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Environment and Communications Legislation Committee - 29/04/2016

MILLER, Mr Michael, Executive Chairman, News Corp Australasia

REID, Mr Campbell, Director, Corporate Affairs and Content Innovation, News Corp Australia

CHAIR: Welcome. Thank you very much for attending today. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. Is that correct?

Mr Miller : That is right.

CHAIR: I invite one of you to make a brief opening statement and then we will open it up to questions from the committee.

Mr Miller : Thank you for the opportunity to address the committee. News Corp does not come to this inquiry today asking for government fee relief or handouts, nor are we asking for government protection from competition or trying to postpone inevitable change. Instead we are here to support this legislation because it will benefit consumers. The reach and two-out-of-three rules should be removed and the legislation, as drafted, should proceed in its entirety. We believe it is a step in the right direction but still does not go far enough. Digital disruption has made the existing legislative framework out of date and redundant.

News Corp is unashamedly proud to produce more local content and broadcast more sport on television, despite the assertion of others, than anyone else in Australia. We produce more than three million stories a year for communities as diverse as Alice Springs, Port Douglas, Hobart and our mainland capital cities. We want to produce more local content, not less. We are committed to serving local communities whether they be the outback or regional, rural and metropolitan Australia. Our company has its origins in Sir Keith Murdoch's decision to invest in News Limited in 1949. Since then we have invested billions of dollars in Australia.

Our support of this legislation is based on the reality that Australia needs a legislative framework that recognises the challenges, opportunities and demands of today's media landscape. The current rules reflect the media industry of late last century, a time when the platforms available to deliver information and the choices for consumers were limited. There was no internet, social media or smartphones. Free-to-air networks were not multichannelled. There was no subscription television and streaming services and no digital radio.

The digital revolution has obviously changed everything. Australians now have greater diversity and choice for news and information than at any time in their history. But our existing legislative framework has not kept pace. It does not recognise the challenges of the companies to service consumer demand for local content to be delivered when consumers want it, on modern platforms, regardless of where they live. It also imposes out-of-date restrictions on how local companies operate and compete. It does not apply those restrictions to foreign competitors like Netflix, Facebook, Apple and Google. As this inquiry has heard, Rod Sims, the chairman of the ACCC—the consumer watchdog—discussed how removing the reach and two-out-of-three rules could lay the groundwork for even more diversity, better local content and stronger Australian companies to compete against foreign competitors. Let me put this to you: anyone arguing against removing the existing rules before this inquiry is really arguing to protect their self-interest, not the interests of the public.

Finally, I would like to address some issues raised by others. Firstly, while News Corp supports this legislation, we also believe all of the cross-media ownership rules should be removed for the same reasons, but we have accepted the call made by Prime Minister Malcolm Turnbull, when he was communications minister, for media companies to find a higher level of consensus. In our view this legislation is a step in the right direction and there is strong consensus amongst most people that the reach and two-out-of-three rules are now redundant.

Secondly, I reject the suggestions by others that this legislation has been created to allow one deal and the inference that this advantages News Corp Australia. You only have to read the financial pages to know that all of our competitors have been linked to possible deals and mergers. It is also worthwhile noting that the existing laws do not stop News Corp Australia from making investments. Regardless, we must satisfy the ACCC that any proposed investment will not lead to a substantial lessening of competition in what can be approved. That requirement will remain even if this legislation becomes law.

Thirdly, I would also like to reject any inference that a secret deal has been struck for the government to water down the antisiphoning rules after the election. We have been very open on our position that the antisiphoning rules are world's worst practice. They do not serve consumers. They have not guaranteed sports fans the best viewing experience. News Corp has made no deals and received no promises and no wink or nod—nothing. We are happy to take your questions.

Senator URQUHART: Were you consulted by the government in the development of this legislation?

Mr Reid : Not specifically. Obviously a lot of the issues that we are addressing here have been discussed amongst media companies for a long time. We have had good ongoing relationships and discussions with communications ministers and the department. But were we specifically consulted? No.

Senator URQUHART: The Public Interest Journalism Foundation has argued for the government to create an independent committee to review and report every three years on the degree of plurality and diversity in the sources of news and information in Australia as well as the adequacy of local news services in regional Australia. Would you support such a body as a safeguard to ensure that the ACCC can perform the role that you say it will?

Mr Miller : 'Public interest journalism' is not a term I am familiar with.

Senator URQUHART: It is a foundation. So you are not aware of their comments?

Mr Miller : No, I am not.

Senator URQUHART: That is okay. I will move on if you are not aware of that. I do not want you to have to try to speculate on it. Maybe I can rephrase it. There has been a suggestion from an organisation that an independent committee be set up to review and report every three years on the degree of plurality and diversity in the sources of news. Would you support that sort of independent committee?

Mr Miller : I do not think it is necessary. I think we have a range of media that already satisfy those areas that you are suggesting need to be reviewed.

Senator URQUHART: So you are satisfied that the ACCC can undertake its role in terms of competition without that committee?

Mr Miller : Yes, definitely. I think we referred to that in our opening statement.

Senator URQUHART: There were reports yesterday that the government is planning on slashing millions of dollars from licence fees paid by free-to-air television station owners. Would you support this change if the government goes ahead with it?

Mr Miller : Our position has consistently been that change in legislation should be holistic. We said in our opening statement that the removal of reach and two out of three is a step in the right direction but does not go far enough.

Senator URQUHART: That has been a pretty consistent theme from a number of witnesses throughout the inquiry as well.

Mr Miller : One to a market, two to a market, the voices rules in addition to antisiphoning and licence fees should be viewed holistically. I will make the comment having read this morning the speculation that next week's budget will see a reduction in licence fees that this legislation, particularly the reach rule, seems to benefit the free-to-air metropolitan television networks.

Further to that, the antisiphoning rules that are in place benefit the free-to-air networks. Further reductions in licence fees seems to be benefiting one, where our position has been that there should be more holistic change that ensures an open market for all media to compete with each other rather than benefiting one and not another. We are not directly impacted. It improves the financial position of the free-to-airs and allows them to compete more aggressively with us.

Senator URQUHART: But it does not have any effect on your organisation?

Mr Miller : No, except to say that it does equip the free-to-airs if you look at it holistically with both the reach rule particularly and the antisiphoning. We do not feel that is the balanced media market that we ought to operate in. So you need to look at it in combination and not in isolation.

Senator URQUHART: I will just go back to the holistic approach because, as I have said, that has been the theme from many, many witnesses that we have had in this inquiry. You are saying that the reach rule and the two-out-of-three rule are predominantly out of date and you agree they should go.

Mr Miller : That is right.

Senator URQUHART: But is it reasonable to do that and not look at other issues? You are saying it should be more holistic. If you had the option of saying, ' This is how it should be done,' how would you propose that that be done?

Mr Miller : The submission we previously made covered one to a market, two to a market, the voice rule, the reach rule, the two-out-of-three rule—

Senator URQUHART: So effectively it follows—

Mr Miller : and antisiphoning. We are advocating a very level playing field not just for our local media players but also allowing us to compete with international players that are now in our market. That was not the case 15 years ago.

Senator URQUHART: That landscape has certainly changed.

Senator PATERSON: Take me through your concerns with the siphoning regime as it is.

Mr Miller : It is important to understand that this is not just about the list. As you pointed out, it is a regime. It is about a process as well. It is about understanding the process. The first thing is that a large number of sports events get offered first to free-to-air networks. Foxtel cannot bid and participate in that process. It does not prohibit at the moment though—and this is where the first mistake is—new players, such as YouTube, Google and Twitter, from participating in those particular options. These are real players in sports now. In particular, if you look at the US market, Twitter now have rights to NFL games on a Thursday night. We are seeing YouTube pick up IPL rights. We see them picking up major league baseball. In this market, we are seeing Optus picking up rights to EPL at large sums. So we are seeing new competitors that are not captured by the existing legislation. It is anticompetitive.

The government's independent economic adviser, the Productivity Commission, said both in 2000 and in 2009 that the current regime is anticompetitive. I will quote them on this. They said it is:

… a blunt, burdensome instrument that is unnecessary to meet the objective of ensuring wide community access to sporting broadcasts.

Look at what the sporting organisations are saying about the ability for them to option their rights at full value. Previously the CEOs of the seven major sporting codes—AFL, NRL, Cricket Australia and others—have submitted that they believe that they are not able to maximise their rights in the current options process because of what antisiphoning prohibits.

What we have here is world's worst practice. In New Zealand there is no antisiphoning. In the US there is no antisiphoning list. In the UK there are 10 events on an antisiphoning list. Three of those are FIFA and Olympic tournaments and then there are seven other events. How many do we have in Australia this year? It is 1,900. We have world's worst practice. We are meant to be a sport-loving nation, but we are unable to ensure that our sporting codes and our public are getting a fair amount of sport at the times they want.

Senator PATERSON: We heard some evidence earlier today from Channel 10. I think it was one of the Channel 10 witnesses who said that all sports on the antisiphoning list are broadcast. That does not ring true to me. Is that right, in your experience?

Mr Miller : You have to look at the detail. For an open international event that is on the list they showed the final round but not all rounds.

Senator PATERSON: For example, they do not show every AFL game. Some of them they on-sell to Foxtel.

Mr Miller : Yes. They can buy every game, but they make an economic decision that they do not want to.

Senator PATERSON: So the antisiphoning list does not even protect the actual broadcast of all those sports; it just protects the rights of the free-to-air broadcaster to obtain those broadcast rights first.

Mr Miller : That is right. It happened recently with the ICC World Twenty20. Those rights were sold two days prior. From a subscription point of view, that was on a list. In this business of subscriptions, you need time to market that. You need to give people time to subscribe. The way that this works does not allow an open option whereby people are made aware and so have the ability to watch. And Australia's love of cricket is well known.

Senator PATERSON: I want to ask a question about other competitive pressures that you as a business face. How significant is competition from the ABC in the context of news and information moving online in a way that the ABC did not offer before? In effect they are now competing with your newspapers in a way that they might not have previously.

Mr Miller : And they have made that decision. I am not sure it is necessarily within the charter, but they have taken the view not to compete with our company and other more commercial operators by offering content which is widely available otherwise. They have done it to the detriment of coverage in regional areas. I cannot really comment too much about their decision. It does not impact us. It impacts audiences. We welcome competition and we are not advocating, necessarily, a change to ABC. As I say, 'Is their charter relevant to today?' is probably the larger question. But in terms of them competing directly with us, they are not the only ones.

Senator PATERSON: Thank you.

CHAIR: Thank you. Mr Miller, can you expand further on your comments about the ACCC having enough powers, particularly in relation to ensuring media diversity? Can you expand a bit more on your company's position on the effectiveness of the ACCC?

Mr Miller : We think the ACCC is well equipped and understands the commercial markets and different audience markets. They consider new media as part of the process that they undertake. We think that that is an independent process, which we have signed up to again and again in terms of different transactions we have undertaken in the past. We think that they are well equipped and have shown themselves thus far to be well equipped in evaluating competition within markets.

CHAIR: Unfortunately, Senator McKenzie has had to pop out, so this particular question is from her. Do you think that non-commercial interests at the heart of a healthy media and journalism environment can be protected by a regulator of commercial interests?

Mr Miller : There are number of elements to that question. In terms of regulation, we do not believe that the media should be regulated at all. If anything, the people who regulate it are the public, our audiences and our readers, who decide whether they are going to consume us or not.

Mr Reid : Is there an implication of a subsidy in the protection of non-commercial interests?

CHAIR: Yes, I believe that is where she is coming from.

Mr Reid : To that, I would say of the diversity of the marketplace in discussion that the barriers to entry for people wanting to produce have gone from enormous barriers to zero barriers. We would contend that the diversity of views and the ability to pursue any kind of journalism is greater now than it has ever been, and any kind of regulatory or committee framework to oversee that is a waste of resources and unnecessary in the modern landscape.

CHAIR: In your submission, and you have reflected it again here today, you state:

More than any other time in history, the power is in the hands of consumers to decide their media consumption.

For News Corp, what internal policy directions might be available for your own organisation to promote the consumption of locally produced content?

Mr Miller : Locally produced content is our DNA. We have over 100 editors, who make decisions based on what best serves their local communities, be they geographic or demographic. We want 2,500 journalists whose core mantra is to service the needs of those communities. As I have already spoken about, the measure of our success is the size of our audience. I think that differentiates us particularly from the international players. The way I see the two-out-of-three rule is that it is no longer three. We talk about it as being the multichannelling of the free-to-air networks, the subscription TV, the Foxtel, the digital radio, the social media platforms as well as the internet platforms.

In the month of March there were 25 websites that had a million unique audience or more. Of those websites, 11 out of the 25 were like The Guardian. They were BuzzFeed and the Huffington Post. They were Daily Mail. So the international players are here. They are competing and they are main media. What differentiates them from us is that we have our community's interest in mind. They do not have the same number of editorial resources, and, while our audiences are also consuming them, they turn to us for local context, local information and local news. That is where we see our differentiation and our success wanting to be in the future, and this legislation is important to ensure that we can maintain the quality that currently our audiences receive.

CHAIR: On the basis of that, we have had a lot of what you just said there—evidence that abolishing the two/three rule would reduce diversity, particularly out in the rural and regional areas. What I understand you are saying is that you think—and it is irrelevant because it has now gone past that—that that is not the case and that it might actually increase it and help you survive and sustain in rural and regional areas.

Mr Miller : Yes, and be stronger and more sustainable. We have a long history of investing in local content, and that is the ambition that we want to maintain and continue. Again, Rod Sims has commented that the passage of these two pieces of legislation will allow the local media players who have vested interests in local communities to compete with the internationals that are coming into the market. They are very well resourced. They are getting global efficiencies, and we do not take them lightly.

CHAIR: Your submission and many others to this committee have said that these two measures are required and required simultaneously and urgently but there is a long journey ahead of us for reforming to really meet the needs of the 21st century digital revolution. This is my take-out of the evidence so far. How urgent do you think these initial reforms are in terms of, particularly, rural and regional media for their viability in the short to medium term?

Mr Miller : In terms of urgency, in many ways we are too late. I think, as Dr Muller said this morning, the horse has already bolted in terms of technology. We are supportive of the legislation. We do feel it has not gone far enough, and our position has been that we should just be getting on with this and more. On urgency, I am not suggesting any hesitation or a drawn-out process. As I said in the introductory comments, we are not here to obstruct it in anyway. Our request is to get on with it and get on with more as well.

CHAIR: As there are no further questions, we thank you very much for appearing here today. We greatly appreciate you taking the time to come here and give evidence. Thank you.