‘Destined for market failure’: Regional TV’s dire warning

As the pandemic took hold in the first quarter of last year, Australia’s three regional TV bosses warned Communications Minister Paul Fletcher that local news and current affairs services would disappear unless they were allowed to merge.

That was crystallised in May this year when WIN Corp, the regional broadcasting company owned by billionaire Bruce Gordon, shut news bulletins across Queensland, Victoria and parts of New South Wales. WIN had already begun to close newsrooms in Queensland and NSW in the year prior to the pandemic.

In a partly redacted letter, obtained under Freedom of Information laws, the three media bosses WIN chief executive Andrew Lancaster, Southern Cross Austereo chief executive Grant Blackley and Prime Media Group chief executive Ian Audsley, wrote to Communications Minister Paul Fletcher begging for laws to be changed allowing them to consolidate. They warned that if they couldn’t then their industry would be “destined for market failure”.

The letter dated March 27, 2020, and signed by the three executives, also requested immediate financial assistance because of the pandemic’s hit to revenues, outlining that the regional broadcasters did not have sufficient capital reserves to maintain their business operations.

“As you are aware, over the last 24 months, the regional television industry has provided your office and department with substantial information and supporting data relating to the economic status and headwinds facing our industry. These headwinds have become increasingly severe and are unprecedented in our history,” the CEOs wrote.

“The industry has long argued that legislation governing our sector is both out of date and not fit for purpose. It certainly does not support a sustainable economic model. Without change, the regional television broadcast industry is destined for market failure. The current COVID-19 crisis is only accelerating that inevitability.”

In April last year, the government provided a range of taxpayer-funded relief measures, including a $50 million Public Interest News Gathering program, to support media businesses in regional Australia.

“Everyone in the bush wants you to commit to it but you know in your heart of hearts it’s bullshit.”

Graham Richardson, former Communications Minister in the Keating government

Two independent reviews were also commissioned by Minister Fletcher’s department of the regional television station’s proposed merger and the sector’s future viability. The merger would have purportedly unlocked an estimated $30 million in capital for the regional networks to invest in future growth.

Such a merger would have reversed changes made during the Hawke-Keating government’s term, which delivered greater competition in the regional television market. Under current law, at least four independent media voices, across radio, newspaper and free-to-air TV, must exist in regional markets.

Graham Richardson, who was Communications Minister in the Keating government and is now a political commentator, expects the regional broadcasters will be absorbed into other media companies. “That was always going to happen. There’s just not enough revenue to have them really last. I never thought it could work properly. Everyone in the bush wants you to commit to it but you know in your heart of hearts it’s bullshit.”

Mr Richardson doesn’t believe a combined regional broadcasting group should exist next to Nine Entertainment Co (owner of this masthead), Seven West Media or ViacomCBS-owned Network Ten. Seven, Nine and Ten have staunchly opposed a merger of the three affiliates.

As of March last year, the regional broadcasters employed about 3500 people. The proposal acknowledged the transaction would create job losses but given the regional television sector’s profitability had been challenged ever since advertising revenue began migrating to digital platforms, jobs were already at risk. The pandemic has accelerated that decline in advertising revenue.

“Removing the one-to-a-market rule would not result in any detriment to regional communities and would prolong the benefits for these communities of having ongoing access to a diversity of free-to-air broadcast television programs,” the CEOs wrote. “Our timetable is shortening – and we expect that some services to small regional markets may soon be turned off. In addition, local news and current affairs services will soon disappear from thousands of lounge rooms. Thereafter, we may experience complete market failure.”

It argued that consolidation was already working in the Spencer Gulf in South Australia where Southern Cross served that community by broadcasting programs from all three metropolitan commercial TV networks under one business umbrella. The CEOs also pointed to sharing arrangements in place in other regional markets.

“We reiterate our request for the Government to take urgent steps to allow the three regional television networks to create a sustainable economic structure by combining our respective businesses,” the CEOs wrote. “A single entity would be of sufficient scale and have capital reserves to respond to significant external events, such as COVID-19.”