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Australia’s media sector is one-step closer to upheaval

Australia’s media sector has taken one step closer to major changes, after the Federal government partyroom approved a number of media reforms including abolishing the reach rule and the two-out-of-three cross-media ownership law.

The reform package still has some way to go but is expected to be introduced to parliament tomorrow before referral to a Senate inquiry according to The Australian.

Communications Minister Mitch Fifield said in a news conference today, that he wants to have the legislation passed before the election – which is due in August or September this year.

The abolition of the reach rule will mean metropolitan free-to-air broadcasters Ten Network Holdings Ltd (ASX: TEN), Nine Entertainment Co Holdings Ltd (ASX: NEC) and Seven West Media Ltd (ASX: SWM) will be allowed to merge with regional broadcasters, including Bruce Gordon’s WIN, Southern Cross Media Group Ltd (ASX: SXL) and Prime Media Group Limited (ASX: PRT).

It could also mean more cross-ownership of different media assets, be they TV, radio stations or newspapers. News Corp (ASX: NWS) and Fairfax Media Limited (ASX: FXJ), APN News and Media Limited (ASX: APN), Macquarie Media Ltd (ASX: MRN) could join the ‘merger-fest’, once the rules are relaxed to allow companies to own more than two of the three media types.

While struggling Ten has hailed the changes as a welcome first step, Seven West Media’s chief executive Tim Worner has told Fairfax that the changes will do nothing to encourage Australian programming unless TV licence fees are abolished.

Broadcasters pay a 4.5% gross revenue licencing fee – but Mr Worner says the fee is crippling the broadcasters’ ability to invest in local programming.

Seven, Nine and Ten reported combined losses of $2.8 billion in the 2015 financial year, after all three were forced to write down the value of their television licences and other intangibles. That compares to combined revenues of $4 billion.

Foolish takeaway

This may just be the lifeline that Ten Network needs, given the broadcaster is struggling to stay relevant and improve its market share. Ten has roughly 20% of the market, with Seven and Nine sharing the remaining 80%, although advertising spend on free-to-air continues to fall.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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