at Fairfax and its newspapers. The matter hotted up following last year's appointment of former Packer group executive Brian Powers as Fairfax chairman in May. Packer's Consolidate Press Holdings sold a 15 % stake in the trust to Powers as part of his move to Fairfax, which kicked off the inquiry. But as he said: "If I controlled Fairfax, do you think they would be running those stories...I have no damn control." (15)

More interestingly these regulations apply only to this more traditional area of media — TV, radio and newspapers — and not other forms such as magazines, cinemas and the Internet. All these are outside the Broadcasting Services Act 1992 (BSA). While cross-media ownership could be considered at different levels — local , regional or national — the current rules are based on the notion that a license can be issues on a specific geographic as designated by the Australian Broadcasting Authority. This of course is blown out of the water when it comes to the Internet which has no such boundaries — a local product can be read and advertised either in Bondi or Berlin. The government's reasoning behind the policy — of competition, diversity and public interest — is also blown out of the water.

Areas such as diversity of programming has often been put forward as reason to fight against media monopolies. This however has not stopped Packer's group of interests putting together a travel show on TV, matched by a travel magazine put out by PBL, and following that up with an online service on ninemsn, which also contains the more lucrative element of booking travel — an area untapped in either its TV or magazine outlets. Such e-commercial extensions are mirrored by Fairfax and News Ltd.

There is no denying that the BSA provides no control over the dissemination of what is essentially the same information over a broader range of outlets — with more importantly a broader range of potential consumers which is the key issue with selling advertising revenue and if that includes getting consumers to your product by offering a free Hotmail account, so be it. At $450,000 it has been deemed a comparative small investment for PBL Online not only as the original inducement but to have an advertising platform to more than a million users. Packer is of course not alone in this pursuit. In all of this, diversity is not an issue.

With regard to the issue competition and the effect on it by the introduction of the Internet and the ensuing e-commerce, it has not been dealt with by the government. At the onset of the Internet several years ago, it pushed itself forward as an area of not only untapped wealth for advertisers and manufacturers but altruistically as a forum for untapped diversity of information. No longer were only several media conglomerates with the finance and resources to broadcast news and information able to publish, but this license was now effectively being opened to anyone with a PC and a modem. The ability to broadcast was no longer in the hands of the few and as a consequence the Internet was billed as a freeing up of information. While smaller agencies, of as little as one-person staff, could not match newsgroups such as CNN or NBC in terms of the breadth of its coverage, it could as effectively offer itself as an alternative on the same computer screen. At its best, the Internet would be credited with salvaging power back to the public, at its worst it could simply become another marketing outlet to push product dressed up as news or current affairs.


The issues of competition in the Australian market are touched on under the Trade Practices Act 1974 (TPA) which prohibits mergers that are likely to have the effect of "substantially lessening competition" in a market, and all deals with the "misuse of market power". Both these issues be levelled at the absorption of newspaper resources into online activities. What were essentially competitive forces would be pushed together to provide one source of news information for the consumer. It effectively sees the major TV network you are watching which advertises the same celebrities which are seen at the group's cinema chain, featured in the magazines, headlined in the morning newspaper and featured on the website. Such a convergence of enterprise is taken on an even more global scale by News Ltd's moves including Fox Studios and Foxtel. This source of convergence is unlikely to produce new media market but break down any distinction those original media markets had. This increased vertical and horizontal integration sees a reduction in ownership numbers and a consequent reduction in diversity.

So how do these media barons view the Internet? Despite its ability to absorb millions of dollars for little immediate return, the Internet is still a darling for the moguls. At present, none of their sites are making money, nor are expected to in the near future. According to The Australian's Media, PBL is spending about $35 million a year, and last year copped a loss of about $25 million. Fairfax is said to have invested $26 million for a loss of $13 million. News hints it is spending about a third to half of the others, losing $5 to $6 million last year. (16)

With this in mind, they are obviously looking a little further ahead than the next financial year, unlike those putting together the legislation. Maybe when a decision is finally made by the federal government as to which markets a mogul can own, they will be dealing with the wrong market.



6. Alston, Senator Richard, Media Ownership in Australia, Media Ownership in Australia Conference Papers, Communications Law Centre, Sydney, April, 1997, pp2-6.



1, 14. Westerfield, Mark, The Australian, April 1, 1999, p 21

2. Behind the News, ABC online, Tuesday May 13, 1997

3. SMH online, March, 1999.

4,5. Collins, Luke, and Lewis, Steve, Australian Financial Review, March 25, p 3.

7,8. Australian Financial Review, afr.com.au, March 1999

9, 10. Kohler, Alan, Australian Financial Review, March 25, 1999, p19

11. Australian Financial Review, March 23, 1999

12. Australian Financial Review, March 24, 1999

13. The Australian, Mark Westfield, April 7, 1999, p19

15. The Australian, March 9, 1999, p1

16. Media, The Australian, April 1, 1999, p8

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