News Limited CEO Mr Kim Williams AM's address to the Australia-Israel Chamber of Commerce

THIS is the full speech that News Limited CEO Mr Kim Williams AM gave to the Australia-Israel Chamber of Commerce today.

THIS is the full speech that News Limited CEO Mr Kim Williams AM gave to the Australia-Israel Chamber of Commerce today.

Thank you Harold.

I begin by acknowledging Leon Kempler, Chairman of the Australia-Israel Chamber of Commerce for extending this opportunity for me to renew my acquaintance with the Chamber's members. As a lifelong dedicated supporter of the State of Israel it is an honour to be here today.

My subject today is one I care about a great deal: the media and the challenge as to how to nurture it in the rapidly evolving technology environment we are experiencing, with all the obvious impacts which we see in terms of technology and behavioural change on a daily basis.

As you know the organisation which I lead - News Limited - will later this year be part of a reorganisation that will see our parent company News Corporation split into two trading companies with separate business focuses. The new News Corporation will, generally speaking, house its publishing assets together with all of our Australian assets, and the Fox Group will house the international broadcast and film and television production assets.

The new publishing company has global scale and breadth, making it the largest English language publishing company in the world. It will be home to some of the world's most prestigious brands across print, digital and information services. Brands such as Dow Jones, The Wall Street Journal, The (London) Times, HarperCollins, The Australian and the Herald Sun. In Australia it also includes brands such as Foxtel, Fox Sports and REA.

I'll leave the prognostications about these new companies to others. I wouldn't want to take away the business journalists' fun, especially as News employs so many of them.

Anyway, I'm not in the prediction business, except to say that it appears that the market likes the approach. I know that I and my colleagues are feeling confident that it is the right path. It is, I assure you, a very exciting time.

I do, however, want to make some observations about the digital media world in which we operate and compete. Every day it is providing new directions, opportunities and challenges for us all. I am certain you all find similarities with the business environments which you inhabit.

So let me start by telling you about the fun I had recently in Las Vegas.

I'm not talking about a Hollywood-style 48-hour blow out at the Bellagio or MGM Grand, but rather the fascinating experience of visiting the Consumer Electronics Show held in that extraordinary city every January.

I have been many times and I encourage you to go.

The CES is a truly colossal event – with over 120,000 visitors packing out the Convention Centre and the lobbies of those remarkable Vegas hotels. It features a myriad of displays from all of the world's leading consumer electronics producers in the hottest consumer market since… well, last year.

In addition to seeing some of the amazing gadgets everyone here will soon want to purchase, I was privy to numerous truly insightful briefings about the profound way in which the digital technology is changing the nature of business.

My six major observations are:

First. The trend towards simple, intuitive interactions with technology products is going to accelerate. What began with Apple iPhones and iPads, is about to get a whole lot more interesting as touch – which is core to almost everything now - is supplemented by voice and gesture command technology. Samsung already has a series of TVs that can be controlled by gestures, similar to the Xbox Kinect gaming device. But it won't be too long before you will, for instance, be able to say to your television "Record every Collingwood game this season" And it will do just that. I'm confident in saying that in the next 3 to 5 years the way in which we and the consumers of our products, interact with devices will change forever our expectations of technology.

Second. The trend towards consumer empowerment will continue ever more strongly. We are witnessing one of the most profound power shifts in history – from producers to consumers. The increasing capacity of consumers to provide input into the design of products and services will have profound implications for what companies produce and deliver. Many have yet to recognise the amount of effort needed to place into relating to customers; whose wants, needs and aspirations are of an unprecedented force and dynamism. The implications - from providing the vast array of goods services to consumers, through to the way our society is managed and governed - are genuinely profound.

Third. The smart phone is going to continue to spread its influence over every electronic product imaginable. Whether it is for controlling home appliances like ovens, washing machines, air-conditioners, cars, televisions and DVRs, or managing your health or your finances; that friendly computer in your pocket will continue on its relentless course as the core tool for managing your life.

Fourth. Social media is going to mean much more than following your friends. Its uses will change the way companies relate to their employees and contractors, and the way they collaboratively work within to design and produce new products or solve major problems. The disappearance of the distinctions between self, work and play, which those citizens known popularly as millennials (those born after 1981) understand intuitively, need to be understood if businesses are to engage with consumers in an environment where technology platforms set expectation and interaction on a minute by minute basis.

Fifth. 'The Cloud' has reached an almost mature level of evolution. It has, and is, changing the way we all plan, deploy and use software and computing power. The Cloud, and the impact it is having on the way companies organise themselves and reach their clients, is nothing short of amazing. Rather than having to acquire expensive software and hardware which sits in your core internal systems - and which is periodically compulsorily upgraded at vast, often involuntary, expense - companies will eventually acquire almost all software as a service sitting somewhere in the cloud. And I can tell you as someone who has signed off some 'character forming' IT budgets, this has enormous appeal. The implications challenging the notion of the competitive benefits from scale are nothing short of astonishing.

And sixth - Big data is radically reshaping the ways in which companies understand consumer behaviour, and undertake product development, marketing and manage consumer and vendor interactions. Quantum expansions in the amount of data companies can collect and process; the ability to dynamically link previously separate data bases and leaps in statistical analysis; are all enabling companies to understand consumer behaviour and importantly preference, in new and quite profound ways.

I should say as so many of you will know already, that a disproportionate amount of these extraordinary developments in technology is driven by many great Israeli companies.

As we know from those Hollywood movies, what happens in Vegas seldom stays in Vegas. All of what I have described is happening now or coming our way. And we need to face up honestly to the extent of the change and what it means for us - across the board. And that means operationally, in regulation and in legislative settings also.

Specifically what it means for my business, and I am sure that the same applies to all of your businesses, is this: putting the customer at the centre of everything we do has ferocious meaning and force as never before. It is not an empty platitude as it has been regrettably for many, in past times.

It also means that we must invest and innovate in a closely consumer connected way displaying an agility and resourcefulness that can be quite confronting. And, of course, we must transform the way in which we manage and operate our business.

Putting customers first is a mantra many companies have espoused for many years. But at a time of historic shifts in power from consumers to producers, when consumers have almost infinite choice, there is no alternative.

You must put customers front and centre, or your business will die.

I suspect that most if not all, of us in the room are facing the same sorts of challenges and are having to rapidly adjust accordingly. Therefore I won’t belabour the point, but I thought I'd give you a little insight into how we are transforming our business.

Our traditional model was to produce news in separate geographic locations. We put walls up between our daily and our Sunday papers. We favoured our print products over digital and mobile. We held back big stories so that they broke first in print.

Commercially we sold by product - one salesperson selling the Herald Sun's print inventory and another selling its online inventory. Why? Because we thought it suited us to do business that way.

But consumers and advertising customers do not care about such traditions.

If there are a great series of pictures taken in Geelong, everyone in the country should see them at the same time we publish the Geelong Advertiser. If there is a cracker story, people want to read it as soon as it breaks on whatever their personal favoured medium is, be it print, PC, mobile or tablet.

Likewise advertisers don’t want to buy by product, they want to buy audiences. If BMW want to reach a certain audience, they shouldn’t have to make separate calls to the Herald Sun's print and online sales teams, and then another to our Leader community titles and another to our CarsGuide website team.

I know that these are not particularly profound observations. But they have profound implications for the ways in which media companies have traditionally been run.

And so at News we are radically reshaping all our operations.

We have integrated our newsrooms, and boosted the power of our editorial network to provide stories seamlessly around the country. We introduced new rules and news gathering processes to ensure we publish first across all devices.

We have reconfigured and integrated our sales teams across the country so advertisers can now get the audience solution they want, encompassing all our products, in a much easier, more efficient manner.

And we have transformed all of our support operations – finance, technology, people and culture and so on, so that we operate in the most effective manner.

The second implication from the summary lessons of the CES is that companies must continue to invest and innovate. Must!

Companies that don't will go the same way as Kodak or Blockbuster: - Both once proud, strong and very popular brands.

In our case we have recently made some very big investments.

We are investing $60 million in a new editorial system – which will allow our journalists to create once and publish many times across all delivery domains.

Last year we acquired CMH and its holdings in Seek Asia, FOXTEL and FOX Sports, which means we now own 50% of Foxtel and 100% of FOX SPORTS.

One of many synergies is seen in the provision of a platform to offer integrated product offerings in sports to advertisers. A simple example is seen in joining News Limited's AFL SuperCoach franchise with FOX Sports' fantasy AFL game. This has now become a fully interactive experience, appearing in our online and printed newspapers. It is accessible on mobile devices using a dedicated app, and has its own dedicated television program.

Last year we also acquired Melbourne's Business Spectator and Eureka Report. Both publications are marvellous examples of the power of digital technology and the innovation which follows from it when managed and driven by a creative forward looking team which understands its market.

We will also launch later this year, new digital products across our mastheads, including subscriptions. I am afraid that for those of you who have got used to accessing our great mastheads without charge, your 15 year free trial is over.

At the same time we are developing new apps, new products and driving change on a wide variety of fronts all of which will become clearer to everyone over the next 18 to 24 months.

I look at all of this change with a great deal of optimism. We are creating new ways of taking journalism to our customers, providing our ever growing audiences with breaking stories and great analysis, and developing new revenue models to sustain and nurture journalism.

Adapting to this unprecedented change in the market, the pace of which is increasing exponentially, is tough, to say the least.

It's hard, often unforgiving, work, but the rewards are simply wonderful.

Persistence, resilience, agility and openness are the watchwords in the business change and digital operational vocabulary.

Which brings us to today, where the most exciting era in human communication collides with a government hell-bent on imposing last century regulation to control the media it doesn't like.

First, a bit of background.

For several years governments had been watching the traditional media grappling with the digital environment and in May 2011 this Government set up the appropriately named Convergence Review to "conduct a comprehensive examination of Australia's communications and media regulations."

Then, five months later with the Greens urging it on, the Government opportunistically seized on the UK phone hacking controversy and arguing that "News Limited had questions to answer", set up the Finkelstein Inquiry into media standards.

But, as my Fairfax counterpart Greg Hywood asked at a Finkelstein inquiry hearing, what problem was the inquiry trying to solve? He argued "there's nothing systemic here that needs fundamental institutional change."

Before that, and without any prompting, News Limited's independent auditors had conducted an exhaustive examination of six years of editorial expenses and activity which was overseen by two retired Victorian Supreme Court judges and two prominent auditing firms. This full and comprehensive inquiry established that none of the activities that occurred in the UK had happened here.

In our view, then, the Finkelstein Inquiry was a punishment in search of a crime.

Also around this time News Limited, acknowledging that the open upholding of standards and handling of complaints is vital to the media's credibility, had been working with the Australian Press Council to strengthen its powers, double its funding and ensure that contractual arrangements were in place to guard against the withdrawal of money or membership.

The Australian Press Council is chaired by a member of the public and in every forum it conducts public members outnumber publisher representatives.

It already meets all the key standards for a modern media regulator set out by the Convergence Review.

Still this was not going to be enough for this government. Unfortunately, while the consumer is increasingly king, Government and regulators won't surrender the crown.

Both the Convergence Review and the Finkelstein Inquiry reported in early 2012 and since then a moveable feast of suggested restrictions and reforms have leaked out from Canberra.

Until yesterday when, at two minutes to midnight, Senator Conroy put a gun to the head of the parliament, our industry and the Australian public and demanded his reform package be passed within a week.

Senator Conroy himself said yesterday that the issues are well known, his proposals have been debated and we all know where everyone stands. Bollocks. This is Soviet style argument.

Not a single senior newspaper executive or industry representative has had a meaningful consultation with the Government. I have never had any engagement on any proposal. And as the CEO of a company which has direct responsibility for employment in its various enterprises amounting to over 14,000 people that seems, let me be restrained, odd.

Senator Conroy's insulting one-week deadline, allows no scrutiny of the detail of his sanction on publishers, a sanction which could affect billions of dollars of investment and the employment of many thousands of Australians.

Senator Conroy proposed yesterday that a parliamentary committee will investigate whether the rule that currently prevents major Free To Air television networks from reaching more than 75% of a market should be abolished, clearing the way for a metropolitan channel to merge with a regional operator.

So much for his lofty demands for more diversity and the protection of existing diversity.

The same committee would also investigate whether the proposed government regulator with the impossibly pompous Soviet style name of the Public Interest Media Advocate, could impose new rules from where our TV stations source their news and current affairs programs.

This is already being described as the Meet The Press clause.

Recently News Limited agreed to supply the Meet The Press program to the TEN Network; an entirely uncontroversial arrangement given that the ABC and Fairfax regularly collaborate to produce television programs and Fairfax and Channel Nine are currently working together on a concept for a business program.

The Prime Minister reportedly described any provision to stop the Meet the Press arrangement as being akin to telling media companies who they could employ and yet yesterday, Senator Conroy said the arrangement should also be reviewed by the new parliamentary committee.

Aspects of yesterday's announcement like the broadening of the ABC and SBS charters to reflect their work in digital channels and the permanent allocation of spectrum to community television can pass without comment from me today.

However, the gun to the head aspects whereby the Minister demands the parliament must pass legislation in a week are a direct assault on the whole increasingly reviled notion of freedom of speech. How dare Senator Conroy say he believes passionately in freedom of the press as a cornerstone of democracy. It is impossible to believe any such thing when these proposals are examined in a sober disciplined way.
 

In addition to his attack on publishers, Senator Conroy is also attacking the democracy of our parliamentary system. The role of our parliament is to scrutinise and debate important legislation to ensure that governments get reforms right.

We all know how damaging poorly informed, ill-considered legislation can be. As with all legislation, the devil is in the detail.

Surely legislation such as this Government's package deserves more scrutiny than a mere few days?

Surely the Greens and independents who promised, in their own words, to pursue "transparent and accountable government, improved process and integrity of parliament" must demand that Senator Conroy's ultimatum be rejected?

The parliament needs time to consider in detail changes that affect billions of dollars of investment, thousands of jobs and the future of entire business frameworks. We argue stridently that Senator Conroy's measures represent bad, backward-looking policy that fails to respond to the challenge of a rapidly changing digital economy.

Government should not be introducing media legislation driven by a motivation to punish or restrict investment or worse, to play favourites. It should be reforming already out-dated regulations to encourage investment and from that innovation, growth, and jobs in Australian journalism.

Sadly the Government's media sanctions will fail the very real challenge to ensure and encourage real diversity of media voices in our country.

As I said publicly last night this is the first government outside of wartime that is contemplating government-sanctioned journalism.

The appointment of a person to act as a so called "public interest media advocate" to on the one hand oversee media company mergers to protect the diversity of voices, and on the other hand oversee the industry's standards represents direct government intervention into free speech.

Senator Conroy is deliberately obscure on detail but this is what he is proposing.

The Government will appoint someone who will have the power to decide whether a media company's standards pass muster. If they do then what I would term the Public Interest Tsar, will permit the company to operate as a "Registered Media Firm."

The proposed Advocate will have power to decide whether or not an industry-funded regulatory body - like The Australian Press Council which Registered Media Firms will be forced to join - is effectively upholding those standards. If this new Tsar decides it isn't, then the advocate has the power to revoke the publisher's exemption from privacy laws which are essential for journalists to do their job. Namely to report without fear or favour.

Effectively the government-appointed advocate will have the power to close down our ability to report on that which is going on in our society.
 

This is outrageous. The Government is saying that, if their appointed representative does not like what the media is doing, it will take away the basic, fundamental, rights of a free press. Rights that are enshrined in every other modern democracy in the world.

At the other end of the Advocate's job description the oversight of diversity turns a deliberate blind eye to the fact that all Australians have access to more diversity in news, opinion and commentary than at any time in history.

Foxtel alone carries 14 news channels - none of which, I may add, it exercises editorial control over. There are now 16 free to air channels, including a dedicated ABC news channel. There are scores of radio stations and an almost infinite number of online voices both domestic and international.

Frankly the so-called public interest test is nothing more than a political interest test.

Senator Conroy contemplates a situation where the Public Interest Media Advocate could well find themself ruling on whether it would be better to let a media company die than to be purchased by another one.

Knock, knock – it is the 21st Century.

In an information environment which is being re-shaped almost daily by new technology and devices, the ability of highly-pressured companies to invest and survive has now had an extra layer of enervating regulation proposed.

The Australian Competition and Consumer Commission, The Australian Communications and Media Authority and the Foreign Investment Review Board all have extensive powers to enforce diversity and ensure competition so why on earth do we need another layer unless it is to impose politically motivated oversight? Where has the case been made. The Convergence Review itself couldn’t even provide a definition of that which constituted the public interest and preposterously left it to a proposed new regulator itself to define.

Can you imagine the effect this would have on any investor contemplating an entry into the media market?

Make no mistake, none of the measures the government demands the parliament pass into law within a week have any of the lofty purpose it pretends they do.

These measures are not seriously intended to protect diversity or improve media standards - indeed they ironically propose abolishing the 75% reach rule which secures diversity in regional areas. The measures matter so little that there was an offensively brief statement with little detail and no rationale offered. One is forced to assume no reasoning was offered because it is inconvenient to justify that which is proposed. Rather it relies on a shabby fast action than explain the reasons for confronting a fundamental basic right to the operation of a free society - freedom of speech and an energetic media.

Friends, as business people we know we can't ignore the great technological developments now underway in the media sphere and the business sphere more generally.

The psychology of our policy makers is simply out of step with the times. We already live in a world of media diversity broader than ever before, thanks to the impact of new technology in allowing the dissemination of more points of view than at any time in human civilisation - it is mass, it is niche, it is democratic and it has all happened without any government contribution at all.

Technology has already given unprecedented power to consumers, making them the guardians of diversity and democracy. That power is going to increase further. Regulation of the type that is being proposed is going to put the media industry further out of step with the times. It will rob us of the ability to take advantage of the technological trends that you will see whenever you go to a major technology trade fair, such as the Consumer Electronics Show.

As I said, what happens in Vegas seldom stays in Vegas. You can't keep it a secret forever. It will get out. New waves of technological change and innovation will keep on coming, at high speed.

We live in an era where the settings and the velocity of change demand that, for investment to be secure, governments should adjust the law and regulation with care. We are on the precipice of a ham-fisted attempt to restrain, contain and at its worse punish, in a way which is totally out of step with the energy and character of modern media and technology.

Modern Australia has been experiencing a profoundly important set of technology and behavioural changes over the last few years and most 'old assumptions' no longer apply to systems, customer aspirations and product development or the chemistry of the territory.

I hardly need to remind you all that investment responds to policy initiatives that reflect a developed understanding of market dynamics, incentives, and alignment with consumers and the future. That is the only path we should be embracing.

Thank you.