Media Ownership (Radio and Cross-media) Order 2011

Lord Gordon of Strathblane Excerpts

Thursday 9th June 2011 Lords Chamber

[Lord Fowler]

My Lords, I declare a past interest as chairman of the Culture, Media and Sport Committee to which the Minister has referred, and also a past interest as chairman of two regional newspaper groups, the Birmingham Post group and the Yorkshire Post group.

It always seemed strange to us in the regional press that intricately detailed regulations were set in place for local and regional press, compared with the position nationally where not only has one owner been able to control almost 40 per cent of national newspaper circulation but where the last Government suddenly changed the rules on the purchase of media companies in this country. For years the policy had been that United States companies were prevented from taking over television companies here until proper reciprocal arrangements were in place. Overnight that position was changed, and although there are no reciprocal arrangements and we are prevented from taking no more than 25 per cent of a company in the United States, a company in the United States can take control of a television company here.

The last Government would have done much better to have looked at the position of the regional and local press, which were then under very considerable pressure—and indeed still are. Its advertising has been hit by the internet, its readership has been impacted by the fact that young people are looking for their news elsewhere; and its circulations have been damaged by changes in social habits. Whereas once people brought back their evening newspaper almost automatically after work, now the regular hours of work have changed and habits have changed. Exactly the same thing has taken place in the United States, not only with their newspapers, which face exactly the same pressures, but with their once-dominant evening television programmes.

As far as this country is concerned, all this has been very much to the public harm. Regional newspapers have had to cut back and in my view the public have suffered as a result. I emphasise that regional newspapers have not been the phone hackers employing private detectives to pry illegally into private lives. The regional press has had a very different tradition; it has stood up for local communities and has guarded the public interest against councils and others who have abused their power. It is for that reason that all the opinion polls show that the regional press is in fact much more trusted than the national press.

The irony of all this has been that the regional press has had to fight the commercial battle for survival with one arm tied behind its back. We have all talked about the multimedia world and the fast-changing media, but regional newspapers have been prevented from adapting to that world. This is what this order allows now to happen, and it is for that reason that I strongly support what the Government are doing and what my noble friend Lady Rawlings has said.

My noble friend referred to the argument of no organisation having no more than 50 per cent of local share. No one wants to see local monopolies any more than national monopolies. My only question is whether that should be better ensured through what would be very complex ownership rules or in some other way. My Select Committee considered this very point and its recommendation was that the public interest test was a more flexible tool than blanket restrictions on local cross-media mergers. It proposed that Ofcom should monitor such mergers and that the competition authorities should examine each on a case-by-case basis. I am delighted that the Government have gone down that road and have accepted that. Indeed, there is a role of this kind in all media mergers: a role for an organisation like Ofcom or something similar to review not just mergers but also the existing position of ownership of media companies and to debundle those companies if that dominance has been too great. If we can do that for airports, we can also do it for media companies.

Finally, this is an entirely sensible, first-class reform. It will be widely welcomed certainly in the industry and is very much to the benefit of the public generally. I congratulate the Government on it.

[Lord Gordon of Strathblane]

My Lords, I, too, welcome the draft order. I have no current interest to declare, except membership of the Select Committee on Communications, but it would be wrong to conceal the fact that I was for 33 years chief executive and subsequently chairman of a group of radio stations. The commercial radio industry, which has recently gone through a fairly rough patch, welcomes this draft order. Advertising revenue is down, in common with most media. Some of it may be down permanently with the arrival of the internet and some of it may recover if there is an economic upturn.

At the moment, more than half of local radio stations are losing money. Well over half the industry is off the stock market and controlled by private companies, one of which is Global and the other being Bauer Media in the United States. That is propping up companies which otherwise would go bust. Worse still, audiences have slumped, partly because far too many radio stations have been created by the Radio Authority and, to a lesser extent, by Ofcom.

I think I can prove that point by taking the House back to 1994-98 when, with 120 stations, commercial radio had a 50 per cent-plus share of audience against the BBC. Let us fast forward to 2008 when there were three times the number of stations—another 250—and the commercial radio share of the audience had slumped to 41.1 per cent. The problem was that the extra stations did not increase commercial radio’s share. It cannibalised commercial radio’s share and nibbled away at the successful stations which then, in my view mistakenly, cut back on their local output, which was why they got their audience in the first place.

It is good fortune for the radio industry that this draft order gives the industry a chance to reshape itself and to get it right this time. Stations faced with declining revenue and the high costs of running two transmission systems, one analogue and one digital, made the mistake of cutting back on the variable—the local output. I am referring to chains of stations which perhaps owned stations in six cities. As regards local output, a combination of the accountants and the marketing people said, “Oh well, we could cut that out”. They did that while forgetting, as the programme people could have told them, that that was what delivered the audience. The idea that local radio stations were superior in quality to the BBC is ludicrous. Yet even the smallest local radio station would wipe the floor with the BBC in terms of audience precisely because of its local output. Therefore, when the local radio industry lost or reduced its local output, it did a grave disservice to itself as well as to the public.

This draft order gives the radio industry a chance to regroup. It is permissive and not mandatory. No one has to do anything but if they want to do something they now can. I hope that my colleagues in the radio industry will realise that vertical chains do not make much sense for the public or themselves. Some station swaps will go on and there will be groups which own perhaps four stations in one town.

If you are one owner with four stations it is in your own interest to make those four stations different from each other, as do the BBC with Radio 1, Radio 2, Radio 3, Radio 4, Radio 5 and so on. At the moment, four separate owners all chase the same market and duplicate themselves. One owner would serve four markets, so already there is a gain to the public good. More importantly, with four revenue streams coming in, there would then be no excuse for not amortising the costs of local news provision over those four revenue streams. It can be required by Ofcom to return to the glory days of ILR when a first-class local news service was creating the audience.

There will be a gain for both the industry and the public because we are all concerned about the democratic deficit in terms of local news coverage. If we have local radio playing its full part as it once did in local news coverage, we have done something to reduce the democratic deficit. For that reason, I very warmly welcome the draft order.

[Lord Clement-Jones]

My Lords, I want to add the support of these Benches to the order. I do not have anything like the experience of my noble friend Lord Fowler in local newspapers or the noble Lord, Lord Gordon, in radio, but the importance of local media is obvious to all of us, whether it is radio, television or newspapers. Surprisingly, we are looking at this order rather late in the day. The other place looked at it in March and, in view of its importance, I do not understand why it has taken us quite so long to consider it.

It is clear that this is extremely evidence-based. As the Minister mentioned, we had the CMS report in April 2010 and the Ofcom report in August 2010. Although the noble Lord, Lord Fowler, did not refer to it, the Communications Committee, of which I declare current membership but was not at that time a member, looked at this whole area and was rather more prescient, strangely enough, than the Newspaper Society. The Newspaper Society’s evidence was described as rather upbeat but the committee was rather more sceptical. It said that such figures which were produced by the Newspaper Society showing buoyant advertising revenue and so on can be deceptive. Of course, 2008-09, in terms of the dropping away of classified advertising revenue, readership and consumer habits in the recession, has been crucial and is why we are in the position that we are today.

In a sense, Ofcom was told to go away and do its homework again by the Secretary of State. I shall come to what I think the reasons are for that. Ofcom acceded to the argument to deregulate further than it originally thought it would on the basis that it thought that local TV, which is very much the brainchild of the Secretary of State, would impact positively on diversity and plurality. I suppose the other argument it gave, quite apart from the competition points that the Minister mentioned, was that the BBC will always be there to provide plurality, and it is very much to be hoped that the BBC will be there. But there is no doubt of the scale of the crisis or of the necessity, exactly in the way that the noble Lord, Lord Gordon, mentioned, to have cross-media businesses that really get to grips with the need for these organisations not to concentrate just in one area of media. In debate, I remember a positive speech made by the noble Lord, Lord Fowler, on free sheets. Perhaps it may have been rather over-regulatory as regards local authorities. Nevertheless, I am sure that the greater regulation of those free sheets from local authorities will help local media organisations, which would be a positive effect.