Anyone with knowledge of the media market knows that it is changing rapidly. Traditional media (TV, newspapers, magazines, radio) is under intense pressure from digital behemoths such as Google and Facebook as audiences have migrated online. Yet the media landscape is still being hamstrung by a draconian and ludicrously outdated set of ownership laws that literally predate the advent of the internet. Only now are the controversial two-out-of-three rule and the 75% reach rule being considered for repeal in the Senate. Yet there are no reach rules for Google or Youtube, and none for Facebook and Instagram, or for online streaming services such as Netflix or Stan. Separation of channels is equally futile. In today’s world, everything is connected and a single company can broadcast digital media over ‘smart’ TV’s, digital radios and online newspapers. The rule today would make just as little sense if it was based on the separation of tablet, mobile and desktop channels.
The playing field is not fair and ailing legacy businesses like broadcasters Seven, Nine and Ten, or newspapers like Fairfax are waiting patiently for regulatory reform, while they bleed advertising revenue share and lose audience. Ironically, media ownership laws have weakened the long-term viability of strong independent media businesses, the very thing regulators were trying to ensure in the first place. ACCC chairman Rod Sims has previously echoed such sentiments, saying “we need to ask whether the two out of three rule is preventing the efficient delivery of content over multiple platforms, and should be reviewed to see whether it is still relevant for the preservation of diversity”.
It was curious then, to see the recent concerns raised by the ACCC over the proposed merger between outdoor media companies, APN Outdoor and oOh! Media. Outdoor has been a beneficiary of the digitisation of billboards and other smaller format screens but by and large, it is still one of the smallest categories in the media landscape and represented by a handful of local firms. The regulator contended that a merger would give the combined group too much pricing power with both its customers and landlords. It used a narrow definition of outdoor as a self-contained market to argue that the merger would result in excessive concentration. Given the majority of ad campaigns are handled by large agencies which apportion the budget over a variety of channels, the ACCC’s view did not appear to be grounded in commercial reality. As a channel, outdoor competes daily with radio, digital, TV and print – evidenced by contract losses last year by APO whereby a large client moved spend from bus ad’s to online.
It sets a dangerous precedent in our view, just at a time when it seemed like the regulatory framework in Australia was being rationalised and reformed. Forced separation in this manner displays a fundamental lack of understanding as to the mounting competitive pressure from digital giants like Google and Facebook. Media is a landscape spread over many channels. Traditional media companies are suffering not because the market is shrinking, but because their share of the wallet has plummeted. Such trends are only likely to get worse from here and without consolidation across all media channels, we could very quickly see the demise of strong independent local firms. Regulation should be designed to promote healthy sustainable industry structures, not to prevent necessary consolidation.
Figure 1. Share of total AU ad spend by category
Clime owns shares in APO in at least one of its portfolios.