1
Media Concentration in Australia
Franco Papandrea and Rodney Tiffen
1. Introduction
Australia has the media profile of an economically advanced, mature and stable democracy. It has
long had close to universal literacy and among the highest life expectancies in the world (Tiffen, and
Gittins, 2009). To understand its contemporary media mix one must understand the legacy of
former local industry development structures and of the effect of domestic policies and regulations.
Australian history was shaped by the tyranny of distance (Blainey, 1968), not only internationally but
domestically. At the time of federation in 1901, it took a week to sail from Perth to Sydney. Most
media markets were local, reflecting local interests and advertising markets, as well as bowing to
logistical necessity. It is only in more recent generations that national media markets and their
economies of scale as well as international integration have developed.
Some traditional media sectors, particularly broadcasting, have been and continue to be subject to
extensive regulation. Others, such as telecommunications, although highly competitive after
liberalisation, are largely dominated by the former publicly-owned monopoly operator. While the
growth of the Internet has been instrumental in the development of new media and the emergence of
some new globally powerful operators, at the local level, its influence on concentration of traditional
media has been, at best, weak. In the Australian context, for example, access to domestic news
continues to be confined largely to traditional media sources which now also control some of the
most popular domestic news sites on the Internet.
Broadcast television and radio from their early beginnings were developed with a dual commercialpublic structure with services widely distributed throughout the country. Entry to the commercial
broadcasting industry, which is funded exclusively from advertising, is strictly controlled by
licensing. There are two separate and independent public broadcasting corporations, the Australian
Broadcasting Corporation (ABC) and the Special Broadcasting Service (SBS). Apart from some
relatively minor income generated from its ancillary business activities, the ABC is funded entirely
from the public purse. The overwhelming proportion of SBS funding also comes from the public
purse. However, unlike the ABC, SBA is permitted to raise part of its operational funding from the
sale of advertising. At present, most urban and regional population centres are served by three
commercial television services, several commercial radio services (at least two in each area) and the
television and radio services of the ABC and SBS.
The newspaper sector is entirely commercial. It is still largely city based, although as in television,
the two key markets are Sydney and Melbourne, which constitute around 43 per cent of the country’s
population. They are the only cities with competing, locally-produced daily newspapers. A single
daily newspaper is published in other major urban centres and many regional centres. Many diverse
magazine titles are published on a regular weekly or monthly basis. The print media are highly
concentrated by world standards.
Multichannel subscription television was a relatively late-comer in Australia largely because of
regulatory prohibitions aimed at insulating commercial free-to-air television from competition. The
first licenses were issued in 1997. According to the Australian Subscription Television and Radio
Association only 34 per cent of the population had subscription television in 2011
(http://astra.org.au/pages/facts-figures).
Current regulatory provisions constrain access of
subscription television providers to broadcasting rights for popular sporting events.
2
The Australian film and television production industry is the beneficiary of substantial direct and
indirect financial assistance from Federal and State film support agencies. It also benefits from
domestic content regulations imposed on free-to-air and subscription television operators. An
average of up to 30 feature films are produced each year with approximately half of total production
expenditure coming from a small number of high-budget foreign features filmed in Australia. Box
office revenue is dominated by foreign feature films and distribution is predominantly controlled by
international film distributors.
Usage of new media is widespread with 74 per cent of the population aged 15 or more years being
regular users of the Internet (Australian Bureau of Statistics (ABS), 2010). There are several
hundred, mainly small, ISPs providing services to the public. Larger ISPs are associated with the
major Australian telecommunications carriers. The search engine sector is dominated by Google.
2. The Issues
Media concentration has a long and vexed history in Australia. It goes back to the early days of the
development of radio when legislators became concerned about increasing concentration of licenses
in the hands of newspaper owners. As a consequence, regulatory limits were imposed in 1935
restricting multiple ownership of radio licences at the local, state and national levels (Joint
Parliamentary Committee on Wireless Broadcasting, 1942). Similarly, when television was
introduced in 1956, ownership limits prevented any one individual or entity from more than one
licence in one area or more than two nationally. As was the case for radio, the new medium was
quickly dominated by newspaper proprietors.
Notwithstanding the long-standing concern with the extension of newspaper influence to other
media, specific cross-media ownership restrictions were not introduced until 1987. When
introducing the cross-media restrictions the then Minister for Communications argued that they were
needed to ‘curb major expansion in television by existing newspapers and radio interests which
already have considerable influence over the formation of public opinion’ (Duffy, 1987).
Almost a decade after their introduction, the cross-media rules became the focus of a major political
debate between the new Conservative Government intent on their removal and the opposing political
forces. After several years of debate, legislation abolishing the restrictions was passed in October
2006. The amending legislation introduced the concept of media diversity limits in local media
markets designed to prevent concentration of independent media voices to below five in metropolitan
areas and below four in regional areas. Given the existence of restrictions on multiple ownership of
radio or television licences in individual local markets, the 2006 media diversity rules were largely
redundant or ineffective in preventing media concentration (Papandrea, 2006).
The introduction of cross-media rules in 1987 was partly intended as a counterbalance to the
concomitant replacement of the previous constraint of common ownership of more than two stations
with a broader rule that allowed common ownership of any number of stations provided their
aggregate reach did not exceed a prescribed share of the national population. Subsequent to the
change, the widely diffused ownership structure of the commercial television broadcast industry was
transformed to one of considerable concentration with the formation of three urban networks
covering the major metropolitan centres and two regional networks. Consequently, the removal of
the cross-media rules not only entrenched the relatively concentrated industry structure but also
opened the doors to the extension of concentration across different media. Another potential avenue
for dilution of ownership concentration in the broadcast television industry has also been blocked by
government imposed moratoria and/or prohibitions on the issue of new commercial television
licences that have been in place for more than two decades and are to remain in force at least until
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the completion of digital terrestrial broadcasting conversion of the industry due for completion by the
end of 2013.
Like broadcast television, broadcast radio was also affected by the changes in cross-media ownership
rules. For radio, however, the strict multiple ownership limits introduced in 1935 were removed by
the promulgation of the Broadcasting Services Act 1992. Since then, the only remaining restriction
is a limit of no more than two stations in common ownership in individual licence areas. There are
no limits on the number of licences that can be held in common ownership in different local markets.
The removal of the cross-media rules has seen the re-emergence of common ownership of radio
licences and newspapers (APN News and Media), and broadcast radio and broadcast television
(Southern Cross Media Group).
Other media industries are not subject to specific ownership regulation. Starting in 1991 the
telecommunications sector underwent progressive reforms transforming the sector from publicly
owned monopoly operations to a fully competitive market structure. The transformation began with
the establishment of a second fully privatised carrier (Optus) providing wireline and wireless
services in competition with the publicly-owned former monopoly carrier (Telstra). A third mobile
operator was licensed and entered the market in 1993. The Telecommunications Act 1997 introduced
a fully competitive market starting 1 July 1997 and Telstra was subsequently progressively fully
privatised. Telstra’s former monopolist’s status and ownership of the wireline consumer access
network (notwithstanding a regulatory regime guaranteeing access to other carriers) has provided it
with an ongoing advantage over its new entrant competitors. Tesltra was also able to use its position
as Australia’s dominant wireline carrier and largest wireless carrier to establish itself as the largest
ISP.
Widespread access and use of the Internet has brought many changes with major implications for
media industries. However, the hoped-for multi-fold increase in news sources and consequential
mitigation of concentration in traditional media has only partially materialised, particularly with
regards to new sources of domestic news. In the domestic arena, little has changed since the
Productivity Commission (2000) pointed out that the majority of Australians who were getting their
news from the Internet were accessing the sites of the established traditional media organisations. So
far, Crikey.com is the only significant independent alternative Australian news site established on the
Internet.
3. Concentration in Media Industries
Australian media industries have tended towards high levels of concentration due to a variety of
factors that differ from industry to industry. The relatively small (in world terms) Australian market
combined with economies of size and scope in many traditional media markets has always been a
limiting factor on the number of competing players. In some industries, regulatory interventions
have sought to limit the impact of market forces on ownership concentration. In other industries
such as telecommunications, former state monopoly provision of services has been supplanted by
open competition, but ownership concentration nonetheless remains relatively high. A high rate of
technological change in recent decades has been an overarching influence on the structure of
established media industries as well as the catalyst for the development of new industries in
competition with the old. These influences have played out differently in terms applications and
effects on the concentration of ownership in the media industries.
In this section we examine the current state of ownership concentration in each of the main industries
of the Australian media sector and the trends that have led to it. We begin with a discussion of the
print media (daily newspapers, magazines, and books) followed by a discussion of audiovisual media
4
(Broadcast TV, Radio, Multichannel TV, Film Distribution/Production, and Cinemas). Discussion of
telecom distribution media (Wireline and Wireless) comes next, and the section concludes with an
examination of online media (Internet Service providers, and Search Engines). The ownership
details presented reveal the emergence in recent years of a significant, but not extensive, presence of
some conglomerates in more than one industry. In part this is a reflection of the effect of regulation
prohibiting cross-ownership in the traditional media industries which applied from 1987 to 2006.
Cross media interests of conglomerates are discussed in a subsequent section.
3.1.
Print Media
The print media in Australia are almost as old as European settlement of the continent. The major
cities each had local newspapers from various dates in the nineteenth century, so that the oldest
Australian newspapers are now 150 years or more old. The most venerable Australian magazine, the
Bulletin, began in 1880, but went out of business in 2008, and was associated with Australian moves
towards Federation. The most successful magazine the Australian Women's Weekly began in the
1970s, but it was only after the Second World War that magazine publishing became a major
industry. For most of Australian history, book publishing remained in British hands, but a local
industry grew quickly in the last quarter of the twentieth century.
3.1.1. Daily newspapers
Shortly after Australia became a Federation in 1901, the six state capital cities between them had 21
daily newspapers with 17 independent owners. The zenith came in 1923 when there were 26 capital
city dailies and 21 independent owners (Mayer, 1964:31). Since then the trend has been towards
reduction of titles and of owners. It began with the impact of the Depression, which led to several
closures, and weakened other titles, so that the Melbourne-based Herald and Weekly Times
company, led by Sir Keith Murdoch, was able to start acquiring titles interstate. Now the
metropolitan and national daily press consists of 11 titles, eight of which were already existing in the
1930s; plus two new nationally circulating papers and one based in the national capital, Canberra.
These 11 titles with have just three owners.
Outside the capitals, there is a long established provincial daily press, 37 newspapers of varying size
and quality, but with little impact or news gathering capacity beyond their own area. Nearly all these
began as locally owned enterprises, but by 2008 only two remained so. All the others had been
absorbed into larger conglomerates.
The number of newspaper titles declined from 56 to 48 over the 24 year period covered by the
analysis presented in Table 1. However seven of the eight closures were of metropolitan afternoon
newspapers, all of which closed between 1987 and 1993. This was the result of a long term decline
because of changing commuting, advertising and reading habits, but equally the trigger for it was the
upheavals following the 1987-88 ownership changes in all Australian traditional media (see below).
However apart from afternoon newspapers, there was only one closure, of a small provincial daily
paper. Given the gloom around newspapers in the English-speaking world this is an interesting
picture of survival and stability.
Table 1 shows a steady decline in circulation, although the majority of this is explained by the
closures. Compared with 1992 levels, 2008 circulation is around 90 per cent, although the
substantial population growth in those 16 years would show that the ratio of newspaper sales to total
population shows a more substantial decline.
5
Daily Newspapers
(% circulation)
1984
1988
1992
1996
2000
2004
2008
News Ltd
Fairfax
HWT
WA
APN
Rural
Other
Totals
Circ (mil)
Titles*
25
23.7
46.4
..
0.8
1.5
2.7
56.2
18.9
..
..
4.5
1.9
18.5
58.1
20.2
..
8.3
5.5
2.2
5.6
56.6
21.5
..
8.6
5.5
2.7
5.1
57.2
22
..
8.1
5.2
3.9
3.5
57.7
21.4
..
7.8
5.3
5.3
2.4
57.8
28.6
..
7.7
5.3
..
0.6
4.52
56
3.95
53
3.27
49
3.17
48
3.11
48
3.06
48
2.95
48
Revenue (nominal USDm)
C4
HHI
Noam Index
.. ..
96.6
81.5
3343
3530
1365
1441
..
92.1
3888
1587
..
91.7
3777
1542
2881
92.5
3864
1577
3403
92.2
3904
1594
5272
99.4
4246
1733
Notes:
1.
2.
3.
*
In 1986-87, Murdoch took over the Herald and Weekly Times (HWT), and in 1988, an internal split
developed in the Fairfax company.
Between 1988 and 1992, all Australia’s afternoon newspapers closed (seven titles in all).
In 2007, Rural Press, which grew as part of the Fairfax split, re-united with Fairfax to form one company
Number of voices used in calculating Noam Index = 6
In 2008, the third biggest group is WA Newspapers. This company owns two titles in Western
Australia, most importantly Perth’s morning paper the West Australian. That paper was part of the
Herald and Weekly Times group, and then went through some ownership changes before becoming
owned by a locally formed company, and most recently the Seven Network of Kerry Stokes has
become the largest shareholder. Its circulation performance has been slightly worse than average,
and hence its slightly declining share.
APN, owned by the Irish company, headed by the Irish businessman Tony O’Reilly, owns several
provincial daily newspapers in New South Wales and Queensland. It began a substantial Australian
presence as part of the late 1980s shake-out, and has acquired more titles since.
Rural Press was formed following the internal divisions in the Fairfax family in the late 1980s. It
built a stable of provincial daily newspapers, and then in 2007, the two companies merged, boosting
the share of Fairfax papers in the total national circulation. Before the late 1980s disruptions, the
Fairfax company had accounted for around one quarter of national daily circulation, but then it
dipped substantially.
By far the largest newspaper publisher in the country, however, is Rupert Murdoch’s News Limited,
which alone accounts for just under six in ten daily sales. Moreover the C4 figure in the table
illustrates just how concentrated Australian daily newspaper ownership is, with the four largest
companies commanding 99.4 per cent of total circulation in 2008. Changes in the C4 and HHI
indices are illustrated in Figure 1.
6
Figure 1: Daily Newspapers Concentration Indices (1984-2008)
C4
(%) C4
100
90
80
70
60
50
40
30
20
10
0
HHI
HHI
4500
4000
3500
3000
2500
high concentration threshold
2000
1500
1000
500
0
1984
1988
1992
1996
2000
2004
2008
3.1.2. Magazines
The magazine industry is dominated by three large Australian companies and some international
publishers (such as Time and Readers Digest) but with a plethora of small circulation periodicals,
some of which are fairly short-lived and on which the Audit Bureau of Circulation has limited data.
On the other hand even small circulation journals, which have a distinctive advertising constituency,
can be viable. However the most reliable data are on the largest magazines, and Table 2 gives the
data for the top 50 circulating magazines in each of the years selected.
Magazines
(% annual circulation of
company's top 50 magazine titles)
2000
2004
2008
PBL (ACP)
Pacific
Murdoch/News
FPC
Readers Digest
Horwitz
Time
Other
Total circulation (mil)
Revenue (nominal USDm)
C4
HHI
Noam Index
46
19
5
7
6
3
5
8
8.05
1027
78
2621
991
46
22
1
11
4
2
4
9
7.55
1343
83
2758
1042
44
27
14
6
1
7
7.05
2210
93
2898
1296
Notes:
1. T h e l argest magazine publisher has always been the Packer company, called PBL (Publishing and
Broadcasting Limited) and earlier ACP (Australian Consolidated Press).
2. Pacific Magazines has become a major player in the last decade and a bit. It is associated with the Seven
Network (television).
3. Murdoch has moved in and out of magazines while shuffling his overall assets.
4. FPC and Horwitz, two relatively smaller publishers, both sold out between
2004 and 2008.
7
The table illustrates that PBL has long been the largest magazine proprietor in the country, with just
less than half the total circulation of the top 50 magazines. The second largest company in 2008 is
now owned by the Seven Television network, headed by Kerry Stokes. Some companies’ shares
jump around as there is often trading in the ownership of titles, occasionally as part of larger
transactions. Figure 2, highlights the relative C4 and HHI indices.
The revenue figures in the table are misleading as they reflect the changing exchange rate of the
Australian to the US dollar rather than actual revenue generated. The more important figure is the
decline in circulation — the total magazine circulation was down by one eighth in just eight years.
Figure 2: Magazines Concentration Indices (2000-2008)
C4
(%) C4
HHI
HHI
100
4500
4000
80
3500
3000
60
2500
high concentration threshold
40
2000
1500
1000
20
500
0
0
2000
2004
2008
3.1.3. Book Publishing
Book publishing is a much less concentrated industry than newspapers and magazines.
Unfortunately the available data are both less comprehensive and are only available for recent years.
Compiled by the industry monitor Nielsen BookScan the data do not include the very sizable sector
of educational textbooks. However there has been a high turnover rate of smaller and medium size
publishers and, as the table suggests, one means of survival is having a larger parent company.
Book Publishing
share of book sales (%)
Penguin/Pearson
Hachette (Lagardere)
Random House (Bertelsmann)
HarperCollins (News Ltd)
Total Revenue (USD m)
C4
3.2.
2008
14.3
13
10.1
9.3
1159.9
46.7
Audiovisual Media
Audiovisual media examined in this section include over-the-air broadcast media (Television and
Radio), subscription TV (cable and satellite delivered program channels), film
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production/distribution and cinemas. The development of the first three (the electronic media) was
largely guided by licensing and other ownership regulation. The domestic film production industry,
while relatively small by world standards, is well developed and has gained some international
success. Film distribution is dominated by the major Hollywood studios. The cinema industry was
initially characterised by widespread localised ownership but eventually saw the emergence of major
chains that now control over 60 per cent of box office takings.
3.2.1. Broadcast TV (over-the-air)
Broadcast television in Australia was established in 1956 as a dual public-private system in which
the government strictly controlled entry and the size of the industry. In the public sector, the ABC
already established as public service radio networks operator, had its mandate extended to the
operation of a public service television network with national coverage. A second national public
service television broadcaster (SBS) to provide multicultural programming began operating in the
early 1980s and was gradually extended nationally1. The commercial sector developed under strict
licensing provisions of entry. Initially, individual commercial television owners were prohibited
from holding a controlling interest (defined as 15 per cent or more of the stock in the company
holding the television station licence) in more than one television station in any one area and two
stations nationally. As previously mentioned, in July 1987 the national ‘two station’ restriction was
replaced by a prohibition of multiple station ownerships with an aggregate population reach of more
than 60 per cent of the national population of Australia. (The aggregate reach limit was increased to
75 per cent of the national population in 1992 and has remained unchanged since.) The concurrent
introduction of cross-media ownership restrictions prohibited a controlling interest in more than one
of the then main media of daily newspaper, commercial television or commercial radio in the same
local market.
The number of commercial operators in the market was also strictly controlled. Initially, two
commercial television licences were allocated in each of the mainland state capital cities. In other
areas only a single commercial television licence was issued. A third commercial operator was
progressively licensed in each of the mainland capital cities in the period 1965-1988. In the late
1980s, through the policy of ‘market aggregation’, existing commercial operators in designated
contiguous regions were permitted to extend distribution of their signal in competition with each
other in the aggregated area. Foreign nationals and entities were prohibited from holding a
controlling interest in a television station. As a direct consequence of the foreign ownership
restrictions, on becoming a US citizen in 1985 Rupert Murdoch (News Corporation) divested his
previously held controlling interest in the TEN Network television stations in Australia’s largest
cities of Sydney and Melbourne. Both cross-media and foreign ownership restrictions were
abolished in 2006.
These regulatory provisions had a profound impact on the level of ownership concentration in the
industry. Initially, the ‘two station’ ownership rule ensured widespread ownership of television
assets and consequently concentration within the industry was low and remained so until 1987.
However, within the prescribed ownership limits, newspaper interests were also major players in
commercial television and radio. The intention of the cross-media ownership prohibitions
introduced in 1987 was to break-up existing cross media groups over time. Consequently no
divestiture of pre-existing arrangements was required and the regulation sanctioned (grandfathered)
them until the event of a change of ownership of the relevant assets. In the event, by the end of
1992, economic turmoil and other events in the industry led ownership changes of all the major
1
The Special Broadcasting Service was established as a radio broadcaster in 1978 (see below) and was given
responsibility for multicultural television in the 1980s.
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commercial television networks and in the process to the dissolution of the main affected crossmedia groupings.
The post-1987 regulatory regime led directly to the formation of major commercial networks
controlling individual stations in each of the mainland state capital cities — the extension of the
aggregate population reach to 75 per cent was specifically implemented to allow this. Similarly, the
population reach restrictions together with implementation of the market aggregation policy
contributed significantly to the formation of regional commercial networks. The resultant substantial
concentration of commercial television assets in the hands of a small number of major players
significantly changed the Australian television landscape. Today, reflecting the constraints of the 75
per cent population reach regulation, ownership of the commercial component of the Australian
television industry is almost entirely concentrated in three major metropolitan network operators and
three smaller regional networks. The remaining independently controlled operators (two) are
economically small entities in control of small individual licenses of remote and regional services.
In terms of programming, the three regional networks are affiliated with their metropolitan
counterparts and invariably retransmit the metropolitan programming with only minor local inputs.
Table 4 provides details of market shares held by the major operators.
Broadcast Television 1988-2007
Market Shares (% revenue)
Commercial TVa
Seven Network (Seven Media Group)
Nine Network (Nine Entertainment Co)b
1988
1992
1996
2000
2004
2007
17.0
23.6
21.2
24.4
22.8
25.7
26.2
27.9
22.1
25.8
24.9
21.5
Ten Network (Canwest)c
Other Commercial TV
17.6
24.7
11.5
24.4
15.4
20.4
13.6
17.8
17.9
20.5
18.2
20.0
Public TVd
Australian Broadcasting Corporation
Special Broadcasting Service
Total Revenue (nominal USD m)
C4
HHI
Noam Index
Notes:
a
b
c
d
Source:
14.6
16.1
12.5
11.6
10.2
12.4
2.5
2.5
3.1
3.0
3.5
3.0
1265.5 1706.3 2289.1 2286.1 3001.0 3981.9
0.7
0.7
0.8
0.8
0.8
0.8
1371.7 1435.4 1578.7 1780.2 1577.9 1565.6
380.4
398.1
437.9
513.9
475.8
472.0
Until July 1987 ownership regulation prohibited ownership of more than two television stations and consequently
ownership concentration in the industry was very low. The 'two station' rule was then replaced by a prohibition of multiple
station ownerships with an aggregate population reach of more than 60 per cent of the national population of Australia. In
1992 the aggregate reach limit was increased to 75 per cent of the national population. Cross-media ownership of
television, radio or newspapers was also prohibited between 1987 and 2006.
Owned by Publishing and Broadcasting Limited since 1990; sold to private equity investors CVC Asia Pacific in late 2006.
Canwest sold its stock in TEN in September 2009.
The ABC and SBS are separate independent entities.
Estimates by authors based on original data from: Australian Communication and Media Authority, Broadcasting Financial
Results (various years); Australian Broadcasting Corporation, Annual Reports; Special Broadcasting Service, Annual
Reports; Australian Broadcasting Tribunal, Annual Reports; and Communications Law Centre, Update, 'Media Ownership
Update' (various years).
Because of the cross-media ownership restrictions (in place from 1987 to 2006) and the ban on
foreign ownership which applied until 2006, broadcast television ownership has been largely free of
links with domestic or international media conglomerates. Packer’s Publishing and Broadcasting
Limited (Australia’s largest magazine publisher) except for a brief period (1987-1990), controlled
the Nine Network, before its sale to private equity investors CVC Asia Pacific in late 2006. News
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Limited sold its ownership of the Ten Network when cross-media ownership rules were introduced
in 1987. A consortium of interest headed and largely funded by Izzi Asper’s Canwest acquired the
network in 1992 and held it until 2009. Although Canwest had a 57.5 per cent economic interest in
the network, it held only 15 per cent of the stock to comply with the then ruling restrictions on
foreign ownership. Kerry Stokes acquired 20 per cent of the Seven Network in 1995 making him the
largest stockholder in the company. His interest in the company has increased since. In more recent
years, the network has expanded its interests in other media sectors including magazine publishing
(Pacific Magazines) and daily newspapers (West Australian).
In 1998 the Australian Government implemented a digital transmission conversion plan for over-theair television. All available spectrum was allocated to established television operators and bans
placed on the use of the digital spectrum to start new services in competition with established
operators were to remain in force at least until completion of the transition to digital transmission.
Slow progress in consumer adoption of digital television forced a rescheduling of the initial
completion target and the process is now due for completion in 2013. Although each of the
incumbent television operators (public service and commercial) now broadcast up to three channels
each, the digital policy has entrenched the pre-existing industry structure and concentration levels.
Figure 3: Broadcast Television Concentration Indices (1988-2007)
C4
(%) C4
100
HHI
HHI
2000
high concentration threshold
1800
80
1600
1400
60
1200
1000
moderate concentration threshold
40
800
600
20
400
200
0
0
1988
1992
1996
2000
2004
2007
Both the C4 and HHI indices for the Australian broadcast television industry, illustrated in Figure 3,
indicate moderate levels of concentration. The top four operators (three main commercial networks
and ABC) control around 75 per cent of the revenue accruing to the industry. The individual shares
of revenue are not highly dissimilar for the three commercial operators each being in the range of 1825 per cent in 2007 (average of 21.5 per cent). In the same year, the ABC’s share of industry
revenue was 12.4 per cent (i.e., somewhat less than 60 per cent of the metropolitan commercial
networks’ average).
The indices are concerned primarily with economic ownership concentration. In television,
however, control of sources of programming can be vital to content diversity and influence of
opinion. Given the prevailing programming agreements (affiliations) between the metropolitan and
11
regional/remote commercial operators, which virtually have no scope to obtain popular programming
from other sources, content diversity is very low.
3.2.2. Radio
After a brief initial period of total private ownership of radio broadcasting, the Australian radio
industry was reconfigured in the early 1930s as a dual public-private system. The ABC as the public
service radio broadcasting was developed as a mixture of national and regional/local networks.
Public service broadcasting was augmented with the establishment of SBS as a second public radio
broadcaster in 1978, initially with transmitters in Sydney and Melbourne and subsequently
progressively expanded into a national network.
Prior to 1987, strict regulation of commercial radio prohibited the ownership of more than one
station in a local broadcasting area, more than four in any one state, and more than eight nationally.
These state and national limits on the ownership of radio stations were relaxed in 1987 to allow
common ownership of up to 50 per cent of the stations in any one state, and up to 16 stations
nationally. As for commercial television, the introduction of cross-media rules prohibiting common
ownership of radio, television and newspaper combinations in the same market (introduced in
1987and extended in 1988) led to the divestiture of many media assets including radio stations.
Some, but not highly significant, common ownership of radio and television assets has re-emerged
since the repeal of cross-media prohibitions in 2006.
Another major factor influencing the structure of the broadcast radio industry was the introduction of
FM radio in the mid-1970s. The new entrants in FM commercial radio were able to carve out large
shares of their local markets and quickly developed into a new competitive force in the industry. The
ABC was also expanded with the development of additions FM services. The restructuring of the
industry was given further impetus by the promulgation of the Broadcasting Services Act 1992. The
Act removed restrictions on foreign ownership of radio services. The limits on common ownership
were also largely removed. The only restriction of common ownership retained imposed a limit of
no more than two commercial radio stations in any local broadcasting area. The new legislation also
provided for the licensing of Indigenous radio services, and locally based community radio stations.
Since 1992, restructuring of the broadcast radio industry continued steadily with changes in the
ownership of several major networks and many stations. Some new networks have emerged from
mergers and acquisition of existing stations. Some foreign newspaper interests entered the market
with two in particular becoming significant players in the Australian broadcast radio industry.
O’Reilly’s Independent News and Media (Ireland) purchased a string of existing stations to form the
Australian Radio Network (ARN). The Daily Mirror Group (UK) also entered the market by
acquiring several established regional stations in 1996 and subsequently acquired several new
licences to establish FM services in urban markets.
While many broadcast radio properties have changed hands since 1992, the effects on concentration
of ownership have not been large. Throughout the period of observation (1992-2007) there has been
little change in the indices of concentration of interest. The HHI index in particular has remained
reasonably steady near the lower limit of the moderate concentration range. Throughout the period,
the main national public broadcaster (the ABC) has remained as the largest single operator although
its share of industry revenue declined significantly with consequential effects on the concentration
ratio. However, in terms of overall concentration, the emergence and growth of Austereo into the
largest commercial operator appears to have produced counterbalancing effects on the industry
concentration ratio. Details of market shares held by major operators are provided in Table 5.
Figure 4 illustrates related changes in the C4 and HHI indices.
12
Radio Concentration Indices (1992-2007)
Market Shares (% revenue)
1992
Commercial Radio
Austereo (Village Roadshow)
Hoyts Media
ARN (Independent News & Media + Clear Channel)
Wesgo
SEA FM
R G Capital
Rural Press
Broadcast Media Group
Regional Media (Macquarie Bank Group)
DMG (Daily Mirror Group -UK)
Tricom (in 1992)/Southern Cross
Radio Superhighway/Macquarie Network
1996
2000
2004
2007
7.9
21.5
16.1
15.8
21.5
9.9
5.2
5.4
(Austereo)
10.0
13.1
11.8
10.4
2.1
3.5
1.8
(R G Capital)
3.7
4.9
(DMG)
(DMG)
(Regional Media)
13.8
6.5
3.6
9.8
8.8
7.5
3.1
1.4
2.5
1.4
6.9
3.9
2.8
34.0
29.8
3.4
14.7
3.0
10.6
3.0
34.0
33.2
3.0
29.1
2.7
27.3
2.7
24.4
2.9
23.7
2.4
516.1
56.6%
1330.7
503.0
639.3
59.8%
1277.0
425.7
629.1
68.8%
1482.4
494.1
814.8
66.1%
1284.0
387.2
1181.2
59.7%
1174.8
354.2
Broadcast Operations
Other Commercial Radio
Public Radio
Australian Broadcasting Corporation
Special Broadcasting Service
Total Revenue (nominal USD m)
C4
HHI
Noam Index
Source: Estimates by authors based on original data from: Australian Communication and Media Authority, Broadcasting Financial
Results (various years); Australian Broadcasting Corporation, Annual Reports; Special Broadcasting Service, Annual
Reports; Australian Broadcasting Tribunal, Annual Reports; and Communications Law Centre, Update, 'Media Ownership
Update' (various years).
Figure 4: Broadcast Radio Concentration Indices (1992-2007)
(%) C4
100
90
C4
HHI
HHI
1800
high concentration threshold
1600
80
1400
70
1200
60
50
1000
moderate concentration threshold
800
40
600
30
20
400
10
200
0
0
1992
1996
2000
2004
2007
3.2.3. Cable and satellite delivered program channels
The broadcast licensing regime prior to the promulgation of the Broadcasting Services Act 1992
(BSA) strictly controlled the establishment of television services likely to compete with broadcast
free-to-air television. A limited form of satellite delivery of multichannel services was sanctioned by
13
BSA and two licences were subsequently auctioned. However, because of technical delays and
considerable policy instability (Tiffen 2007) subscription television commenced operating in 1995
on a variety of delivery platforms including satellite, terrestrial multipoint distribution systems and
cable. Currently, there are no major restrictions on the ownership of subscription television services.
However, there are considerable barriers to entry into the industry both in relation to delivery
platforms and in access to programming.
The industry developed slowly and take-up still relatively low (only 34 per cent of the population).
Control of major sources of content by established media, particularly Foxtel, became a potent
barrier to entry into the industry as well as a major constraint to competitiveness. Control of the
output of several major Hollywood producers (not available to competitors) enabled Foxtel to
establish a dominant position from the start and to further consolidate that position in later years.
Austar and Foxtel do not compete with each other. Under a territorial program distribution
arrangement between the two operators, Foxtel’s market is confined to the 5 main state capital cities
and the Gold Coast, while Austar distributes the same programs elsewhere. With a limited cable
distribution network at its disposal and unable to secure access to the exclusive Hollywood content
controlled by Foxtel, Optus (telecommunications carrier) faced considerable difficulties in growing
its customer base. In 2002, after reaching a program sharing agreement with Foxtel, Optus withdrew
from the market and became a reseller of Foxtel to customers connected to its cable network. A very
small number of other players operate localised cable distribution system in regional areas and a
limited satellite service.
Drama and sporting programs on subscription television are affected by regulation. Subscription
television providers, including their drama channel package suppliers, are subject to the Australian
content provisions of the BSA which require them to invest at least 10 per cent of their total drama
channels’ program expenditure on new Australian drama. Access to transmission rights of major
sporting events is constrained by ‘anti-siphoning’ rules. Australia has one of the world’s most
extensive mandated list of sporting events that are to be made available for general viewing on freeto-air television. Subscription television licensees can acquire the rights to broadcast events on the
anti-siphoning list only if those rights are not acquired by over-the-air television broadcasters.
The trend in the concentration ratios in the period (see Table 6 and Figure 5 for details) reflects the
increasingly dominant position of Foxtel.
Multichannel Television (1996-2008)
Market Shares (%)
1996
2000
2004
2008
Australis Media
14.0
Foxtel (Telstra, News Corp & PBL)
30.7
54.4
56.6
63.1
Austar (Liberty Global)
19.5
27.9
26.7
27.2
Optusa
34.9
16.4
12.1
6.2
(SingTel)
Other
(in liquidation)
0.9
1.3
4.5
3.5
168.9
601.3
1010.1
2153.4
C4b
99.0
99.0
95.5
96.5
HHI
2735.5
4008.6
4068.0
4755.5
Noam Index
1116.8
1792.7
1819.3
2126.7
Total Revenue (nominal USD m)
Notes:
a
b
Foxtel reseller post-2002
Based on top 3 firms for 2000 and subsequent years.
Source: Estimates by author based on data from various sources including companies' annual reports and other sources
14
Figure 5: Multichannel Television Concentration Indices (1996-2008)
C4
100
HHI
C4 (%)
HHI
5000
4500
4000
80
3500
3000
60
40
2500
2000
high concentration threshold
1500
20
1000
moderate concentration threshold
500
0
0
1996
2000
2004
2008
3.2.4. Film distribution/production
The Australian film and video production and post-production services industry is made up of more
than 2000 establishments most of which are very small in size. According to the Australian Bureau
of Statistics (2008), in 2007 only 18 of the establishments in the sector employed more than 100
people accounting for 39 per cent of industry employment and 31.3 per cent of income. Included
among the larger production establishments are the operations of broadcast and subscription
television services producing programming for their own use. The main producers are: Village
Roadshow (31.6 per cent of total production expenditure in 2009); Endemol Southern Star (9.8 per
cent); GTV Holdings (4.3 per cent) and Beyond International (1.3 per cent). Of these, the latter three
are primarily engaged in the production of television programs.
Overall, ABS data indicate that in 2007 productions made primarily for television accounted for
more than 72 per cent of all production costs. An additional 13 per cent of production expenditure
was devoted to production of television commercials, station promotions and program promotions.
Only 14.5 per cent (approximately AUD273 million) was for productions made other than for
television. The main components of non-television production expenditure were AUD183.8m for
feature films and AUD71.7m for corporate marketing and training media. In 2009, total production
expenditure on film and video production amounted to AUD2082 million of which AUD368 million
related to feature film production (Screen Australia, 2011). The aggregate production expenditure of
the top four producers was 47 per cent of the total (that of the largest producer alone was almost 32
per cent of the total).
The level of activity in feature film production is significantly influenced by foreign film producers.
In 2010, total production expenditure amounted to AUD435m of which AUD°69m related to foreign
productions. In the period 2001-10, the average annual proportion of production activity funded by
foreign producers was 44 per cent, with a peak of 74 per cent in 2004-05 (Screen Australia, 2011).
Overall, on average around 30 Australian feature films are produced each year. Foreign production
activities usually relate to a very small number of foreign features (2-3 titles a year).
Film distribution is largely the domain of international distributors. In addition to the main
international distributors, some 30 small specialised distributors are active in the industry which
account for an aggregate market share ranging from seven to 15 per cent in the period covered by the
15
research data. Among the international distributors, the Australian company Village Roadshow in
association with Warner Bros has the largest market share. In 2009, 13 percentage points of its total
market share were derived from the distribution of its own productions and eight percentage points
were related to Warner Bros owned productions. Details are provided in Table 7 and Figure 6.
From relatively modest beginnings as the operator of a drive-in movie theatre in the in the early
1950s, Village Roadshow has grown into an international media conglomerate. Its early expansion
involved first acquisition of other drive-in and traditional cinemas. Subsequently, it expanded into
film distribution in the 1960s and film production in the 1970s. In 1988 it further broadened its
interests with the acquisition of De Laurentis Entertainment followed by the acquisition of theme
entertainment parks in Australia including Warner Bros Movie World and Sea World in 1992. In the
1990s it expanded its cinema exhibition operations internationally acquiring cinemas in 20 countries
(subsequently scaled back to cinemas in Australia and Singapore). It also further broadened its
media interests with the purchase of the Australian Triple M radio network in 1993, which was later
transformed into the Austereo Group — the largest commercial radio network in Australia in terms
of market share. More recently (February 2008), its Village Roadshow Pictures interests were
merged with Concord Music Group to form the diversified Los Angeles-based Village Roadshow
Entertainment Group.
The decline in the industry concentration indices during the period under review is largely a
reflection of the combined effect of the splitting of United International Pictures into Paramount and
Universal in 2006 and the rising share of the market being secured by small specialist independent
distributors.
Film Distribution (2003-2009)
Market shares (% revenue)
Village Roadshow/Warner Bros
2003
2004
2006
2008
2009
22
23
20
23
21
11
11
20
15
16
a
Fox
United International Pictures
b
21
27
19
n.a.
n.a.
Paramount
n.a.
n.a.
n.a.
18
13
Universal
n.a.
n.a.
n.a.
14
11
Walt Disney [Buena Vista International (2003-2006)]
25
16
15
12
13
Sony (Columbia TriStar)
14
13
15
8
12
7
11
11
11
15
Other
c
Total Industry Revenue (nominal USD m)
581.2
630.7
643.3
904.0
874.8
C4
82.0
79.0
74.0
70.0
63.0
HHI
1867
1804
1611
1482
1300
316
305
272
247
217
Noam Index
Notes:
a
b
c
Village Roadshow is the main Australian-owned film distributor. In 2009, 8 percentage points of its market share were
derived from Warner Bros; information not available for earlier years.
United International Pictures split into Paramount and Universal after 2006.
Includes some 30 small distributors (30 + majors listed above used no. of voices in Noam Index).
Source: Screen Australia, http://www.screenaustralia.gov.au/research/statistics/wcbodistshare.asp
16
Figure 6: Film Distribution Concentration Indices (2003-2009)
C4
(%) C4
100
90
80
70
60
50
40
30
20
10
0
HHI
HHI
high concentration threshold
moderate concentration threshold
2003
2004
2006
2008
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2009
3.2.5. Cinemas
The Australian cinema exhibition industry is made up of three large chain operators (Greater Union,
Hoyts and Village Roadshow) and some 140 smaller exhibitors. ABS (2001) data show that prior to
2000, the number of operators in the industry was in gradual decline at a rate of about three per cent
per annum. At June 2000 there were 173 cinema businesses in operation with 97 of them earning
less than AUD one million per annum. While the slow decline in the number of operators has
continued over the past decade, the industry itself has grown both in terms of cinema screens and
attendances.
In 2009, Independent operators controlled 31 per cent of total screens. The three major chains
controlled over 1,000 cinema screens (over 50 per cent of the total), the rest being controlled by
several other smaller chains. Overall, there is low to medium concentration in the industry with little
change recorded over the period 1998-2009 (see Table 8 and Figure 7 for details).
Cinemas (1998-2009)
Market Shares (% cinema screens owned)
Greater Union
Hoyts
Village Roadshow
Reading
Palace
Grand
Dendy
Wallis Theatres
Others
Total box office revenue (nominal USD m)
Australian movies box office (nominal USD m)
Australian movies share of box office (%)
C4
HHI
Noam Index
1998
24.2
17.6
13.5
2000
24.2
19.2
12.5
4.6
2002
24.9
18.5
12.6
5.1
3.1
2004
23.1
18.9
11.8
6.8
2.6
2006
24.2
17.7
11.5
6.9
3.0
2007
23.8
17.3
11.1
7.0
3.2
1.4
43.3
390.7
15.9
4.0
57
1080
80
1.1
38.5
411.7
32.4
7.9
60
1133
86
1.0
34.7
475.5
23.5
4.9
61
1161
90
1.7
35.1
630.7
8.3
1.3
61
1084
87
1.4
35.3
643.3
29.7
4.6
60
1088
89
1.5
36.1
760.3
30.6
4.0
59
1048
87
Source: Screen Australia, http://www.screenaustralia.gov.au/research/statistics/wcbodistshare.asp
2008
23.8
17.2
11.3
7.8
3.8
1.9
1.3
1.4
31.5
904.0
33.9
3.8
60
1073
90
2009
24.6
16.7
11.3
7.5
3.8
1.9
1.3
1.2
31.7
876.0
44.1
5
60
1087
92
17
Figure 7: Table 8: Cinemas Concentration Indices(1998-2009)
C4
(%) C4
100
90
80
70
60
50
40
30
20
10
0
HHI
1200
1000
moderate concentration threshold
800
600
400
200
0
1998
3.3.
HHI
2000
2002
2004
2006
2008
2009
Telecom distribution media
After some initial tentative steps Australia embarked on a two-stage program of full-scale
liberalisation of its telecommunications sector. The first stage, starting in 1991, involved the
licensing of a full-line private sector telecommunications carrier (Optus) to provide wireline and
wireless services in competition with the publicly-owned former monopoly carrier (Telstra). The
market was further expanded in 1993 with the entry of a third (wireless only) carrier (Vodafone)
competing with the two full-line carriers in the mobile telephony market. In addition A third mobile
operator was licensed and entered the market in 1993. The liberalisation arrangements mandated
interconnection between the carriers including access of the private carriers to Telstra’s wireline
customer access network (CAN) which was deemed to be an essential facility.
The second stage began with the promulgation of new legislation, the Telecommunications Act 1997,
which introduced a fully competitive market starting 1 July 1997. The publicly-owned carrier was
transformed into a private sector corporation listed on the stock exchange and its stock was
progressively sold to a wide spectrum of institutional and individual stockholders. With full
competition, service provider or carrier2 licences were easily secured and progressively over 100
service providers entered the market for the supply of wireline and wireless services. Many,
however, are very small in size or market share. For the analysis, the number of effective
competitors (voices) in the market includes operators with revenue of more than AUD 25 million in
at least one year of the review period.
3.3.1. Wireline
With the introduction of open competition in July 1997 the number of providers of
telecommunications services increased considerably. By the end of June 1997, the Australian
Communications authority had issued 77 carrier licences to prospective operators in the liberalised
regime. However, some of them did not become operational and others withdrew from the market
soon after entry. Also, the 1990s boom in the Australian and global telecommunications industry
2
The basic difference between carriers and service providers is that the former own or operate a network for the
carriage of their services and those of other service providers.
18
which came to an end in March 2000 led to a shakeout causing many companies to withdraw from
the sector. By June 2001, there were only 54 carriers and 88 telephone service providers listed by
the Telecommunications Industry Ombudsman and not all of them were thought to be active
(Productivity Commission, 2001).
The weaker market outlook of the early 2000s impacted on all carriers with many scaling back their
investment plans. Nonetheless competition intensified as the new entrants sought to establish
themselves in the market. Telstra’s former monopolist’s status and ownership of the wireline CAN
(notwithstanding a regulatory regime guaranteeing access to other carriers) has provided it with an
ongoing advantage over its competitors as it sought to protect its position in the market and attenuate
its loss of market share. In first few years of the liberalised regime Telstra’s market share declined
rapidly from 92.0 per cent in 1997 to 78.8 per cent in 2003. The erosion slowed down somewhat
afterwards but continued throughout the period covered by the analysis (see Table 9 for details). By
the end of the period, however, Tesltra still remained the dominant supplier of wireline services
controlling more than 70 per cent of industry revenue. This erosion of the market is particularly
evident in the HHI ratio, but less so in the C4 which is based on the aggregate share of the largest
four operators (see Figure 8 for details).
Wireline Telecommunications (1997-2009)
Market Shares (% revenue)
Telstra
Optus (SingTel)
AAPT (Telecom NZ 1999)
Primus (Primus)
Powertel (Telecom NZ 2007)
Agile Communications
Soul Pattinson
Chime
Uecomm Operations
Macquarie Telecom
Reach Networks Australia
Total Known Shares
Other
1997
92.9
6.4
0.7
1999
90.0
7.5
2.1
0.4
0.1
100.0
99.9
0.1
2001
84.1
10.9
2.5
0.9
0.1
0.0
0.0
0.1
0.1
0.1
0.3
99.2
0.8
2003
78.8
13.3
3.7
1.3
0.3
0.0
0.0
0.2
0.1
0.4
0.3
98.6
1.4
2005
77.0
13.5
3.5
1.5
0.5
0.1
0.1
0.5
0.4
0.5
0.0
97.7
2.3
2007
73.6
12.0
3.0
1.1
0.6
0.2
1.4
0.6
0.6
0.6
0.0
93.8
6.2
2009
71.8
11.6
2.2
0.8
0.7
0.3
1.2
1.1
0.9
0.5
0.0
91.1
8.9
Total Revenue (USD billion)
9.6
9.0
8.1
10.9
11.7
13.4
13.9
Number of operatorsa
3.0
12.0
21.0
22.0
22.0
22.0
21.0
100.0
99.9
98.5
97.2
95.5
89.7
86.4
C4
HHI
8673.2
8159.8 7201.7
6409.9
6125.5
5574.8
5302.3
Noam Index
5007.5
2355.5 1571.5
1366.6
1306.0
1188.6
1157.1
Notes:a 'Number of operators' refers to active registered carriers with eligible revenue greater than AUD25 million in at
least one year during review period
Source: Australian Communication and Media Authority ‘Carriers Eligible Revenue Returns Data’, Australian
Competition and Consumer Commission (various published reports); Companies' annual reports; Productivity
Commission (2001), Telecommunications Competition Regulation Inquiry Report; and authors' estimates
19
Figure 8: Wireline Telecommunications Concentration Indices (1997-2009)
C4
(%) C4
HHI
HHI
10000
100
90
80
70
60
50
40
30
20
10
0
9000
8000
7000
6000
5000
4000
3000
high concentration threshold
2000
1000
0
1997
1999
2001
2003
2005
2007
2009
3.3.2. Wireless
When Australia embarked on liberalisation of its telecommunications the wireless sector was still in
its infancy but growing rapidly. Consequently Telstra’s incumbent position was much more
vulnerable than for the wireline sector. Both Optus and Vodafone moved quickly to establish their
own wireless networks and began to compete strongly with Telstra and establish themselves in the
market. Following full liberalisation of the sector a fourth wireless carrier (Hutchison) established
its own network and several other independent service providers relying on the established networks
to carry their services also entered the market.
The largest of the independent service providers, OneTel, began operating in 1999. Its major
stockholders included James Packer of PBL Media (major interests in broadcast TV, magazines and
subscription TV) and Lachlan Murdoch (son of Rupert and previously associated with News Corp in
Australia). It quickly established itself in the market with an aggressive marketing strategy, but then
failed spectacularly when it got itself into credit difficulties and its major stockholders withdrew
from further support of the enterprise.
Starting from its incumbent position, Telstra gradually lost market share as the other major carriers
established themselves. Its loss of market share was nominally greatest in the early years of market
liberalisation and introduction of full competition. However, the loss of market share did not
translate into reductions of market revenue. With market growth, its wireless revenue continued to
grow in absolute terms, but at a slower rate than its competitors. Telstra remains the largest operator
in the market with the market share in recent years tending to stabilise at around 43 per cent.
The smallest of the major carriers, Hutchison, entered the market in 2000 with its 3G network. It
gradually increased its market share, but remained relatively small compared to the three previously
established wireless carriers. In early 2009, it entered into a 50:50 joint venture with Vodafone
combine the wireless operations of the two carriers in Australia. In effect, the move reduced the
main players in the industry from four to three competing carriers.
The changes in industry concentration during the period under observation are reflected in the HHI
index. As there number of significant players in the industry reached five only for a small part of the
period under review, the C4 index does not change significantly. Details are provided in Table 10
and Figure 9.
20
Wireless Telecommunications (1997-2009)
Market Shares (% revenue)
Telstra
OPTUS (SingTel)
Vodafone Australia (Vodafone Group Plc)
Hutchison Telecommunications (Australia)
Vodafone-Hutchison Joint Venture^
One.tela
Other (Resellers)
1997
67.0
22.0
6.0
1999
57.0
26.0
12.0
2001
48.0
29.0
15.0
3.0
5.0
0.9
4.0
2.8
2.0
2.0
1.0
1.0
1
Total Revenue (nominal USD billion)
2.2
2.6
3.0
4.3
7.3
8.7
9.6
Number of Operators (excludes resellers)
3.0
4.0
5.0
4.0
4.0
4.0
3.0b
95.0
96.0
95.2
98.0
99.0
99.0
99.0
5009.0
4069.9
3386.8
3438.0
3302.3
3233.0
2853.0
C4c
HHI
2003
46.0
32.0
17.0
3.0
2005
43.0
34.0
16.5
5.0
2007
43.0
32.0
18.0
6.0
2009
42
33
24
Noam Index
2891.9 2034.9 1514.6 1719.0 1651.1 1616.5
1647.2
Notes:
a
One.tel went into liquidation in 2001
b
Vodafone Australia and Hutchison Telecommunications (Australia) merged their operations in 2009
c
based on top 3 players in 1997and 2009.
Source: Australian Communication and Media Authority ‘Carriers Eligible Revenue Returns Data’, Australian
Competition and Consumer Commission (various published reports); Companies' annual reports; Productivity
Commission (2001), and authors' estimates
Figure 9: Wireless Telecommunications Concentration Indices (1997-2009)
C4
(%) C4
HHI
HHI
100
6000
5000
80
4000
60
3000
40
high concentration threshold
20
1000
0
0
1997
3.4.
2000
1999
2001
2003
2005
2007
2009
Online Media
Internet service providers (ISPs) and search engines have had contrasting experiences in Australia.
With rapid growth in the rate of access to the Internet, the ISPs industry was increasingly
transformed from basic localised access services to large hubs providing a wide range of information
services in addition to internet access. The main telecommunications carriers and service providers
were well-placed to take advantage of their position in the market and quickly consolidated their
market shares at the expense of the small local providers many of whom left the industry. The
21
services provided by search engines are highly conducive to centralised provision favouring the
emergence of global dominant players.
3.4.1. Internet service providers
More than 400 Internet Service Providers (ISP) businesses are estimated to be currently active in the
Australian ISP industry. The vast majority however are small (with less than 1000 subscribers) with
many servicing localised geographic markets and often operating as ‘virtual’ ISPs reselling
connectivity provided by major operators. Less than 10 per cent of ISPs have a subscriber base of
more than 10,000 with only 11 having more than 100,000 subscribers.
The industry has been experiencing considerable consolidation. A decade ago, the number of ISPs
operating in the industry was almost 700 and remained around that level for several years. Starting
in 2006 the number of ISPs operating in Australia rapidly declined contracting to just below 400 by
the end of 2008 with many of the smaller operators disappearing. The contraction in the number of
smaller/medium ISPs is reported to be continuing (ABS, 2010).
The period 1998-2008 was one of rapid take-up of internet by households and, particularly from
2003 onwards, of rapid adoption of broadband. In 1998, only 16 per cent of Australian household
had access to the internet, by 2008 the proportion of households with internet access had quadrupled
to 72 per cent (ABS, 2009). Incumbent telecommunications carriers extended their established
unique positions in the telephony market to the provision of internet services. This gave them the
advantage of vertical integration in the supply of ISP services. As alternative delivery platforms
were not available, other ISPs were reliant on access to the networks of incumbent carriers to deliver
their services. While access was guaranteed by regulation, the incumbent telecommunications
carriers were advantage by their established relationships with customers. This was particularly so
for Telstra (the dominant telecommunications carrier) with its ubiquitous national network presence.
The aggregate market share of the top four ISPs more than doubled in the period 1998-2008 with C4
increasing from 31.3 per cent in 1998 to 67.3 per cent in 2008. Much of the increase in C4 is due to
the growth in the market share of the largest ISP, Bigpond (owned by Telstra), which increased from
13 per cent to 43.8 per cent in the same period. Optus (also a major telecommunications carrier) also
experienced a high rate of growth in its market share increasing from 1.7 per cent to 11 per cent. Of
particular note is the decline in the market share of OzEmail, one of the successful early entrants in
the ISP market that had built up a sizable dial-up internet service. OzEmail was eventually taken
over by iiNet transforming the latter from a small regional operator to the third largest ISP in
Australia. It should be recalled that, as noted above, the overall market grew rapidly in the period
under review. Consequently the growth in the size of the individual ISPs was much greater than
would be implied by a simple comparison of the market shares held at the beginning and end of the
period.
The consolidation is clearly reflected in the transition of the HHI index from low concentration
levels pre-2000, to moderate concentration levels in the first half of the decade, and to high
concentration levels in the latter half of the decade. Details are provided in Table 11 and Figure 10.
22
Internet Service Providers (1998-2008)
Market Shares (% revenue)
Bigpond (TELSTRA)
Optus (SingTel)
iiNet
OzEmail
iPrimus (Primus Telecommunications Group Inc)
TPG/SP Telemedia
Chariot
Other
Number of main ISPs
Total Revenue (nominal USD m)
C4
HHI
Noam Index
2000
24.4
7.0
0.8
12.8
4.6
3.4
1.3
45.7
36
835.9
48.8%
843.3
140.5
2004
31.6
9.8
3.3
8.2
8.3
5.7
1.6
31.5
36
1946.6
57.9%
1276.7
212.8
2008
39.8
11.1
8.7
iiNet in 2005
5.9
5.2
TPG in 2008
29.3
27
3729.2
65.5%
1844.8
355.0
2010
42.2
11.8
9.6
5.3
5.1
26.0
27
3561.6
68.9%
2066.3
397.7
Note:
Number of voices for Noam Index defined as ISPs with more than 10,000 subscribers.
Source: Actual and estimates by authors based on data from a variety of sources including, Australian Bureau of Statistics, 8153.0 Internet Activity, Australia (various years), companies annual reports, media reports and other sources
Figure 10: Internet Service Providers, Concentration Indices (1998-2008)
(%) C4
C4
100
HHI
HHI
2500
90
80
70
2000
high concentration threshold
60
1500
50
moderate concentration threshold
40
1000
30
20
500
10
0
0
2000
2004
2008
2010
3.4.2. Search engines
The internet search engine market in Australia is dominated by the main global search engines and
more specifically by Google whose market share now exceeds 90 per cent. Yahoo and other global
search engines that were popular a decade ago have all suffered considerably from the emergence
and growth of Google. Yahoo and Altavista appear to have been the main losers, but other engines
have not been spared. In the period under review Yahoo’s market share declined from 41 per cent in
2001 (the largest in the market) to a share of only 2.4 per cent in 2010. In the same period
Altavista’s share declined from 18.6 per cent (second largest in the market) to a miniscule 0.1 per
cent in 2010.
While the market is dominated by the global search engines, there are several Australian well
established search engines available to users. Most of them, however, have limited coverage and
depth relative to what is on offer on the global engines. Sensis, benefited considerably from its
ownership by Telstra (dominant Telecommunications operator in Australia) and its relationship with
Bigpond (the largest ISP in Australia also owned by Telstra). Sensis maintains its own database and
23
sponsored listings. In 2001 it had 9.2 per cent of the Australian market. Its linkages to the Telstra
‘family’ appear to have insulated it somewhat from the Google onslaught in subsequent years and its
share of the market remained relatively stable at about eight per cent. In 2008, however, it entered
into a commercial arrangement with Google including adoption of the Google search engine for its
operations. Other Australian search engines include Ansearch, Anzwers, Howzat, WebWombat and
WotBox. Some tend to operate specialised services. Generally, their market share is very small.
The concentration indices indicate that the search engine market has always been highly
concentrated. The C4 values indicate that the four largest search engines in aggregate controlled
over 90 per cent of the market throughout the period under review rising to over 98 per cent at the
end of the period. The rise of Google at the expense of other previously popular global engines has
resulted in dramatic increase in the HHI in the period reviewed in Table 12 and Figure 11.
Search Engines (2001-2010)
Market shares (% revenue)
Google
Yahoo!
ninemsn (MSN)/Bing
Altavista
Sensisa (TELSTRA)
Ask
Other
2001
12.3
33.3
13.0
15.1
7.5
0.0
18.8
2004
54.0
21.4
14.2
Yahoo!
7.1
1.1
2.2
2006
60.2
16.8
12.8
2008
87.8
3.9
6.7
2010
92.5
2.6
3.4
8.3
0.8
1.2
0.4
1.2
0.4
1.1
Total Industry Revenueb (nominal USD m)
10.2
89.0
296.9
793.0
956.5
C4
73.7
96.7
98.0
98.8
98.9
HHI
1714
3623
4134
7769
8575
Noam Indexc
495
1046
1193
2243
2475
Notes:
a
From 2008 Sensis has been using Google engine for searches and its share has been attributed to Google
b
Revenue relates to search engines and online directories
c
Number of voices for Noam Index defined as 12
Source: Based on Roy Morgan Survey Data (Press Releases 2006/453 and 2006/496), IAB Australia, and various other
sources including Hitwise and http://statcounter.com/
Figure 11: Search Engines, Concentration Indices (2001-2010)
C4
(%) C4
HHI
HHI
100
10000
90
9000
80
8000
70
7000
60
6000
50
5000
40
4000
30
3000
high concentration threshold
20
2000
10
1000
0
0
2001
2004
2006
2008
2010
24
4. Other Concentration and Ownership Issues
4.1. Media conglomerate companies, vertical integration issues
Much of the policy concern in Australia in relation to media diversity has been focused on the
capacity of media conglomerates to use their power across media to influence public opinion and to
skew competition in their favour. In the Australian context, media conglomerates and their power to
influence public opinion was a concern from the early days of the development of electronic media
starting with radio in the 1920s and reinforced by the introduction of television in 1956.
The Australian press has traditionally enjoyed full freedom of expression and participation in the
industry has never been subject to regulation. Indeed, the Australian federal constitution contains no
powers for regulation or control of the Press. In contrast, the constitutional powers in relation to
electronic transmissions (initially telegraph) have been deemed to extend the power to regulate
electronic media. It is this power that was first used to license the radio broadcasters when the
medium was introduced and later (in 1935) to set limits on the number of radio licences — and
subsequently also television licences — that could be held by a single individual or entity.
According to the Joint Parliamentary Committee on Wireless Broadcasting (1942) the purpose of the
ownership limits was to constrain the extension of influence of newspapers into the new medium as
there was ‘little multiple ownership of broadcasting licences by other interests’.
The concern with media influence on public opinion was also cited as the justification for restrictions
on foreign ownership and control of media. In this regard, as stressed in 1951 by the then Prime
Minister Robert Menzies, the issue was whether ‘whether the Government should permit or even
encourage a state of affairs in which the most intimate form of propaganda known to modern science
that is being conducted in this country, one that is going into every home and is reaching every man,
woman and child in this country, should be in the hands of people who do not belong to this country’
(House of Representatives, 1951:2926).
While these restrictions remained in place, and ensured some limits on concentration within each
broadcasting medium, they did not prevent a degree of cross-media ownership from arising. The
1987 changes were designed to trade-off a deeper influence within a medium (initially television and
later also radio) by allowing the formation of networks with a prohibition of control in more than one
of the established traditional media in the same local market. The cross-media rules remained in
force until 2006. Foreign ownership restrictions were abolished in 1992 for radio, and for television
in 2006 concurrently with the abolition of cross-media ownership restrictions. It should be noted,
however, that foreign investment in major traditional media remains under the purview of the
Foreign Investment Review Board.
The application of ownership and control (including foreign control) limits and the cross-media rules
while in force were a major constraining influence on the formation of media conglomerates with
interests in broadcast media. The impact of these factors is evident in the main media interests of the
various conglomerates summarised in Figure 12.
25
Figure 12: Main Cross-Media Groups (2010)
TELSTRA
Telstra (72%
market share)
Wireline
Telecommunication
Telstra (42%
market share)
Wireless
Telecommunication
Optus
News Corporation
Nine Entertainment Seven Network Ltd
Co (formerly PBL
Media)
Optus (33%
market share)
Nine Network
Seven Network
Radio
Pay TV
Village Roadshow
Optus (12%
market share)
TV Broadcasting
50% owner of
Foxtel (63%
market share)
APN News &
Southern Cross
Media
Media Group
(formerly Macquarie
Media Group)
OptusVision
(Foxtel reseller)
Southern Cross TV
(regional network)
Australian Radio Austereo
Ownership of
Network
several radio
stations
25% owner of Foxtel 25% owner of
(63% market share) Foxtel (63%
market share)
Fox Studios (Sydney)
Village Roadshow
Film
Village Roadshow
Movie Theatres
ISPs
Bigpond (largest
ISP (40% market
Sensis
Optus (second
ranked ISP 12%
50% ninemsn
Yahoo!7 (joint
venture with Yahoo!)
Search Engines
14% of market
Magazines
Daily Newspapers
newspapers with
combined circulation
of 57% of market
Books
HarperCollins (incl.
Angus & Robertson)
Pacific Magazines
ACP Magazines
44% market share
Western Australian
(daily)
several regional
newspapers
The figure reflects the situation in 2010, some four years after the abolition of cross-media
ownership restrictions. Although there have been some changes in the ownership of traditional
media assets since the abolition of the cross-media rules, they have not been extensive.
Combinations of media assets that would have been prohibited by the cross-media rules include the
recent acquisition of the Western Australian (Perth daily newspaper) by Seven Network Limited
(metropolitan TV network), the acquisition of the Southern Cross TV regional network by the former
Macquarie Media Group which owned a regional radio network with a similar coverage area, and
APN News and Media (owned by the Irish magnate O’Reilly) common ownership of regional radio
and regional newspapers in the same market. All the other combinations illustrated in the figure
would have been permitted by the previous cross-media rules as they did not involve common
ownership of daily newspapers, television and radio entities with common geographical coverage
areas.
Traditionally, four key corporations have dominated the Australian media landscape. The first was
the Herald and Weekly Times, which until 1986 was the largest of the newspaper companies. It had
been founded by Sir Keith Murdoch, father of Rupert, and was the first to extend newspaper
ownership into several capital cities. It had the biggest circulation newspapers in every state capital
city, except Sydney where it had no presence. In 1987 Rupert Murdoch (News Limited), who had
not inherited the company, successfully mounted a daring raid, announced in anticipation of the
coming changes in media ownership laws. The introduction of those laws was widely seen as the
last chance to buy into television, and there was a frenzy of takeovers with TV stations commanding
prices which before would have seemed impossible (Tiffen 1994). News Limited subsequently
became one of the world’s biggest media companies.
Apart from the Herald and Weekly Times, the other three companies were unusual in the modern
corporate world in that they were dominated by a central proprietor. The Packer organisation (PBL
26
Media) — led by Frank from the 1930s to his death in the 1970s, then by Kerry until his death in
2005, and since by James — owned only one daily newspaper, the Sydney Daily Telegraph, sold in
1972 to Rupert Murdoch, but also was the largest magazine group in the country, and crucially was
the first television network to own the crucial Sydney-Melbourne axis of channels. Packer was the
largest TV operator in the country, until in the post 1987 actions he sold to Alan Bond, but a few
years later regained control of the network. Later PBL Media acquired one quarter of the dominant
Foxtel pay TV operator, in partnership with News Limited and Telstra.
The Fairfax company owned most of Australia’s leading ‘quality’ newspapers, had two TV channels
in Brisbane and Sydney, plus a stable of magazines and radio stations. After the post-1987 shakeout,
the company was well placed but then a disastrous internal division in the family left it much
reduced. It remained strong in newspapers, but no longer had a presence in television.
Currently, the two most prominent cross-media conglomerates are News Corporation which has
relocated its headquarters from Australia to the United States, and Nine Entertainment Company
(formerly PBL Media). While News corporation’s assets include newspapers, magazines, book
publishing, subscription television (25 per cent share of Foxtel) and film production studios, they do
not extend to broadcast media. Although Murdoch did own some television stations before the
introduction of cross-media ownership restrictions, he sold those assets on becoming a US citizen to
avoid conflict with the then prevailing prohibitions of foreign ownership
Kerry Packer never hid his ambition to broaden his interests in television and magazines to daily
newspapers but was frustrated by the cross-media rules. Except for a brief period in the late 1980s
PBL Media, was the owner of Australia’s consistently highest rating television network (Nine
Network) with stations in all the largest metropolitan cities and consequently was barred from
owning a daily newspaper or radio services in any of those cities. PBL Media assets therefore have
been largely concentrated on television, magazines and subscription television (25 per cent of
Foxtel). In 2006, PBL media’s television and magazine interests were hived off into the Nine
Entertainment Company with James Packer selling off a 50 per cent share of the new entity to a
private equity company (CVC Capital Partners). The interest in Foxtel was retained by Packer.
Subsequently, CVC acquired all the capital in Nine Entertainment Company. .
A third Australian media mogul, Kerry Stokes, controls the Seven Network (television) which has
recently acquired a daily newspaper, the Western Australian in Perth. This would not have been
possible under the former cross-media regime. Before acquiring a strategic interest in the Seven
Network in 1996, at various times Stokes owned several broadcast and newspaper assets including
concurrently a television station and a daily newspaper in Canberra, but sold those assets at the onset
of cross-media regulation regime in 1987. The Seven Network also owns Pacific Magazines (second
largest Australian magazine publisher), Yahoo!7 (a joint venture combining Yahoo! search and
online capabilities with the Seven Network’s content) as well as interests in wireless broadband and
in a voice over internet protocol (VOIP) telephony operator.
4.2. International ownership (both inbound and outbound)
International owners have substantial stakes in Australian media. Indeed Australia is probably
unique not only in having one company controlling papers which constitute such a large share of
daily circulation, but in that company being foreign. Reflecting its origins as an Australian
corporation, Rupert Murdoch’s News Corporation is the dominant player in Australia’s newspaper
industry controlling a combined daily newspapers circulation of 57 per cent and has significant
investments in magazines, book publishing, subscription television and film production. The
corporation was relocated to the US in 2004 but has maintained its Australian interests. Previously,
27
Murdoch also had interests in broadcast TV, but had to dispose of them on taking up US citizenship
in 1985 because of the then ruling regulation which prohibited foreign control of Australian
television licences. This meant the timing of the 1987 changes was perfect for Murdoch as his TV
holdings sold for much more than they would have done if he had been forced to sell immediately.
As discussed in earlier sections, the acquisition of a controlling interest in the broadcasting sector
was specifically prohibited until 1992 in relation to radio and 2006 in relation to television. Since
those dates, foreign investment in radio and TV is governed by the provisions of general foreign
investment policy which is broadly encouraging of foreign investment consistent with the national
interest. Broadcast TV, radio and newspapers are defined as sensitive industries within that policy
and all foreign investment proposals involving five per cent or more of a company’s stock regardless
of the value of the investment must be notified to the Government and get prior approval before they
can proceed (Treasurer, 2011). In most recent cases, approval has been granted subject to conditions
regarding Australian residency of the CEO, retention of Australian incorporation and headquarters
and inclusion of a majority of Australian directors on the board of a corporation; see for example,
Costello (2007a and 2007b). Foreign investment proposals in other media industries, except for the
special case applied to privatisation of Telstra (former government-owned telecommunications
carrier) are subject only to the broader generally applicable thresholds to non-sensitive foreign
investment. In the case of Telstra, ‘aggregate foreign ownership … is limited to 35 per cent of the
privatised equity and individual foreign investors are only allowed to own up to 5 per cent’
(Treasurer, 2011).
Two of the three main commercial television networks are controlled by foreign entities. The
Canadian corporation Canwest (Izzy Asper) acquired a majority (50.1%) economic interest in the
TEN Network in 1992 when the network was in receivership. To get around the then ruling
prohibition of foreign control, the network was formally acquired by a corporation in which Canwest
owned marginally less than the 15 per cent share of the prescribed foreign control threshold and held
the remainder of majority economic interest in the form of subordinated debentures and convertible
debentures which were not captured by the legislated definition of ‘company interests’. Following
abolition of the restrictions on foreign ownership of television in 2006, the Government approved
Canwest’s conversion of all its debentures into stock giving the company formal control of the
network (Costello, 2007a). Foreign control of the Network ended in September 2009 when Canwest
faced with financial difficulties, sold its stock to Australian institutional investors. Also in 2007, the
government approved the purchase of the Nine Network (owned by PBL Media) by CVC Capital
Partners, an international private equity and investment corporation. The transaction also included
the purchase of ACP magazines, the largest magazine publisher in Australia but the latter did not
require government approval.
The removal of foreign investment controls of radio in 1992 was quickly followed by the entry of
foreign investors in the Australian Industry. Australian Provincial Press, owned by the Irish
Independent News and Media PLC (O’Reilly) and already established in the Australian market as
publishers of more than a dozen regional daily newspapers and other periodicals, became the first
foreign entrant in the radio industry. Forming a joint venture with Clear Channel (US), it gradually
purchased several metropolitan radio stations to avoid breaching the then prevailing cross-media
ownership prohibition of common ownership of daily newspapers and radio licences in the same
area. Another major foreign investor in radio, the UK’s Daily Mirror Group (DMG), entered the
market in 1996 and by 2000 had acquired one metropolitan and over 50 regional stations. By 2004 it
had expanded its metropolitan stations to nine and began to focus exclusively in the metropolitan
market. Soon after, it sold all its regional stations to the Macquarie Media Group.
28
In telecommunications, the special foreign investment rules relating to Telstra (mentioned above)
have ensured its status as an Australian controlled carrier. The three other major carriers operating in
Australia, however, are all foreign controlled. Optus, the second major carrier operating both
wireline and wireless networks in competition with Telstra is currently a subsidiary of Singtel
(Singapore Telecommunications) and was formerly owned by Cable and Wireless (UK). The other
two, both major wireless carriers are Vodafone Australia, owned by Vodafone Group PLC (UK) and
Hutchison Telecommunications (Australia), a subsidiary of the Hong Kong based Hutchison
Whampoa Ltd. The latter two carriers have recently combined their Australian operations in a joint
venture. Other foreign investments in telecommunication carriers include Telecom New Zealand,
Primus Telecom (US), and Reach Networks (Hong Kong).
In film, overseas features are a major component of film production activity in Australia contributing
on average over 40 per cent of annual production revenue. A major producer of television
programming, Endemol Southern Star, became a wholly-owned subsidiary of Endemol, the
Nederland based producer/distributor of popular TV programs in 2009 (formerly it was a joint
venture between Endemol and the Australian TV producer Southern Star). Film distribution is
dominated by the large US based international distributors. Box office revenue is also
predominantly accruing to the international distributors. In search engines, Google is the dominant
operator with over 90 per cent of the market in terms of searches.
Australian media investments in other countries are not extensive. Although News Corporation
originated in Australia and its founder Rupert Murdoch is still often identified as Australian despite
his acquisition of US citizenship, the corporation is effectively US based.
Telstra has several significant investments in telecommunications services in other countries. These
include TelstraClear the third ranked telecommunication carrier in New Zealand, and CSL New
World Mobility Group, the largest wireless operator in Hong Kong. Another significant Australian
related venture overseas is the Los Angeles-based diversified Village Roadshow Entertainment
Group formed from a merger of the Australian Village Roadshow Pictures with Concord Music
Group.
5. Overall Interpretation
Concentration of ownership in broadcast television was influenced strongly by major changes to
ownership regulation in the period immediately preceding that reviewed in this paper. Before 1987,
prohibition of common ownership of more than two television stations ensured a low level of
concentration. Its replacement in 1987 with a population reach limit, which in effect allowed
common ownership of a television station in each of the five major metropolitan cities in Australia,
had an immediate impact on concentration. Prior to that, the three main commercial operators
controlled two stations, one each in the two largest metropolitan markets of Sydney and Melbourne.
The removal of the two stations limit was quickly followed by changes in ownership of the three
major commercial operators, with the new owners moving quickly to acquire properties in other
metropolitan markets. This is reflected by the gradual rise in both the C4 and HHI in the period
1988-2000. Although concentration increased, the impact was attenuated by other ongoing
ownership controls preventing ownership of more than one television station in any local market and
prohibitions of entry into the industry by new players. Concentration peaked in 2000 when one of
the three main networks was temporarily in excess of the population reach limits following an
acquisition of a group of stations. That year was also a time of considerable turmoil in the industry
with all three major commercial networks experiencing financial difficulties which subsequently
forced them into receivership. The slight subsequent decline in the concentration ratio is due to the
mandated divestiture of assets to ensure new owners remained within the population reach limits.
29
The situation in broadcast radio was much more fluid. Like broadcast television, broadcast radio had
been subject to considerable change in ownership controls immediately prior to the period under
review. Entry of new players in to the broadcast radio industry, although strictly controlled by
licensing, was not prohibited as was the case for television. In particular, during the decade
preceding 1988 several new FM radio broadcasters established themselves in the main metropolitan
and regional markets. These, combined with the changes to the pre-existing controls of ownership,
brought about extensive changes in the industry. However, the combined effect of the prevailing
limit of common ownership of no more than two stations in any one local market and the licensing of
up to 12 new large FM stations in the main metropolitan areas, in addition to the prominence of the
national public broadcaster, seem to have averted undue concentration. Both C4 and HHI indicate
low to moderate concentration in the broadcast radio industry.
While the initial establishment of multicast (subscription) television in Australia was delayed and
marred by government regulation, subsequent development of the industry has not been subject to
regulatory restrictions of ownership. However, entry into the industry faces considerable barriers
particularly in securing content. While some independent content aggregators are available to all
multichannel providers, there is a significant level of exclusivity in the movie output of some
Hollywood studios and popular sports programs. Foxtel was able to exploit a degree of vertical
integration with its partial owners — Telstra (Australia’s dominant telecommunications) with regard
to cable distribution in major cities and News Limited with regard to exclusive Hollywood movie
output — to become the dominant player. Apart from a couple of very small operators, the
Australian subscription TV market is subdivided into two exclusive submarkets each served by a
single (monopoly) supplier of the same programming, Foxtel in major metropolitan areas, and Austar
in regional areas. The high values of both C4 and HHI reflect the high level of concentration in the
market.
Liberalisation of the telecommunications sector, as would be expected, has had a major impact on
industry concentration. With competition from new carriers and many smaller service providers, the
market share of the incumbent carrier has been declining gradually over the years. However, the
incumbent enjoys substantial economic advantages over its competitors not the least of which is its
ownership of the wireline CAN throughout the country. After almost two decades of competition
Telstra still controls more than 70 per cent of industry revenue. The position is unlikely to change
significantly into the foreseeable future. However, the Government has recently embarked on the
building of a national broadband fibre-optic network including the CAN (fibre-to-the home) with the
intention of providing access to all carriers on an equal basis. When completed, it will do away with
Telstra’s monopoly control of the CAN and is likely to intensify competition in the market with
consequential reductions in industry concentration.
In the wireless sector liberalisation has produced more intense market competition. The wireless
sector was still in an early development stage when liberalisation was put in place giving the new
entrant carriers a more balanced basis to compete with the incumbent. Consequently, Telstra’s
market share has declined significantly during the review period. Nonetheless, Telstra remains the
largest operator with market share of around 43 per cent. However, as the market has grown
considerably, the current market shares of Telstra and its competitors relate to a much larger pie that
was the case when completion was first introduced in the early 1990s.
The nature of the Australian film and video production industry is not conducive to a high degree of
concentration. The industry is largely made up of medium and small enterprises, with many very
small establishments engaged in the provision of freelance services to larger production houses. This
structure lends itself to the ‘project nature’ of much of the industry’s main production activity for
which specialist skills and services are typically brought together for the duration of a project. A
30
large proportion of the industry output is made to order for television internally by television
networks themselves or commissioned from other producers. More than two thirds of all
establishments are engaged in production of outputs for television.
In contrast, film distribution is dominated by the major international distributors. During the period
under review, the HHI ratio for film distribution has declined from just above the high concentration
threshold to lower levels in the moderate concentration band. C4 ratio shows a similar declined from
82 to 63 per cent. The decline in the industry concentration indices during the period under review is
largely a reflection of the combined effect of the splitting of United International Pictures into
Paramount and Universal in 2006. While the doubling of the share of the market held some 30
independent specialist distributors also made a small contribution to the decline, it is unlikely that
their market share will grow sufficiently to pose a threat to the majors in the foreseeable future.
Concentration in the Australian cinema exhibition industry has changed very little during the review
period. The share of the market held by each of the three major cinema chains remained relatively
stable. While there appears to be some ongoing slow rationalisation among the smaller operators in
the industry, the resultant minor gains in market share are being made by medium size operators.
In the period from 1998-2008 concentration in the Australian ISP market increased considerably,
with the transformation of a relatively unconcentrated market to a highly concentrated one. The
period coincides with extensive growth in the household internet access. In 1998, only 16 per cent of
Australian household had access to the internet, by 2008 the proportion of households with internet
access had quadrupled to 72 per cent (ABS, 2009). During the same period there was also a
transformation of household internet connections telephone dial-up to largely ADSL broadband. The
growth of the internet household market provided a significant advantage to incumbent
telecommunications carriers over whose network the services were delivered. Unsurprisingly, the
dominant incumbent telecommunications carrier, Telstra, was able to exploit this advantage to secure
the lion’s share of the market. Other telecommunications carriers, despite deregulation of the
telecommunications industry, were largely dependent on access to Telstra’s network to deliver their
services. Consequently, both their appeal to customers and market growth were relatively
constrained.
The Australian Internet Search Engines market has always been highly concentrated and dominated
by global operators. The situation in Australia largely reflects international developments. While
there are several specialised Australian search engines they command only very small market shares.
During the period under review the rise of Google at the expense of other previously popular global
engines has resulted in dramatic increases in the already high industry concentration ratios.
The analysis indicates a tendency for increased market concentration in all the electronic media
markets. While regulation has constrained high levels of concentration in mass media markets, such
as broadcast television and radio, the inherent economies of scale continue to provide incentives for
greater concentration. In television, for example, there are major economies of scale in both
programming and the supply of national advertising. In both of these areas, major broadcasters were
able to increase their market power through commercial agreements that are not constrained by
ownership regulation.
The tendency towards concentration is also evident in the new media. As for all information services
once content is created the cost of making it available to larger numbers of users are very small.
Increased popularity of a service enables providers to exploit a virtuous circle by increasing
investment in content and thus increase its appeal to users. Less popular services face a vicious
circle fed by the loss of users and reduced capacity to invest in improvements. Bigpond in the ISP
31
market and Google in the search engine market display some of these characteristics. Bigpond, for
example, is one of the most popular websites in Australia and offers its ISP subscribers unmetered
access to its own content. Subscribers to rival ISPs incur a usage charge to download the same
content via their ISPs, which in turn do not have as much capacity as Bigpond in providing matching
or better content on their websites for unmetered access by their subscribers.
The measures of concentration used in the research discussed above are based on traditional industry
definitions. While convergence brought about by the development and rapid growth of online
information services may have eroded traditional industry boundaries the resultant impact on
industry concentration does not appear to have been significant. Traditional media not only continue
to dominate in the domestic market via traditional distribution platforms but have also extended their
presence into the online world. Various indicators suggest that in Australia at least the most popular
online news services are associated with traditional media including daily newspapers and television
networks. Indeed it would appear that among the ‘thousands of voices’ accessible online, most have
little following and very few have the capacity to challenge the influence of traditional media on
public opinion.
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