National Press Club Address
16 March 2016
E & OE
Thank you so much Chris.
It’s great to be back here at the National Press Club.
Can I thank the Club for allowing me as Manager of Government Business in the Senate some brief respite from the Australian Senate.
The last time I was here was at the end of 2013 in my former portfolio of disabilities and ageing.
I must say that, back then, one of the challenges was drumming up media interest in my areas of responsibility.
It seems to be a problem I don’t have anymore.
Indeed such is the media interest in my new portfolio that I often read about my own thoughts before I’ve even thought them.
Just a sidebar, I note that it is a shame that that which is the core business of government, providing support to people who have challenges beyond their control, such as people with disability, doesn’t always get the same level of attention it warrants.
But I must commend the Canberra Press Gallery for giving disability much greater attention in recent years.
I should make one special acknowledgement at the outset today. And that is Julie Flynn, a former President of the Canberra Press Gallery, who has just announced that after 15 years she is stepping down as Chief Executive of Free TV.
Something I have realised early in the piece is that Free TV and ASTRA are a bit like the Capulets and the Montagues. Harold Mitchell as Lord Capulet. Tony Shepherd as Lord Montague. Which makes Julie Flynn Tybalt and Andrew Maiden Benvolio. Julie, best wishes for the future.
Can I acknowledge the Secretary of my department Heather Smith and Ben Roberts-Smith VC who is with us.
As Minister for Communications and the Arts I see myself as having responsibility for both the sinews and the soul of the nation.
The sinews through Communications and the soul through the Arts.
The sinews being that which is essential, connective and often unseen.
And the soul, well the closest any minister comes to that in a secular, pluralistic democracy is the Arts Minister.
So as Communications Minister, mine is an enabling portfolio. To create an environment where people, businesses and consumers can configure and interact as they see fit.
Our agenda as a government is to manage a transitioning economy. The Communications portfolio is both a mechanism to be used in this transition, but also a transitioning sector in its own right.
Reforming media law is part of this transition.
I can think of no more fitting setting for my remarks today than here at the National Press Club.
You all work in an industry that has been through rapid and major change.
Unfortunately in media law some things have been stuck for a long time. Like a faulty dial on an old analogue TV.
A distant era
I wonder how many of you remember 1987? I suspect many of you around my age, like me, are in demographic lock. Trapped in 1987. Others, let’s call them the Buzzfeed generation, for instance, may not have been born in 1987.
But for those of you who were – let me refresh your memories:
- Kylie Minogue still lived on Ramsay Street and was singing “the Locomotion”
- Allan Border led Australia to victory in the cricket World Cup in a place that was still called Calcutta.
- Oliver Stone’s “Platoon” won the Oscar for Best Picture.
- I was finishing my degree at Sydney University.
- Meanwhile, the first mobile phone call in Australia was made by the Managing Director of what was then Telecom Australia.
- The Internet was in its infancy.
- The iPhone was still two decades away.
- And the world was still 11 years from hearing the name “Google.”
1987 was a long time ago. Yet much of the law that governs our media organisations today dates back to that year.
These laws have been tinkered with, but their core remains largely unaltered.
The media landscape, meanwhile, is unrecognisable.
You have all heard the term “digital disruption.”
Firstly, it’s not technology that is disruptive, its people and their imaginations about how to deploy that technology that is disruptive.
But “disruption” is a negative term. It implies that these changes are somehow bad.
The way technology is transforming our lives is one of the most overwhelming forces for good in human history.
It is making our lives easier. Our work more productive. People more connected.
It is an enormous part of the story of recent human prosperity.
And for consumers in particular, technology has afforded greater power and choice than ever before.
But technological advances have posed challenges for governments and for business.
Everyone understands this.
You understand it particularly well if your printing business produced phone books. You drive a taxi. You run a book store. A DVD rental business. Or a travel agency.
And in my own portfolio, exhibit ‘A’ in terms of a disrupted business is Australia Post. Its forebear, the Post Master General’s Department, was the NBN of its time. So fundamental was it to communications that until 1975 my role was called Post Master General.
Australians are now sending 1.4 billion fewer letters per year than they were in 2008 – down 47 per cent.
There are now 70 million fewer visits to post offices each year than there were seven years ago.
Australians are increasingly choosing to communicate over the Internet. Letter volumes are falling to the level they were in 1995. Services such as Internet banking and bill pay are also being completed online in record numbers.
Meanwhile, Post is transforming from a letter-delivery company into an e-Commerce company. Seventy-five per cent of the parcels delivered by Australia Post last year originated from online shopping, and Australians spent $17.3 billion shopping online last year.
I can remember when my grandmother used to get the train into town to pay her utilities bill. Over time she was persuaded to use the post. And if she was still with us today she’d no doubt be paying those bills online.
Change is remorseless.
That is why we must reform our media laws.
They are a relic of a bygone era.
They were designed for a media environment that no longer exists.
And just like the cathode-ray tubes that we’ve all thrown on the naturestrip for the hard rubbish collection, so too must these old world rules be scrapped.
The road to now
Now the journalists in this room will understand particularly well that the media sector was one of the first to really feel the effects of digital disruption. And the media sector, particularly newspapers, were at the cutting edge.
Unlike many other forms of online content, news is expensive. It takes time and resources.
So news organisations looked to find efficiencies and further commercialise their online offerings. Newsrooms around the world have felt the impact of these changes.
And the environment today, driven by the choices consumers are making, is very different to that which existed back in 1987.
- Close to half of all Australians actually identify online sources of news, including social media, as their main source of news.
- At the end of 2015, major mastheads reach over 50 per cent of their audiences via their website or app in an average week.
- Online-only or predominantly online sources which compete for Australian readers now include many with which we are all familiar.
Online access is also changing the way people engage with news content. It is notable that, according to Neilsen, consumers who access online news spend a greater amount of time reading news compared to those that read printed newspapers (3.4 hours versus 2.8 hours in an average week).
The other big change in the way Australians engage with news and entertainment services relates to social media. With networks such as Facebook and Twitter used as pathways to news, but also as tools to curate and share content with others.
Some 82 per cent of Australians had an active social media profile in 2014. Seven in ten are active on Facebook, with 52 per cent sharing content. This reflects a broader trend from passive to active engagement with media content.
In 2015, 59 per cent of Australians accessed news on a weekly basis from smart phones – higher than citizens in the United States, the United Kingdom, France, Germany, and Japan.
In this environment, traditional newspapers are under pressure.
And we see the same pressures affecting Australian broadcasters.
Traditional commercial radio and television platforms remain profitable and continue to attract large audiences. However, new technologies are giving consumers access to other types of content, creating more competition for audiences.
A clear example of this is the way Australians are embracing subscription video on demand services.
At the end of 2015, more than 2.7 million Australians had Netflix. And the demand for streaming services continues to grow.
One of Netflix’s local competitors, Stan, has claimed demand for their product may rise to four million households within the next four years.
In the United States, on some estimates Netflix accounts for 37% of that nation’s entire internet traffic.
New media formats also have the capacity to challenge commercial radio. Apple exceeded one billion podcast downloads in 2013 and then went on to exceed seven billion in 2014.
Apple Music now claim to have over ten million paid subscribers to the service, challenging the market leader Spotify, with its 20 million paying subscribers.
The consequences for traditional media companies have been borne out in their advertising revenues:
- In 2005 newspapers had around 37 per cent of the advertising “pie” – today their share hovers just above 15 per cent;
- TV advertising has had a more modest fall in share whilst radio’s share has remained flat;
- Online advertising has grown from 6.1 per cent in 2005 to 36.2 per cent in 2014;
- In real terms, commercial television broadcasting revenues fell by 20 per cent in the 10 years to 2014.
This is the environment in which the more established media of newspapers, commercial radio and television are operating.
It’s a market defined by unparalleled choice for consumers across multiple devices.
And it’s a market in which our current media regulations are a pair of cast iron shackles on competition, to the detriment of traditional Australian media companies.
The current rules
Currently, Australia’s media control rules are based on five numerical tests.
These rules were viewed as a proxy for media diversity and because of the historical dominance of newspapers, commercial radio and commercial television, only apply to these media platforms.
They were designed for the Princes of Print and the Queens of Screen as Paul Keating described them.
Under the rules:
- A person is prohibited from exercising control of commercial television broadcasting licences whose combined licence area populations exceed 75 per cent of the Australian population – known as the ‘75 per cent audience reach rule’.
- A person cannot control more than two of three regulated media platforms in any commercial radio licence area – known as the ‘2 out of 3’ rule or the ‘cross-media ownership rule’.
- At least five independent media ‘voices’ need to be present in metropolitan commercial radio licence areas and at least four in regional commercial radio licence areas – known as the ‘5/4’ or ‘minimum voices rule’.
- A person cannot exercise control of more than one commercial television broadcasting licence in a licence area – known as the ‘1 to a market rule’.
- Finally – a person cannot exercise control of more than two commercial radio broadcasting licences in the same licence area.
Trying to explain the relevance of these rules to people under thirty is a challenge.
For many decades these control rules were a measured and appropriate way of ensuring Australian media provided a diverse range of views.
However, technology has marched on leaving some of these rules redundant.
The need for reform
As you know, the Government has introduced legislation to abolish the 75 per cent audience reach rule and the 2 out of 3 rule.
I’ve made the case on many occasions that these rules have not kept pace with advances in technology. In fact, the rules now impede traditional media from competing in the modern media landscape.
Today, I can use my smart TV to quickly skip from a regulated commercial TV service – restricted to less than 75 per cent of the population – to an online service that is not regulated and can be accessed all over the world.
And in any one commercial radio licence area, I can use my tablet, computer or smart phone to access news, high-definition video, social media and blogs, political commentary or documentaries spanning the entire political spectrum.
Yet we restrict Australian media organisations from cross-media ownership in the name of media diversity.
I have argued that a defining feature of the digital age is the diverse range of views that consumers can access from anywhere, at any time, on a wide range of networked devices.
Repealing the 2 out of 3 rule and the 75 per cent audience reach rule will free up our media organisations to structure themselves more efficiently and in ways that will enable them to compete in an increasingly global media space.
Now whenever you’re talking about changes to media law, people who live in regional areas have a strong interest in local content and its protection.
My regional Liberal and Nationals colleagues in particular have raised these issues with me. I have listened to their concerns that these reforms could lead to merger activity and other changes in control that may result in the loss of local content, particularly television news.
That’s why our package includes a range of important local content protections. Newly merged entities will have higher minimum local content requirements. And in large regional population centres where there are currently no minimum local content requirements, a new minimum will be introduced for the very first time.
And for the first time, regional broadcasters who reconfigure will have incentives to produce their news locally through an adjustment to the current points system.
Minimum local content levels send an important signal that the Government regards this as an important part of regional broadcasting. And commercial realities mean that, in most cases, the level of local content provided is likely to continue to be much higher than the regulated minimums.
What is absolutely clear though is there is one serious threat to local content that dwarfs all others. And that is the threat that these laws are not reformed.
All of the local content rules in the world are absolutely meaningless if there are not strong and viable media organisations capable of delivering that content.
Regional communities understand that once such things are lost, they are very hard to get back.
Now that the Government has announced this reform package, attention rightly turns to its passage through the Parliament.
The Government has responded to the Opposition and the crossbench who have asked for an opportunity to examine the detail by referring the legislation to a Senate inquiry. This is underway.
It is clear from the public comments others have made that there is broad support for the removal of the reach rule and for the local content protections the Government has proposed.
But there is hesitation in some quarters about removal of the 2 out of 3 rule on the grounds that it remains an important diversity protection.
I find this a difficult argument to understand.
What is the justification for keeping a rule that pretends there are only three media platforms?
Why retain a rule that pretends the Internet doesn’t exist?
Why on earth would some Australian politicians hold our own companies hostage to rules that do not apply to their international competitors?
We must give our Australian media companies the chance to compete against the global media giants they are now up against.
The task they face is daunting.
The market capitalisation of all the major listed Australian commercial broadcasters is less than AUD $5 billion.
Netflix alone has a market cap of AUD $58 billion.
Facebook’s is AUD $432 billion. Apple and Google each have market caps over AUD $700 billion.
Imagine how ridiculous it would be if, say, Apple were restricted to only selling you a few different products. Phones and tablets OK, but not computers nor TVs and certainly no music streaming.
Yet incredibly, some want to keep similar restrictions on Australian media companies that are trying to compete.
It is absolutely critical that we offer Australian media companies the opportunity to build scale.
Now I have heard the argument that there is a distinction between diversity of content and diversity of ownership.
But the point is, our major sources of news already display diverse ownership which would not significantly change.
Just take online news sources as an example.
According to Nielsen online ratings data for January, there were 41 news websites with more than 300,000 unique visitors in that month.
Of those 41 news websites 19 (46 per cent) are ‘international’ or in other words, not owned by the traditional Australian media companies.
Of the top 10 websites there were:
- Four international sites not owned by the traditional media companies – a clear sign that Australian news media companies are competing in a global market;
- The ABC had one;
- And the other five were owned by four of Australia’s traditional media companies.
Even with two out of three removed and consolidation occurring, there would still be significant ownership diversity amongst sources of news.
Ask most Australians whether we need some special rules to ensure diversity of news sources. Be sure to also add that, by the way, these rules don’t cover the internet. You can expect both stares of disbelief and incredulous laughter.
Also the two out of three rule has little relevance to most regional areas. This is because most regional newspapers are not regulated because they do not meet the threshold to be an “associated newspaper” under the rules, meaning the size and frequency of their circulation is not large enough.
In any case, the Government is retaining the other three diversity rules to ensure a minimum number of traditional media voices in markets and limits to ownership of television and radio licences.
To be fair, there are varying degrees of enthusiasm amongst media organisations for this package. From those who welcome it to those who wanted us to go further.
But there is near unanimity in one respect. And that is – if the package is to go forward, the ‘2 out of 3’ rule and the reach rule must both be removed.
My firm belief is that this entire package is important. It is not the Government’s intention to split it. It should pass in its entirety.
One aspect to the debate that does concern me is how some may be basing positions on emotion rather than reason.
The fact that some people instinctively react against media law reform because it may assist a particular media company or a particular proprietor, even though thousands of Australian media sector jobs stand to benefit, is emoting at its worst.
However, I fear this approach it is still alive and well amongst a few analogue warriors in Canberra.
It would be incredibly disappointing – not to mention illogical – to reject this reform package on that basis.
The strong and near unanimous support for the removal of the ‘2 out of 3’ rule amongst media organisations ought to dispel any notion that this is about any one company in particular.
But more importantly, the Government has not crafted this package with particular ownership outcomes in mind. I have said many times that I am ownership agnostic and I want the companies themselves to have the freedom to configure in the way that suits them.
So I was heartened to see my counterpart Jason Clare recently say:
“If you make decisions based on one media company or another then you’re not doing your job properly.”
I hope the Senate follows his advice.
Reform is not an exercise in doing everything all at once, and then not touching it for years. It is an ongoing and incremental process.
Rome was not built in a day. And nobody argued that because it could not all be done in a day, that Rome should not be built at all.
Throughout this process I have had extremely productive consultations both with media organisations and with my parliamentary colleagues.
These consultations have been important not because it has allowed me to tick a box. They have genuinely resulted in a much improved package because of the input we received.
I have said before that when I arrived in the role of Minister for Communications, much of the media reform trail had already been marked out by the now Prime Minister, Malcolm Turnbull. I thank him for his efforts and leadership in this regard.
I also acknowledge my Parliamentary colleagues who took a particular interest, especially the Chairman of the Coalition Communications Committee Senator Dean Smith and my colleague the Minister for Regional Communications, Senator Fiona Nash.
Being intimately involved now in my portfolio, particularly my media regulation responsibilities, I have a deep respect for those of you here today who are working in the field, have weathered changes and shown a remarkable ability to adapt.
It is not governments or legislation that are driving these changes. It is consumers. Everyday Australians who are voting with their swiping fingers for a digital world where challenges are outweighed by opportunities.
We all have an interest in a robust, flexible and profitable media sector which provides the independent news and commentary vital for our society.
The Government’s package of reforms will provide much-needed flexibility for our media organisations to continue to fulfil this role, which is good news for you, good news for consumers and particularly good news for regional Australia.
Thank you very much.