OFCOM: MEASURING MEDIA PLURALITY (‘TAKE TWO’)/media/Files/us-files/insights/white-papers/... · cost characteristics) will be a few large firms (oligopoly) rather than thousands

SEPTEMBER 2012

OFCOM: MEASURING MEDIA PLURALITY (‘TAKE TWO’)

Culture minister Jeremy Hunt asked Ofcom to consider the feasibility of

measuring media plurality across platforms (including which platforms,

the best approach, and how to take account of the BBC). Ofcom was

also asked how practical it is to set limits to protect plurality without

unnecessarily restricting growth or producing perverse incentives. In this

paper we consider whether Ofcom’s advice stacks up and review trends in

media plurality since 2003. We think that there has been a sea change in

Ofcom’s view of the world since it investigated the Sky/News takeover.

OFCOM: MEASURING MEDIA PLURALITY (‘TAKE TWO’) 1

OFCOM TAKE TWO: MEASURING MEDIA PLURALITY1

IntroductIon

In this paper we examine the backdrop leading to Jeremy Hunt’s request to Ofcom to

conjure up a measurement-based approach to safeguarding media plurality in the UK.

We consider the definition(s) of media plurality, trends in media plurality since the 2003

Communications Act, briefly review recent assessments of media plurality in the UK and

assess whether it is possible and appropriate to measure it. And whether we agree with the

recommendations of Ofcom’s subsequent report:

“Measuring media plurality: Ofcom’s advice to the Secretary of State for Culture, Olympics,

Media and Sport.”2

While historically matters of media plurality have been dealt with during competition/

communications legislation and M&A activity, Ofcom in its report on the plurality issues

arising from the News Corp/Sky deal suggested that plurality should be considered more

broadly and in cases where market growth or company exits led to concerns.3 We thus

review whether it is practical or advisable to set absolute limits on news share more

generally and also assess the impact of the internet on news provision and consumption.

While we largely focus on plurality across separate independent media groups (‘external

plurality’) we note that also of importance is plurality within individual media groups

(‘internal plurality’).4

Preamble

Much of the focus on media plurality issues tends to overlook some important

characteristics of the news supply chain: the cost of providing quality news journalism is

high. Journalists require high quality training across a broad range of skill sets and highly

regarded news media have extended reach and depth, with local, national and international

presence and significant resources devoted to investigative journalism. Such costs render it

difficult to make a commercial return – confirmed by examining the profit and loss accounts

of ITN, Sky News, The Times, The Guardian, the regional press and so on. Simple economics

tells us that the ‘natural’ industry structure of this part of the news business (given such

cost characteristics) will be a few large firms (oligopoly) rather than thousands of small ones

(perfect competition). While not a market failure – more a ‘social’ failure – a possible key

question to pose to public policy makers is: should (can or how?) there be intervention at

this stage of the news supply chain?

Despite such economics upstream, there is a rich array of media (television, radio, national

press, regional press, news magazines and online news media) with sufficient numbers of

providers in each (with thousands online). Thus there are numerous news media outlets

and a large number and range of voices available. Today’s news media environment is

sufficiently plural and considerably more plural than in 2003.5

the Secretary of State asked ofcom to devise a measurement-based approach to safeguard media plurality in the uK

Highly regarded news media have extended reach and depth, with local, national and international presence and significant resources devoted to investigative journalism

1 Thanks go to Antonio Bavasso, Partner, Allen & Overy for introducing the terms Ofcom ‘take one’ and ‘take two’ in relation to Ofcom’s two recent reports on media plurality at FTI Consulting’s breakfast briefing on media plurality. (See: http://www.fticonsulting.co.uk/global2/critical-thinking/featured-perspectives/media-plurality/index.aspx)

2 See: http://stakeholders.ofcom.org.uk/binaries/consultations/measuring-plurality/statement/statement.pdf3 Ofcom’s report on its ‘public interest test’, submitted to the DCMS minister. See http://stakeholders.ofcom.org.uk/binaries/consultations/public-interest-test-

nov2010/statement/public-interest-test-report.pdfKnown also as Ofcom’s ‘PIT’ report. 4 We consider in brief internal plurality in relation to Ofcom’s recommendations in its plurality report. 5 The 2003 Communications Act deregulated media ownership and at this time parliament deemed that media plurality was sufficient. As we demonstrate in this

paper, media plurality has since increased.

2 FTI CONSULTING, INC.

One of Jeremy Hunt’s questions to Ofcom is whether to include the BBC in any assessment

of media plurality. We think that is a no-brainer. Of course the BBC should be included;

it adds to the number, range and variety of voices available. Interestingly, as we discuss

below, Ofcom’s main concern about the BBC is not so much whether it should be included

in any assessment but more about a possible lack of plurality within the BBC itself.

Access to high quality news from a number and range of sources is, de facto, important

for all citizens; it is good for the public.6 So it is logical that the BBC is charged with the

provision of high quality and impartial news: on TV, on radio and online, and with training

(see the BBC College of Journalism, part of the BBC Academy).7 If not for the BBC, the level

of funding for news journalism would be considerably lower and it is unlikely that the

private sector could step in and match the money.8

We do not believe that the media plurality regime should be more stringent. Recall that

under the current regime one way to get the News Corp/Sky deal through would have

been to close Sky News!9 The very system that was supposed to preserve media plurality

could have reduced it. Yet Ofcom in December 2010 considered that the current regime is

inadequate and that government should:

“…consider undertaking a wider review of the statutory framework to ensure plurality in

the public interest. Specifically, we believe there may be value in providing for intervention

where plurality concerns arise in the absence of a corporate transaction involving media

enterprises and which are not safeguarded by the current media ownership rules.”10

In our view to set limits on shares arising from exits or organic growth is nether practical

(share of what?) nor advisable (inevitably the BBC would be scaled back). Our advice is to

leave the system as is, but as a minimum there needs to be some agreed upon principles

for conducting the public interest test (‘PIT’). During any future public interest tests, the

recipients of the completed output should not cajoled into panic on the basis of a barrage

of scary charts that are not in fact accurate indicators of media plurality. And there should

be clear guidelines on how to conduct the test. Indeed, there is a public interest test

‘template’ available already (see the Competition Commission’s (“CC”) appraisal of plurality

in its assessment of the Sky/ITV case).11

overvIew of tHe current medIa PluralIty regIme

In the UK, like in many territories, there are ownership rules in respect of television, radio

and newspapers. The rules, typically set by parliament, aim to help protect plurality –

allowing citizens access to a variety of sources of news, information and opinion. While an

imperfect proxy, as Ofcom states:

6 While good for the public, news is not a ‘public good’ but arguably it is a ‘merit good’ and certainly a ‘Reithian good’.7 We note that all public service broadcasters are subject to news provision requirements. 8 We of course acknowledge that other broadcasters, other media outlets and in particular national and regional newspapers and fund news journalism.

See “The provision of news in the UK”, Mediatique, June 2012, pp 6-7.9 While we pass this remark, this is based on press commentary rather than any knowledge of which options were considered.10 See: http://www.culture.gov.uk/images/publications/OfcomPITReport_NewsCorp-BSkyB_31DEC2010.pdf, para 7.16.11 See: http://www.competition-commission.org.uk/assets/competitioncommission/docs/pdf/non-inquiry/rep_pub/reports/2007/fulltext/535.pdf, Appendix I.

one way to get the news corp/Sky deal through would have been to close Sky news!

to set limits on shares arising from exits or organic growth is nether practical nor advisable

but there needs to be some agreed upon principles for conducting the public interest test


“Ownership is used as a proxy for viewpoints because media owners are assumed to be in a

position to influence what is said by the media they own and how it is said. They do this by

having editorial control and being able to affect the news agenda.”12

The 2003 Communications Bill sought to liberalise previously over-restrictive cross-media

ownership rules. However, at the eleventh hour, following nearly 24 hours of to-ing and fro-

ing, a last-minute compromise clause was inserted into the Bill by Lord Puttnam, then chair

of the Joint Scrutiny Committee and known at that time as the rebel peer. The compromise

was coined the ‘Murdoch clause’ and meant that any future media merger could be subject

to a public interest test (“PIT”) conducted by Ofcom, to examine any relevant share of

media voice, on the instruction of the Secretary of State (“SoS”). Depending on Ofcom’s

findings, the deal could then be referred to the CC for further scrutiny. Whether the deal

went ahead ultimately would be the SoS’s decision.

The Bill duly became the Act, complete with the clause on media plurality, amending the

Enterprise Act 2002.13

Unfortunately media plurality was not defined. And, of course, it is very difficult to measure

precisely something that is open to interpretation. In practice, interpretations have included:

“the range and the number of persons with control over media enterprises”

The CC in assessing Sky/ITV.14

“can connote more than just a number exceeding one. It may carry an implication

of range and variety as well”

Court of Appeal judgement.15

“a large number or quantity of; a multitude; a profusion”

Note by Professor Charlotte Brewer for Enders Analysis.16

While sufficiency was also not defined, it is clear that parliament considered that the news

media sector was sufficiently plural in 2003, at the time the Communications Act was

implemented. We also note that since then Ofcom has conducted two reviews of media

ownership (in 2006 and 2009) concluding that no further interventions were necessary. 17

cHallengeS In PractIce

To assess media plurality in practice is challenging, not least because definitions of the

term itself and sufficiency were absent from the legislation. Even if we adopt the working

definitions reported above, there is then the measurement challenge and the need to look

at ‘both sides of the coin’ – to consider both the supply side (provision) and demand side

(consumption).

12 See: http://stakeholders.ofcom.org.uk/binaries/consultations/morr/summary/morrcondoc.pdf, para 2.5.13 See: http://www.publications.parliament.uk/pa/ld200708/ldselect/ldcomuni/122/12209.htm, para 233.14 Ibid.15 http://www.bailii.org/ew/cases/EWCA/Civ/2010/2.html16 Submission by Enders Analysis to the Ofcom review of the proposed takeover of BSkyB by News Corporation, December 2010.17 Media plurality issues were of course examined during the review of Sky/ITV – by Ofcom, the Competition Commission, the Competition Appeal Tribunal

and the Court of Appeal.

the media plurality clause was a last minute compromise in exchange forcross-media ownership liberalisation

unfortunately neither media plurality or sufficiency was defined

It is clear that parliament considered that the news media sector was sufficiently plural in 2003


On the supply side it is arguably straightforward to demonstrate plurality at any point in

time or indeed over time – simply count the number of owners and outlets (number of TV

channels, newspapers, internet outlets, radio stations etc.) and whether they are readily

available to consumers.

On the demand side measurement is trickier. In order to measure media plurality precisely

from the consumer perspective would require a sophisticated basket of metrics that summarise

usage, engagement, impact/influence, trust, others (?) in a meaningful manner, across news

media. That is a really difficult thing to do – consumers typically make mistakes when reporting

their news consumption, may report effects slightly differently to what they are in practice

and it is particularly difficult to get a handle on the impact that various news media have. One

example to illustrate this is the televised party leader debates prior to the last general election.

Following these, Nick Clegg’s popularity in the polls increased massively but was not realised

at the polling station. In this case a significant increase in brand awareness and subsequent

enhancement was not translated into a willingness to pay. As echoed at one of the academic

seminars hosted by Ofcom – exposure and influence are not the same.18

So, there is no accepted way of converting consumption of a news medium into an effect

on consumers, i.e. its impact on minds and/or behaviour.19 20 And it goes beyond this simple

construct. In protecting media plurality, we are concerned with the prevention of undue

influence. By way of analogy, in competition policy we are not concerned per se with

dominance but with abuse of dominance. Abuses are fairly obvious (including but not limited

to: excessive pricing; predatory pricing; tie-ins, refusal to supply) and while in practice

difficult to prove, evidence may be available from consumers and competitors. Determining

what constitutes undue influence is a much tougher task. As Lord Justice Newberger stated:

“The law of undue influence is a topic which is bedevilled by presumptions, misconceptions and

subjective value judgements; sometimes resulting in judicial inconsistencies and difficulties… it

also is based on public policy. And public policy is, famously, an ‘unruly horse’.” 21

We also observe that assessing plurality within media (‘mono-media’ or ‘inter-media’) is

much more straightforward than assessing cross-media (‘multi-media’ or ‘intra-media’)

plurality; the latter adds a further layer of complexity. This is largely owing to the

presumably differential degrees of influence that each medium has. Thus it is especially

challenging to compare across different media; there is no accepted cross-media ‘exchange

rate’. How can the influence of the following readily be compared: 3 minutes spent reading

news on the internet vs.15 minutes reading a newspaper vs. 5 minutes watching TV news vs.

listening to 2 minutes of radio news? To get anywhere near the bottom of this would require

some serious socio-psychological experiments on a sample of consumers for a week or so.

Even then the results may be biased.

In practice, it is not surprising that a more pragmatic approach is adopted. But pragmatism

can be dangerous.

18 See: http://www.ahrc.ac.uk/About/Policy/Documents/MeasuringMediaPluralityseminar1part2.pdf19 See “The Political Economy of Mass Media”, Andrea Prat and David Strömberg for a review of 101 papers, mainly empirical, on the relationship between

citizens, media and government. See: http://econ.lse.ac.uk/staff/prat/papers/mediasurvey11.pdf20 See Annex 4 to Ofcom’s 2012 plurality report for some discussions of the academic literature. 21 See: http://www.stepjournal.org/pdf/TQR2006i1p5.pdf?link=article

to measure media plurality precisely from the consumer perspective requiresa sophisticated basket of metrics that summarise usage, engagement, impact/influence, trust, others (?) in a meaningful manner

How do you determine whether a media outlet has undue influence?

there is no accepted cross-media ‘exchange rate’


leSSonS from overSeaS?

While the protection of media plurality is clearly the preserve of each territory’s public

policy makers, given that we are dealing with a fairly tricky concept, are there role models

available from other countries? At first glance, possibly not: numerous countries permit

political parties to own newspapers and/or broadcasting licences e.g. France, Finland, Italy,

Luxembourg, The Netherlands, Sweden, Estonia, Czech Republic, Poland and Slovenia.22

Typically there are two broad approaches to protecting media plurality: restrictions on

numbers of outlets or restrictions on market shares. These may apply both within and across

media. Examples include: financial ceilings for broadcasters in Italy and a requirement for

diversity in shareholders for broadcasters in France. 23

More sophisticated approaches have also been tried – with attempts in Germany and

the US to construct cross-media indices that weight the perceived influence of each

medium. The German Commission on Concentration in the Media (‘KEK’) in 2006 compiled

a metric that attempted to convert shares of various media (press, online and radio) into

equivalents of TV audience shares.24 This was devised in respect of the proposed merger

between ProSiebenSAT.1 Media AG and Axel Springer Media AG but was criticised owing

to its validity and manageability and because it went against the grain of the German

Broadcasting Treaty.25

In the US the FCC in 2003 created the ‘Diversity Index’. This built on a concentration measure

used in antitrust investigations (the so-called Herfindahl-Hirschman Index (‘HHI’)) and was

developed in response to demands for an empirical basis for assessing media mergers (and

a string of defeats for the FCC in the courts).26 Compilation of the index required weighting

various media outlets based on their relative importance in consumption. The index has been

the subject of much criticism and serious challenges in court.

Finally we observe that the European Commission engaged a consortium of consultants and

academics to conduct a major study on media plurality across EU Member States.27 Its objectives

were to consider appropriate metrics to measure media plurality and to monitor and indicate

risks to media plurality. It developed a diagnostic tool, the ‘Media Pluralism Monitor’ which

comprises more than 160 indicators. A report was published in 2009 but there appears to be no

subsequent developments. This is not surprising – in our view media plurality matters are for

each country to deal with. Moreover, even if there was broad agreement on media plurality, it

seems unlikely that 27 member states would compile and monitor 166 metrics.28

Having reviewed some overseas case studies, no single role-model emerges. Moreover, it

appears to us that attempting to construct sophisticated cross-media plurality indicators is

fraught with difficulty and has been subject to legal challenge. We prefer the CC’s approach:

to form a judgment, a qualitative assessment, based on the evidence available and taking into

account the circumstances of the case, noting that each case must be decided on its own facts.

22 See: http://www.kek-online.de/Inhalte/vortrag_bergen_gounalakis_23.11.07.pdf23 Ofcom considered but dismissed revenue ceilings. 24 Die Kommission zur Ermittlung der Konzentration im Medienbereich.25 See: http://mcs.sagepub.com/content/31/1/97.extract26 Michael K. Powell requested an objective scientific formula. He called the FCC’s public-interest standard an “empty vessel” into which politicians can pour their

preconceived notions. See: http://articles.latimes.com/2003/feb/10/business/fi-formula1027 Independent Study on Indicators for Media Pluralism in the Member States – towards a risk-based approach, Leuven, 200928 In June 2012 there was a full-day debate in Brussels: “United in diversity: a pan-European Forum on Media Pluralism and Diversity”. See: http://www.mediapluralism.eu/

Some territories permit political parties to own newspapers…

…others have constructed complex cross-media indices in an attempt to measure market power

unfortunately no media plurality role-model is apparent from overseas case studies


trendS In medIa PluralIty SInce 2003

Our research demonstrates that over time (and particularly since the enactment of the

2003 Communications Act) there has been a significant increase in the number and range of

voices in news provision together with access and consumption to the variety of new and

differentiated news sources.29

Since 2003 while there has been little change in radio, there have been some changes in the

press – most notably the launch of the “i”, the acquisition of the Independent Group by

the Lebedev Foundation and the re-launch of the Evening Standard as a freesheet. Indeed

there have been numerous freesheet launches but also many regional closures. Most of the

changes in news provision and availability have occurred in TV and online. While digital TV

penetration stood at 48% in 2003, by 2011 it had reached 97%. In tandem with this has been

the launch of new news channels, many of which are available on Freeview – Al Jazeera,

France 24, RT and Press TV being prime examples.

Online the changes are even more striking. Total broadband take-up now stands at 76%

compared to 52% in 2003 and consumers are able to access news on PCs, lap-tops, tablets

and smartphones. The number of news websites (attracting UK visitors) tracked by the

measurement agency comScore in 2011 totals 550 of which around 160 attract more than

100,000 monthly visitors. Since 2003, trends in news online include an increase in:

– the range of news sites (range of owners – press agencies, other off-line media, specialist

sites, aggregators, including regional, national and global providers);

– broadcaster live and catch-up services (e.g. ITV Player launched 2008);

– news apps – at least 7 UK news sources have over 500,000 app downloads;

– the use of social media as a vehicle for news – there are more that 10 UK news twitter feed

with over 250,000 followers and Facebook traffic drives 10% of visits to Mail Online; and

– news blogs and personalisation.

On the demand side, there has been a substantial increase in the consumption of online

news. As a result, consumers are using more sources, comprising both traditional and new

media. News sources available to them have increased: from traditional media, new online-

only entrants, from newly accessible overseas providers such as CNN and The Wall Street

Journal, and new news media.

New technology has essentially changed news consumption – with portable devices

providing new platforms for reading content and tablets have been found to increase

both the reach and duration of reading of online news. Overall the trend is a continuing

shift in cross-media news consumption patterns towards online, which is a highly plural

environment. The most important consumption trends since 2003 are:

– TV continues to remain the most important source for news, with the internet increasing

in importance and radio/press declining in importance;

29 See: http://www.culture.gov.uk/images/publications/Annexes-NewsCorps-submission-to-SoS_14JAN2011.pdf

In the uK there has been a significant increase in the number and range of voices in news provision together with access and consumption to the variety of new and differentiated news sources

the internet has fundamentally changed the way news is provided and consumed

overall the trend is a continuing shift in cross-media news consumption patterns towards online, which is a highly plural environment


– Consumers are increasingly multi-sourcing – typically obtaining their news from several

outlets within each medium, totalling around 5 sources on average; and

– Social media and interaction across news media now play an important role in news

consumption.

The effect of the internet cannot be understated: it blurs the boundaries of the traditional

news media: newspapers, TV and radio; it has led to an explosion of supply of news sources;

and has fundamentally changed the news provision environment for established players.

There is as result a new dynamic news landscape, a need to provide new forms of news

media alongside the traditional while facing increased competition - from traditional

competitors, other media, and, owing to the lowered barriers to entry, other new entrants.

Taken together, online news, social media and the interaction between new and traditional

media has led to a vibrant, diverse and dynamic news environment enabling the consumer

easy access to literally thousands of news ‘voices’. The internet (and to a lesser extent, TV),

has been instrumental in changing the plurality of news, reducing the influence of established

providers. Overall we conclude that media plurality has increased significantly since 2003.

newS corP/SKy deal

News Corp’s announcement that it wanted to purchase the remainder of the shares in BSkyB

that it did not already own (60.9%) in June 2010 was described by debating peers as a:

“chilling prospect”, “deeply harmful” and that it would give the US media group “an

unprecedented level of control”.30

The Mail Online reported that:

“the proposed takeover provoked an impassioned debate in the House of Lords.”31 with more

than twenty peers from all parties speaking out against the deal, with not one supporting it.

Numerous interested parties filed in line to provide comments to the press, including:

“The level of media concentration would not be permitted in any other democratic country.

[It] offers a genuine threat to plural, consensus-based democracy in this country … there

is a point at which forbearance ceases to be a virtue…” and the deal would be “extremely

damaging… to informed democratic debate’ and said that the takeover raised the ‘chilling

prospect of a disparity of scale in which all competition, not just the BBC, is frozen to death’.

Lord Puttnam

“I feel we should be extremely worried.”

Lord Gavron (former chairman of Guardian Media Group)

“That’s bad news for consumers because the proposed takeover of BSkyB increases the

dominance of News Corporation and reduces the plurality of news sources.”

Sly Bailey, Chief Executive, Trinity Mirror

30 http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/media/8110675/News-Corp-takeover-of-BSkyB-a-chilling-prospect-peers-argue-in-House-of-Lords.html#

31 November 5th 2010.

the internet has led to an explosion of supply of news sources and has fundamentally changed the news provision environment for established players

comments verging on hysteria were reported by the press when the news corp/Sky deal was announced

Presumably business Secretary vince cable had no choice but to invoke the public interest test from overseas case studies


“… could have serious and far-reaching consequences for media plurality.”

chief executives of several media companies, BT and the BBC’s director general 32

“There is a case to answer, and the public interest can only be determined through proper

scrutiny by the competent authorities.”

Ivan Lewis, (then) shadow culture secretary

Within this haze of hysteria, presumably Business Secretary Vince Cable had no choice

but to invoke the public interest test. An intervention notice was issued and Ofcom was

instructed to review whether the acquisition would give rise to media plurality issues.

The announcement was made on November 4th 2010 and Ofcom had to report by 31

December 2010. Separately, the deal was cleared (on competition grounds) by the European

Commission on 21 December 2010.

ofcom: ‘taKe one’ (tHe december 2010 ‘PIt’ rePort)

A precedent for conducting the PIT had been set by the CC in its assessment of Sky/

ITV in 2007. Ofcom did not appear to follow this approach and constructed a range of

new metrics: ‘share of references’ based on bespoke market research, time-based news

consumption metrics and comparative reach charts. Metrics at both the wholesale and

retail stages of the supply chain were provided. Based on its findings, Ofcom advised the SoS

to refer the bid to the CC on plurality grounds.

News Corporation stated that Ofcom’s analysis suffered from serious legal and analytical

errors and that it had failed to conduct the PIT appropriately:

– it failed to address whether plurality was sufficient pre-merger and whether there was a

significant change post-merger; and

– many metrics presented were misleading or quite frankly incorrect (mistreatment of

wholesale activities, flaws in the reach, share and time-based metrics, the exclusion of

certain media outlets from the market research and so on).33

– Concerns were also expressed by News Corporation because Ofcom dismissed the

importance of online news and multi-sourcing as significant contributors to plurality.

Ofcom acknowledged that the multi-sourcing of news is of relevance to plurality

(paragraph 4.59) and even “important” (paragraph 5.115). However Ofcom stated at

paragraph 5.114 that:

“The implications of multi-sourcing in relation to this proposed transaction are complex and

as a first stage authority we do not have sufficient time to consider it fully”.

A small number of stakeholders were publicly critical of the PIT report and its metrics. Indeed

there were at least two re-calculations of Ofcom’s data available in the public domain (Ken

Goldstein from CMI in Canada and David Elstein of OpenDemocracy). Criticism included:

32 Media companies included the Telegraph Media Group, Associated Newspapers and Northcliffe Media, the regional newspapers arm of Daily Mail & General Trust, Trinity Mirror, the Guardian Media Group, Channel 4.

33 See: http://www.culture.gov.uk/images/publications/NewsCorps-submission-to-SoS_14JAN2011.pdf FTI’s supporting report is attached at Annex I.

ofcom dismissed the importance of online news and multi-sourcing…


“…Ofcom’s analysis was muddled and spectacularly inaccurate. The claim that a combination

of News Corp’s newspapers and Sky News would give Murdoch a 24% control of UK news

consumption was demonstrably false.”34 “Unfortunately, Ofcom’s attempts to apply these

criteria are seriously flawed, thanks to a combination of errors of fact and of judgment. 35

Most other stakeholders were satisfied with the Ofcom report and agreed with Ofcom’s

advice that the transaction:

“may be expected to operate against the public interest since there may not be a sufficient

plurality of persons with control of media enterprises providing news and current affairs to

UK-wide cross-media audiences” 36

At the end of the PIT report Ofcom suggested that the current plurality regime may not be

adequate as it deals with plurality matters only under the circumstances of transactions,

and that a broader regime should be considered. Additionally to the citation on page 2 of

this paper, Ofcom recommended that:

“Any new legislative and regulatory framework for plurality would need to provide a

mechanism for intervention if market developments resulted in changes which raised serious

doubts in relation to the sufficiency of plurality.” 37

Over to you Jeremy.

Jeremy Hunt’S letter

Once the dust had settled on the Sky/News deal, in October 2011 Jeremy Hunt wrote to

Ofcom’s CEO requesting some further work:

“that Ofcom should undertake some work into the feasibility of measuring media plurality

across platforms, and recommend the best approach. … look at which platforms should be

included (for example, websites) and consider the best way to take account of the BBC’s

position in the market. In addition, I would be grateful if you could also consider how

practical it is to set limits which would protect plurality without unnecessarily restricting

growth or producing perverse incentives.”

In the letter, Hunt referenced his Royal Television Society speech where he had considered

the possibility of the PIT being extended to include market growth and exits. These

(dangerously in our view) would allow for the application of discretionary levels to be

applied. In essence the possibility of a SoS (or regulator) determining the future market

structure of the media landscape.

Hunt posed five main questions:

– What are the options for measuring media plurality across platforms? What do you

recommend is the best approach?

34 See comments made by David Elstein at: http://www.guardian.co.uk/commentisfree/2011/mar/03/sky-news-news-corp-bskyb35 See: http://www.opendemocracy.net/openeconomy/david-elstein/newscorp-bskyb-settlement-says-more-about-failures-at-ofcom-and-bbc-domina36 Paragraph 1.57 of Ofcom PIT report. 37 Paragraph 7.13 and 7.16 of Ofcom PIT report.

… and that the current plurality regime may be inadequate as it applies only under the circumstancesof transactions

the SoS had considered extending plurality assessments to market growth and exits


– Could or should a framework for measuring levels of plurality include websites and if so

which ones?

– What could trigger a review of plurality in the absence of a merger, how might this be

monitored and by whom?

– Is it practical or advisable to set absolute limits on news market share?

– Whether or how it should include the BBC?

ofcom: ‘taKe two’ (tHe June 2012 PluralIty rePort)

In the run up to compiling its plurality report, Ofcom launched a public consultation,

receiving numerous responses, met with stakeholders on request, hosted a number of

academic seminars and conducted significant research and analysis (reported in the

substantial annexes that accompany the report). Internally the report would have been

subject to peer review and review and challenge at Ofcom’s various review groups (such as

the policy executive) before being considered and ultimately signed off by the Ofcom board.

A number of the submissions to the consultation were highly critical of Ofcom’s PIT report

(most notably those cited above and an LSE academic).38 Others provided guidance on

measurement (e.g. the RadioCentre spelt out exactly how the news is compiled and provided

on radio, thereby ‘correcting’ errors made in the PIT report).

Some of the output of the academic seminars appears to have helped shape Ofcom’s

thinking whereas some appears to have been dismissed – most notably the advice that

minsters should not have the final say in plurality matters:

“…ministers have shown over the last 30 years they cannot be trusted with media plurality

decisions. The power must be delegated or at least diffused.” 39

The overall result is that Ofcom recommends a sensible framework for assessment, that

plurality should be considered in respect of certain market characteristics, and that the

features of a plural news market include:

– the presence of a diverse range of independent news voices;

– high reach and consumption of multiple news sources;

– low barriers to entry and competition to encourage innovation;

– economic sustainability, with no single organisation holding too large a market share.

Most encouragingly, Ofcom echoes the CC’s ITV/Sky approach, referencing a need to

consider ‘things in the round’, and that there is a need ‘to make judgements’. Crucially,

Ofcom provides a clear steer away from rigid triggers.

38 See: http://stakeholders.ofcom.org.uk/consultations/measuring-plurality/?showResponses=true39 See: http://www.ahrc.ac.uk/About/Policy/Documents/MeasuringMediaPluralityseminar2part2.pdf

“…ministers have shown over the last 30 years they cannot be trusted with media plurality decisions. the power must be delegated or at least diffused”


Indeed, the tenor of Ofcom’s recent plurality report contrasts sharply to its PIT report.

Many will have been pleasantly surprised at the clear change of viewpoint on Ofcom’s

part. Ofcom appears to have taken on board most of the criticism of the PIT report. As Ray

Snoddy stated at FTI Consulting’s breakfast briefing on media plurality:

“Declaring myself deeply shocked by this, that for the first time in living memory, Ofcom has

come up with a reasonably sensible price of work.” 40

The main conclusions of the Ofcom report are:

– measurement – Ofcom acknowledges the inherent measurement challenges and puts

forward a range of measures to consider ‘in the round’. It agrees that ‘impact’ is difficult

to measure and overall appears to suggest a pragmatic framework and even suggests that

the suitability of metrics be re-assessed over time;

– online news media – these are now endorsed as clear contributors to media plurality and

that they: “should be included in a plurality review as online news sources are used by a

significant and growing proportion of the UK population”. This is a clear move away from

its previous position during the PIT process;

– triggers – Ofcom suggests a periodic review approach (every 4-5 years) and dismisses the

idea of reliance on discretionary interventions.41 But it also asks whether the existing

media merger regime should sit within a ‘new proposed plurality regime’ or exist in

parallel. We await further news on how the new regime may look;

– setting limits on news share – it is concluded that such an approach is inflexible and

inadvisable and that any concerns should be addressed within the periodic review. Ofcom

asks parliament to determine what constitutes sufficient plurality and whether there

should be any further relaxation in cross-media ownership rules; and

– treatment of the BBC – pragmatically Ofcom acknowledges that any plurality review

should include the BBC given its leading position in TV, radio and online news but the

BBC’s position itself should not trigger a review. Explicit acknowledgement of the BBC’s

leading position is to be welcomed. The more interesting comment is however in relation

to media plurality within the BBC and the suggestion that this may be wrapped more

explicitly into the BBC’s public purposes (Royal Charter and BBC Agreement – neither of

which contain the word plurality).

In summary we think that there are two significant areas that emerge from the Ofcom

report: the first is the radical shift in views since the PIT report and the move towards a

much more pragmatic approach to assessing media plurality. The second is the focus on the

BBC in relation to both external and internal plurality.

40 See: http://www.fticonsulting.co.uk/global2/critical-thinking/featured-perspectives/media-plurality/index.aspx . 41 It is hoped that Ofcom’s media ownership reviews (currently every three years) are subsumed within these reviews.


next StePS and concludIng remarKS

The SoS now has to consider Ofcom’s answers to his questions and decide the way forward.

Presumably the next Communications Act will pave the way for a flexible regime. What will

be interesting to hear is whether the final decisions on plurality are left with or taken away

from ministers.

Media plurality is important; a crucial feature of a democratic society. But it is difficult

to define (more so in practice than in theory) and challenging to measure. In particular,

identifying a definitive way to measure cross-media plurality remains tricky; there is no

acceptable cross-media exchange rate. This boils done to the fact that ‘impact’ is almost

impossible to assess. Adding up consumption of TV, radio, newspaper and online is fraught

with difficulties. Ofcom has made some sensible recommendations in identifying the market

characteristics that when present are indicative of sufficient plurality. Ofcom’s suggestion

that it is appropriate to examine a range of metrics ‘in the round’ and make a subjective

judgment is sensible and echoes the approach adopted by the CC in Sky/ITV.

Ofcom is right to say that the determination of what constitutes sufficient plurality is a

matter for parliament (although an obvious inference is that today’s news media market is

plural owing to the trends exhibited in provision and consumption since 2003). Ofcom also

suggests that ministers should have the final say in decisions - government will of course

be nervous about this. We assume that ministers will want to stay well clear of opining on

media plurality matters when deals occur. There will be no lengthy queue for the post of

culture minister, that’s for sure.

In respect of the BBC, Ofcom rightly acknowledges the BBC’s leading position in news

media and it is interesting to note that (arguably) Ofcom goes beyond its ambit by asking

parliament to reconsider the scope of the BBC’s public purposes and how their fulfilment

assessed – effectively giving the BBC Trust an additional role. The new Director General, the

Trust and government will have even more to do during the next Charter review.

Finally, we think that had Ofcom adopted the approach it now recommends to assess the

News Corp/Sky bid, it surely could not have found that the deal raised media plurality

matters. How much wasted time and effort (jobs?) would that have saved? With the

increasing role of the internet and instant access to opinions, should we in fact turn our

attention to the role of other players and how they may pervade our television sets?

As one of the speakers at our breakfast briefing stated:

“In ten years time the threat is not going to be BSkyB, it’s going to be the influence of

Google over mass media.” 42

September 2012. The views herein are those of the authors alone and are not necessarily the views of FTI Consulting,

Inc., its subsidiaries and affiliates or the other professionals at FTI Consulting, Inc., its subsidiaries and affiliates. FTI

Consulting supported News Corporation on media plurality matters in its submissions to UK regulatory authorities.

42 Chris Goodall at FTI’s breakfast briefing on media plurality, July 4th 2012.

for furtHer InformatIon, PleaSe contact:

AUTHOR:

Alison Sprague D.Phil

Entertainment & Media, Economics FTI Consulting DD +44 (0) 20 7632 5133 M +44 (0) 78 7621 7131 [email protected]

about ftI consultingFTI Consulting, Inc. is a global business advisory firm dedicated to helping organisations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. FTI Consulting professionals, who are located in all major business centers throughout the world, work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. More information can be found at www.fticonsulting.co.uk.

©2013 FTI Consulting, Inc. All rights reserved.

Alison specialises in the entertainment, media and telecoms sectors. Her sector experience includes

television, radio, film, internet, sport, music, publishing and fixed/mobile telecoms. She has

led numerous strategy and economics projects, providing commercial, competition, policy and

regulatory advice, including advising companies, regulators and governments on deregulation of

media/telecoms markets and digital broadcasting. She jointly led the study, ‘The public policy issues

arising from telecoms and audiovisual convergence’ for the European Commission which formed

the basis of the Green Paper on convergence. She has advised on film policy, radio ownership

rules, broadcast licence applications and renewals, TV advertising minutage, media plurality and

conducted several economic impact studies for the TV and film sectors. Additionally she has advised

on consumer interest matters in the formation of regulatory policy and written thought leadership

papers on various media matters including local newspapers, sound recordings copyright duration,

media policy, the Hargreaves review of IP and gambling.