Tag Archive for lse media policy project

Media Plurality Series: The impact of a 20% ownership cap is not so ‘minor’ – Rob Kenny

Rob-KennyIn response to LSE Media Policy Project’s policy brief on modelling proposed media ownership limits [PDF], Rob Kenny of Communications Chambers counters one of the report’s conclusions and explains why he thinks such limits would have significant impact on the media market. This is the latest post in our joint series with the LSE Media Policy Project.

Last week Justin Schlosberg (of Birkbeck, University of London and the Media Reform Coalition) and I debated media plurality issues at an LSE event. We agreed (I think) on the objectives of media plurality, but had very different views on the merits and form of regulatory intervention.

At the event Justin presented a paper Modelling Media Ownership Limits. This paper contains much useful material, but I write now to question one of its conclusions.

The paper sets out various proposed media ownership caps to support plurality, and their likely impact. For brevity I will focus on the caps proposed by the Media Reform Coalition (MRC), which are typical. In brief, they are:

    • At a 15% share of a media market, behavioural remedies would be applied such as the appointment of an independent panel to oversee editorial policy
    • At a 20% market share, ownership limits would be applied to ensure no person or entity had a controlling stake in the media entity

Justin’s paper suggests that “the impact on markets [of these caps] would be relatively minor”. However, this seems a bold claim.

Selling off the Sun and the Mail?

Both the Mail and the Sun have shares of the national newspaper market of over 20%. Thus under the MRC’s rules, both these titles would need to be publicly floated as independent entities. It is not at all clear that there is much public demand for the shares of new newspaper companies, particularly ones that would have no ‘take over premium’, since they could never be acquired. Thus the value placed by the public markets on a new ‘Sun PLC’ or ‘Mail PLC’ might be well below its true value. Moreover, there would be the listing costs to be borne, and the future costs of being a public company. Ultimately these would all be costs borne by the current owner (since they would be factored into the initial sales price). The current owner would also face the loss of any synergies with the rest of the group, and the intangible costs of loss of control.

What would a rational owner do when faced with such a forced sale? Presumably seek to avoid it by bringing the title’s share down below the 20% mark – relatively easily done through a price increase (which would keep revenues flowing but reduce circulation). The result would be a further reduction in newspaper readership. Moreover, it would severely discourage any future investment in those titles that might once again increase their share, and trigger an enforce sale.

Nor do the problems end there – if the Sun and the Mail reduced their share, then someone else would gain it. The Mirror could easily find itself close to or above the 20% share mark, forcing it to be spun out, or potentially to reduce its own circulation to avoid that fate. There is a clear risk of a vicious circle, and at minimum an acceleration of the already alarming decline in newspaper circulation.

Putting Sky News out of business?

Serious though the implications for newspapers are from a ‘20% rule’, they are far from the most drastic consequences. Because of Sky’s provision of wholesale radio news, the paper suggests that Sky News would fail the 20% test. However, it is hard to imagine Sky News being viable as an independent company – it is substantially loss making. In such cases the paper allows that “an equity carve-out or the transferral of voting rights from shareholders to employees” would be appropriate. It is not clear what is meant by an equity carve out – who would be interested in owning any number of shares that had no prospect of paying dividends, but rather required constant subsidies?

Conceivably voting rights could be transferred to employees, but would this have any practical benefit? If a Sky News remained utterly dependent on its parent for financial support – and by extension, the employees remained dependent on the goodwill of the parent for their jobs – how much real editorial independence would they have? Indeed, why would we expect the parent to continue to support a loss making, uncontrolled entity? Ownership regulations could put Sky News’ life at stake.

Within wholesale TV news, ITN is close to a 20% share – a relatively small drop in BBC consumption or the disappearance of Sky News could push it over the threshold. Once again, there are real concerns whether an independent ITN would be viable as a public company. In 2012 it made a pre-tax profit of just £1.5m, which contrasts to its net liabilities of £60m – without the support of its parents, it could well be bankrupt.

Thus the rules proposed by MRC could jeopardise the future of some leading news providers, accelerate the decline of newspaper circulations and act as a major disincentive to investment. It is hard to reconcile these significant risks with a view that the rules’ impact would be “relatively minor”.

Media Plurality Series: Is Ofcom’s ‘Share of References’ scheme fit for measuring media power? – Steven Barnett

steven_barnettKicking off our joint media plurality series with the LSE Media Policy Project, University of Westminster’s Steven Barnett argues that the “share of references” method of measuring media power is not sufficient. 

At the heart of any discussion about plurality and media ownership lies the concept of power: for democracy to function properly, the exercise of power over public opinion, law-makers, opinion-formers and elite decision-makers must be properly distributed and not become concentrated in a small group of individuals or organisations.

Principles of media power

This essentially abstract notion of media power was implicitly addressed by the communications regulator Ofcom in its advice to the Culture Secretary on “Measuring media plurality” in June 2012. It defined plurality with reference to what it called “desired outcomes of a plural market” and suggested two overarching principles:

• Ensuring there is a diversity of viewpoints available and consumed across and within media enterprises.

• Preventing any one media owner or voice having too much influence over public opinion and the political agenda.

These principles were adopted by the government in its consultation on Media, Ownership and Plurality in July 2013 and are generally accepted as a sensible interpretation of the democratic underpinnings of media plurality. They encapsulate the notion of power – over dissemination of news and opinion as well as over hearts and minds – and provide the philosophical basis for intervention in the market to promote a healthy and dynamic democracy.

Measuring media power – Ofcom’s approach

In order to gauge the nature and proportionality of that intervention – at what level concentration becomes dangerous and raises issues of democratically unacceptable power – it is necessary to generate some objective and justiciable criteria. Not only is this important for abstract reasons around justice and fairness, it is also essential for providing clarity to commercial enterprises making vital investment, employment and expansion decisions.

In an era when media sectors were discrete, convergence did not exist and there was little or no cross-ownership, it was relatively easy to impose sectoral limits by audience consumption: traditionally (though not necessarily logically) share of TV viewing, share of newspaper circulation, and share of radio listening. With convergent technologies and cross-ownership now an established fact, we need some kind of “currency” which permits measurement across sectoral boundaries.

Only one such currency has so far been proposed: Ofcom’s “Share of References”. In its June 2012 advice to government, Ofcom elaborated on the Share of References scheme it had first employed for its public interest test of News Corp’s proposed takeover of BSkyB in 2010. That scheme has never really been interrogated as a satisfactory proxy for measuring media power, despite its potential drawbacks.

A full explanation of how the scheme works is contained in Ofcom’s news consumption report published in September 2013. Briefly, share of references is calculated by asking respondents in a representative survey which sources of news they use “nowadays”, and how frequently. Each mention is counted separately and the figures are aggregated, culminating in a share for each news provider expressed as a proportion of all references for all news sources. In Ofcom’s words: “This produces a cross-media metric with consistent methodology and a consistent definition of news across all platforms.”

Share of References: why it is problematic

While superficially offering a solution to the perennial conundrum of cross-media measurement, this metric suffers from one fundamental flaw: by focussing entirely on consumption, it is bound by default to exaggerate the role of television and, in doing so, to distort the true picture of how media power is distributed in the UK.

In pure consumption terms, television’s dominance is clear. According to Ofcom’s 2013 News Consumption report, when asked about their news sources nowadays, 78% said television, 40% newspapers, 35% radio and 32% the internet. This ratio is a wholly predictable function of television’s ubiquity and accessibility, and of course the average 28 hours of weekly viewing. But does that really equate to power?

In three important respects, I believe this metric overstates the power of broadcast media and understates the power of the printed word, whether in hard copy or online.

First, it takes no account of the power to persuade, or the opinion-forming impact of print and online media.  The significance of “impact” was recognised by Ofcom in its 2012 advice to government, and in particular the significant influence which could be exerted by print media’s partiality and its agenda-setting role. However, Ofcom’s ideas for possible measurement “proxies” – importance, impartiality and quality of news source – all favour the television medium despite being, by their own admission, imperfect substitutes.

Impassioned, one-sided argument is an integral and powerful element of a free press. Our national newspapers are highly partisan, and the popular press in particular often elides news and comment.  While we cannot measure to what extent such editorialising drives popular opinion, intuitively a one-sided, opinionated approach will carry more weight than a carefully balanced approach. And yet the power to exercise that passion and thus to influence hearts and minds is entirely absent from this calculation.

Second, it takes no account of the power to set news agendas. Rigorous research is lacking, but there is plenty of anecdotal evidence that our national press plays a hugely important role in driving news agendas. Broadcast newsrooms are usually immersed in mountains of newsprint, and informal conversations with BBC journalists reveal a high level of editorial anxiety when bulletins are not covering a story which has featured prominently in the press.

Then there are the newspaper reviews: twice each evening on Sky and BBC News channels, at the end of every edition of Newsnight, on Sunday morning’s Andrew Marr show, and frequently mentioned on the Daily Politics and the Today programme. Both Sky and the BBC tweet the front pages of next day’s national newspapers every evening.

Third, it takes no account of the power to influence policy makers – parliamentarians, think tankers, civil servants, regulators. In his 2013 book Democracy Under Attack, former Guardian journalist Malcolm Dean published a meticulously researched account of how this press-driven influence has operated in a number of social policy areas. Moreover, evidence to module 3 of the Leveson Inquiry provided abundant evidence of how unduly powerful media corporations exert pressure on politicians and their policy-making. Four successive prime ministers admitted, either implicitly or explicitly, that they were bound too closely to News Corporation and Rupert Murdoch. That kind of power cannot be measured through share of references.

The conclusion is straightforward, even if the ramifications are not. It is inherent in Ofcom’s approach that television’s penetration and popularity equates to power. But that is an assumption which is at best unproven and at worst seriously misleading. If we adopt their Share of References schema uncritically, we may miss dangerous concentrations of power elsewhere. We therefore need to find ways of assessing media power in a broader sense than this limited cross-metrics approach will allow.

This post is adapted from a presentation to the Westminster Media Forum seminar on media plurality, 27 November 2013.