The ACCC and ACMA have both recently cleared a deal that will see:

  • FOXTEL Management Pty Ltd take an up to 15% stake in Ten Network Holdings;
  • Ten acquire just under 25% of Multi Channel Network Pty Ltd (MCN) the advertising business that is owned jointly by FOXTEL and Fox Sports Australia Pty Ltd (FSA); and
  • Ten granted an option to acquire 10% of Presto TV Pty Ltd a subscription video on demand (SVOD) service, which is a joint venture between Seven West Media Limited and FOXTEL (collectively the Acquisitions).

The deal’s approval isn’t a surprise given the minority nature of the interests involved and Ten’s weak position as a free to air television (FTA) provider compared to Seven and Nine.  However, the ACMA decision in particular, highlights how out of date the media ownership rules are. Momentum for change is building with the Minister requesting reform options from his department to put to Cabinet by Christmas.

The ACCC decision

The ACCC is yet to issue a public competition assessment. However, its thinking on the Acquisitions can be discerned from its media release (see here) and earlier statement of issues (SOI)(see here).

The ACCC considered the impact of the Acquisitions on a number of markets including various national markets for the supply of television services, the national market for the acquisition of television content (including a potential submarket for sporting content) and the national market for the supply of television advertising.

 It left open the question of whether SVOD services were part of the broader national market for television services, but appeared to accept that they were not substitutes for FTA services or subscription television (STV) for sporting content. This will be important for any future competition assessment of tie ups between STV and SVOD providers.

 In terms of the market for the acquisition of content, the ACCC’s particular focus was sporting content and whether the acquisitions would lead FOXTEL, FSA and Ten to enter into joint bids and other commercial arrangements for sports rights in a way that could limit the ability of other FTA networks to compete for those rights.[1]   

In its analysis of the downstream markets the ACCC has also emphasised the importance of premium sporting content to the ability of television service providers to compete.[2] The SOI expresses the concern that joint bids between FOXTEL and Ten would see more and/or better events being shown exclusively on FOXTEL resulting in benefits to FOXTEL and Ten while harming FTA competitors.

Ultimately, while it considered that the Acquisitions would increase alignment between FOXTEL and Ten and FOXTEL’s influence over Ten, the ACCC was satisfied that FTA networks, STV providers and on-line service providers would continue to have sufficient access to content to make them attractive to viewers and to vigorously compete.

It appears that a number of factors were viewed as significant by the ACCC. First, the relatively small stake FOXTEL is proposing to take in Ten. Second, the fact that long term deals for both AFL and NRL rights have recently been concluded with Seven and Nine as the successful parties and thirdly, predictions that streaming services are likely to become increasingly important in the sale of sports rights.

This deal’s approval can be compared against the ACCC’s objection to Seven’s proposal to acquire 50% of FSA in 2013. Although a similar transaction in some respects, the relative size of the stakes and the fact that Seven (a FTA network) was taking the stake in a premium content producer (rather than the other way around) appear to have made the difference.

The ACMA Decision

The Acquisitions were relatively uncontroversial from a media control perspective and the ACMA’s primary focus was on whether they would give Lachlan Murdoch control of Ten. 

Because Lachlan Murdoch is already in a position to control radio stations and associated newspapers in the Sydney, Melbourne, Adelaide and Brisbane radio licence areas, control of commercial television licences in those areas would result in an “unacceptable 3-way control situation”.[3]

The Acquisition of up to 15% of Ten by FOXTEL is just under the threshold that would see control deemed. On that basis, the ACMA’s assessment focused on whether the terms of the Acquisitions would give Lachlan Murdoch actual control of Ten. Although the ACMA considered that the stake would give Lachlan Murdoch influence over Ten, it concluded that this fell short of actual control.[4]

The decision is as interesting for what it does not consider as for what it does and validates the new Minister of Communications’ observation that Australia’s media ownership laws represent “horse-and-buggy legislation in the 21st century”. No consideration is currently given to STV or any form of online content, be it live streaming, SVOD or internet-based news content, when assessing the media diversity impacts of a given transaction. Given the range of platforms now available for consuming content and their rapid take-up, these omissions give an increasingly skewed picture of the market.

Where to from here?

Changes to the media control rules are always challenging, with the interests of many powerful stakeholders being diametrically opposed. However, momentum for change is building with the new Communications Minister declaring he is willing to accept “broad consensus” rather than “unanimity” in terms of any reforms.[5]

Despite the objections of Seven, an obvious contender for repeal is the reach rule, which prevents a person being in a position to exercise control over television licences covering more than 75% of Australia’s population. This rule has produced a number of regional affiliates to the major FTA networks that depend on the networks for almost all of their content except local news.

In recent days a number of these affiliates have, perhaps surprisingly, come out in favour of the abolition of the reach rule[6] as Nine prepares to follow Seven’s lead and offer live streaming of its content. This move will give Nine de facto national reach via its internet-based offerings without contravening the reach rule.