Investment Matters

Media law reforms

This week, finally, the Australian government passed reforms to media ownership laws.  The current ownership restrictions are generally considered out-of-date, in that they were implemented in the pre-internet era.  Media and news consumption has changed considerably, making existing laws redundant and adversely impacting the traditional players in relation to their ability to compete in the new landscape.

Changes have been on the cards for two plus years.  But I will leave comments on politics in Australia to W&D...

What are the changes

The key changes (in addition to the pork barrelling / special interest measures required to get senate approval) are:

1/ removal of the two-out-of-three rule - this prevented one player owning TV, radio and newspapers in the same market

2/ removal of the audience reach rule - this prevented one player owning TV licences encompassing more than 75% of Australia's population, and

3/ reduction in fees, with the removal of licence fees, to be replaced by a new spectrum based fee.

Impact on companies you own

Most equity clients own investments in Southern Cross Media and HT&E.  The former owns regional TV licences, currently under an affiliate agreement with Nine.  It also owns regional and city radio stations, including the Hit and MMM networks. 

HT&E also owns metropolitan radio stations, the Australian Radio Network (as well as outdoor advertising, which is not impacted by these changes).

The most immediate impact of the changes will be a reduction in licence fees, which is expected to take effect from this financial year.  This is expected to have a meaningfully positive impact on the profit of both companies.

Longer term, it is difficult to predict the impact in terms of ownership / takeovers / mergers.  We invest in both businesses because we view the assets (including licences) they have as attractive.   Thus, it would not be surprising if there were some developments on this front at some stage in the future.

And an aside (not really from an investment perspective, rather general interest) the provision in the legislation that may become meaningful is an ACCC enquiry into Google and Facebook and journalism / content in Australia.