OCTOBER 1987 - VOLUME 8 - NUMBER 10
A U S T R A L I A
Controlling the News
by Paul Chadwick
It was June 8, 1987, and Rupert Murdoch was expected to arrive in Melbourne on June 11. The timing of his visit would be very controversial - his arrival happened to be 30 days before federal elections. Journalists looking for conspiracy were aware of Murdoch's habit of making no secret of his political favorites. At the time, he also controlled newspapers accounting for over 50 percent of the circulation in Australia.
Murdoch is one of a few proprietors who have made a series of changes in ownership of the print and electronic media in Australia, a vast continent which, although populated by only 16 million people, is ideally placed in the fastest growing region of the world, the Pacific basin.
Murdoch's success means that Australia now has the dubious distinction as the country with the most concentrated media ownership in the world, excluding, of course, countries where the media are state-owned.
His conquest was supported by the national government, the failure of every regulatory body with power to protect the public interest and a general paralysis - with honorable exceptions - among the journalists and public figures who ought to have alerted the public to the danger of concentrating such enormous power in so few hands.
Today Murdoch, who has U.S., British, European, Hong Kong and New Zealand media interests, controls over 10 of Australia's 19 metropolitan daily newspapers, representing 59 percent of total national circulation. In effect, he controls two others accounting for another eight percent of circulation.
Murdoch's only real competitor, the Fairfax family, publishes five of the 19 papers and represents 24 percent of total circulation. Murdoch and Fairfax together dominate regional and suburban publishing, with Murdoch having the edge. Both groups - Murdoch and Fairfax - hold a 47 percent stake in Australian Associated Press, the country's only domestic wire service. Through his holdings in Australian Associated Press, Murdoch has strengthened his position in Reuters, where he was already arguably the dominant voice. Murdoch and Fairfax have 50 percent each of Australian Newsprint Mills, the only domestic supplier of the industry's fundamental commodity.
They dominate the system of news agencies which sell most papers, magazines and books in Australia. Murdoch owns Gordon and Gotch, the major distribution company for papers, magazines and books, as well as several large book publishers (Collins, and Angus & Robertson) and Australia's largest computer information service.
The changes in Australian media have profound implications for how Australians see themselves and the world. For years, Murdoch has been building a formidable multinational in that most precious of commodities - information. Now he has added to it and other Australians have joined in.
As in the U.S., ownership and control of the Australian newspaper industry has been progressively concentrated in fewer hands for decades (See Table 1). Some of the reasons are the same as in the U.S. New generations of a newspaper family sell the heirloom because they want the cash or care less for the tradition than their elders did and big fish swallow small.
But some factors are peculiar to Australia's past. After white settlement in 1788, journalism and a free press had to struggle. Military governors ruling a penal colony under a system of government steeped in the British traditions of "official secrecy" were formidable, sometimes vicious, opponents of free speech.
Brave people suffered floggings and imprisonment to establish journalism in Australia. It may have been these fragile beginnings which led to such consolidation of press power in the hands of a small number of wealthy individuals. Without financial strength and influence to shelter it, freedom of the press might not have developed to the extent it has in Australia.
A peculiar and retarding feature of Australian journalism is its almost feudal nature. Instead of a diverse, vigorous and independent journalistic tradition, existing alongside, yet separate from, the media proprietors, there has been a tendency for journalists to identify their craft with their employers.
This feature has not been universal; there have been fine independent-minded Australian journalists. Nevertheless, the tiny number of potential employers has reinforced a certain timidity.
The financial resources necessary to set up and sustain a big media outlet are formidable. In Australia, which has barely one sixteenth of the U.S. population, markets are small and distribution costs enormous.
Murdoch Senior and Murdoch Junior
When Murdoch's father, Sir Keith, died in 1952, he left Rupert with an evening paper in Adelaide, The News, and a Sunday paper in the same city.
By 1958, the young Murdoch had bought into television and in 1960 Fairfax sold him the Sydney Daily Mirror. By 1964, Murdoch had penetrated the New Zealand media market and had started Australia's first national daily, The Australian. In the late 1960s he moved into the London market and in 1972 Kerry Packer, son of Sydney newspaper strongman Sir Frank Packer, sold Murdoch the family's Daily Telegraph and Sunday Telegraph.
Murdoch moved to the U.S. market in 1973 when he bought the Antonio Express and News. In 1974 he started the national weekly Star and in 1976 acquired the New York Post. He added the Village Voice and the New West in 1977.
In 1979, Murdoch made a takeover bid for the Herald and Weekly Times Limited (HWT) which the board fiercely resisted. Fairfax saved the HWT by making expensive stock purchases and Murdoch withdrew with a profit. By 1981 Murdoch owned Northcliffe's old paper, the Times of London. The next year he bought the Herald-American (later the Boston Herald) and started the Brisbane Daily Sun in Australia to compete with the HWT's Courier-Mail, formerly owned by Sir Keith. When Murdoch took over the country's biggest media group, HWT, in February 1987, he acquired daily newspapers in Fiji and Papua New Guinea.
In recent years, Murdoch has withdrawn from a battle for Warner Communications, acquired the European satellite TV station Sky Channel, bought Twentieth Century Fox and begun a fourth TV network in the United States.
In Australia, he is admired as an achiever, a native son who took on the establishments of London and New York and won. He is also loathed for his ruthlessness. Some of his papers - the Boston Herald, the Star, the New York Post - are tabloids with glaring headlines, well known for their gutter journalism.
By 1986, Rupert Murdoch had surpassed most other press barons. In the "Information Age," he could, if he chose, personally control any part of a vast network of information services from the prestigious journals offered to "decision-makers," to television services in Europe, the United States and Australia.
The Powers That Be
Since those who control the distribution of information wield important power in society, media owners in Australia, as everywhere, have always had influence with parties and their leaders.
In 1981, when Murdoch, then a resident of New York, had his TV station ownership challenged on the grounds he was violating Australia's residency requirement, the then Liberal Fraser Government changed the law.
In what became known as the "Murdoch Amendments," the Australian government dropped the requirement that Australian TV station owners meet Australian residency requirements.
The Liberals also removed the requirement that the Australian Broadcasting Tribunal, roughly the equivalent of the U.S. Federal Communications Commission, grant prior approval for any sale of TV stations. With this change, approval for takeovers could be sought after sales had been finalized, a change which has made the Tribunal little more than a rubber stamp. The 1981 amendments also removed the Tribunal's power to deny a TV license on public interest grounds.
These legislative changes - and others planned later by the Labor government - were crucial to the events of 1986 and 1987.
Last year Murdoch again ran into trouble with the Broadcasting Tribunal. This time Murdoch's legal right to own or control his two Australian TV stations was being challenged because of the Australian citizenship requirement. In September 1985, unable to evade a similar U.S. rule, Murdoch became a U.S. citizen in order to buy into the U.S. television industry and to establish a fourth U.S. television network.
Murdoch's immediate problems were: How, if he were forced to sell his Australian holdings, could he still get a premium price? How, without TV, could he remain a powerful force in Australian media? The answer - get bigger in newspaper ownership.
The ideal target was the company his father helped to shape, the HWT, by then a complacent, lumbering bureaucracy with 142 papers reaching 6.2 million readers.
The subsequent action and, in crucial ways, inaction of the Hawke Labor government seemed tailored to solve Murdoch's dilemmas in the most lucrative way. In the frenzy of takeover activity which the government's policies unleashed, the Australian Broadcasting Tribunal - enfeebled by the 1981 Murdoch amendment - was a pathetic bystander without the necessary powers to protect the public interest.
But the Tribunal also seemed timid and divided about using its remaining powers to stall the events that were reshaping the public resource of broadcasting.
The catalyst for the media watershed of the past nine months was the decision by the Labor Party government of Prime Minister Robert Hawke to reform the law governing television, the Broadcasting and Television Act. Satellites made possible the establishment of lucrative national networks across the country and the big television owners - Packer, Murdoch, Fairfax and HWT - were eager to exploit the potential.
Essentially, the government proposed to:
The 75 percent limit was a compromise between arguments for no limit by the Treasurer, Paul Keating, and a claim for a 43 percent limit by the Minister for Communications, Michael Duffy.
Hawke, who took a keen interest in the reforms, had argued for a 33 percent limit for everyone except Packer and Murdoch who, he suggested, should be treated differently and allowed to reach 43 percent of viewers - the combined populations of Sydney and Melbourne, where both Murdoch and Packer owned stations.
The combined effect of the government's proposals was great for Packer and, to a lesser extent, Murdoch. Abolition of the two station rule meant they could buy more stations. The 75 percent limit meant they could acquire a station in every state capital and at least one of the aggregated regional markets and still be under the limit.
The cross-ownership limits would not impede Packer because he had sold his newspapers and the proposals did not cover magazines, of which he is a large publisher. Packer owned radio stations but none had a monopoly in its city of operation.
Murdoch was not unduly restricted by the government's plan. The cross-media rules would not be retroactive, so he could keep his station in Sydney where he also published morning and evening daily papers.
The companies most severely injured by the proposed reforms were Fairfax and HWT, whose newspapers had also been the most severe critics of the Hawke government.
Fairfax owned The Age in Melbourne and would therefore be unable to buy a TV station there to complement its Sydney channel unless it sold the lucrative and prestigious Age. The HWT was also prevented by the cross-ownership rule from expanding its TV interests in Melbourne and Adelaide because it had papers in every other state capital except Sydney (where no station would be for sale anyway) and many other regional centers.
Preventing Fairfax and HWT from further concentrating media ownership was arguably desirable from the Labor government's perspective because both chains have an antiLabor editorial stance. Packer and Murdoch, who in recent years had begun to see eye to eye with state and federal Labor governments, were allowed to grow.
The objectionable feature of the government's scheme was that while it reduced cross-ownership, it increased concentration of ownership and control in both print and television. (See Tables 2 and 3.)
After much lobbying the amendments eventually passed by Parliament in June 1987 allowed for a 60 percent limit.
Murdoch Swoops, Some Duck, Others Swoon
Murdoch outlined his takeover bid for HWT to its top executives at about 10 a.m. on December 3 and said that unless the board made a decision that day the bid would lapse. At 6 p.m. the HWT board recommended that shareholders accept Murdoch's offer of $A12 a share or News Corporation stock or convertible notes.
If Murdoch were simply to have added the HWT's holdings to his, he would have had 14 of the 19 metropolitan daily papers, which would account for about 75 percent of national circulation. With the HWT's TV stations he would clearly breach existing and proposed broadcasting law.
Despite these facts, there was little official opposition to the takeover. When the Foreign Minister, Bill Hayden, expressed concern about the degree of control over Australian media resulting from the takeover of HWT, Hayden's Cabinet colleagues silenced him. The opposition Liberals were also silent, except for the spokesperson on communications, Ian Macphee. Macphee's opposition to the Murdoch buyout prompted his leader, John Howard, to break off a holiday to go to Sydney to rebuke Macphee. When Macphee persisted, Howard fired him as communications spokesperson.
Over the next few weeks the West Australian speculator, Robert Holmes a'Court, and Fairfax made counter offers for HWT, but Murdoch triumphed when the HWT board obligingly divested itself, under Murdoch's supervision, of the TV stations which put Murdoch in conflict with broadcasting law. He sold his other two stations to Northern Star Holdings, then bought 15 percent of that company.
During the struggle, Stock Exchange rules in two Australian states were broken, but the exchanges themselves said retrospectively they would excuse the breaches.
The Trade Practices Commission (TPC), which administers the anti-monopoly law roughly equivalent to the U.S. Sherman and Clayton Acts, inquired into whether Murdoch's purchases would breach the law by allowing him to "dominate the market" in any state.
Murdoch sold to Northern Star the Adelaide News, his first paper, and the Brisbane Sun, and sold the West Australian and the Daily News to Holmes a' Court. Holmes a' Court sold the Daily News to a tiny local company, United Media. After these transactions, the Commission made the startling finding that the takeovers had diversified media ownership. The decision rested on the fact that there had been three owners - HWT, Murdoch and Fairfax - and now there were five - Murdoch, Fairfax, Holmes a' Court, Northern Star and United Media.
The TPC ignored the disproportionate power of Murdoch over all the others.
Throughout these extraordinary episodes, the major media raised few serious questions. Some print and electronic outlets did, however, carry articles opposing the increasing concentration in Australia's media. But they did not press unusually publicity-shy politicians to say how they could or would react; no community debate was encouraged about whether such concentration of ownership was desirable or dangerous or avoidable; the less glorious episodes in Murdoch's past were discreetly glossed over; massive attention was given to every financial nuance, but the crucial social and political issues about diversity of information being the lifeblood of democracy were barely mentioned.
In short, journalism malfunctioned because, at the crunch, the owners' financial interests prevailed.
The Hawke government was re-elected for a third three-year term of office in July after a campaign strewn with allegations of media bias. The Liberals claimed Labor was being paid off for the favors it gave the media owners. It is impossible to prove or disprove such claims because alleged media bias is subjective, difficult to measure and fraught with variables. But it is interesting that during the campaign both Bond and Packer made glowing public endorsements of Hawke, a step neither had taken in previous elections.
The rapid reshaping of Australia's media continues. On August 31, Warwick Fairfax, the youngest son of family patriarch, Sir Warwick Fairfax, announced a bid to buy out other members of the family and protect the company from takeover by outsiders. The Fairfaxes are Australia's oldest newspaper dynasty; John Fairfax bought the Sydney Morning Herald in 1841.
Holmes a' Court is a possible bidder for the company and, if he gets it, Australia will have only two potentially competing press proprietors. Murdoch would control 12 papers representing 67 percent of circulation and Holmes a' Court would dominate the other seven papers. Successful entry into such a market would be virtually impossible.
The recent performance of the TPC and the government are not encouraging, but the Australian public, faced with such numbers, may begin to demand an independent inquiry into the state of the industry that produces news, opinion and ideas. An inquiry would provide a forum for the desperately needed debate about media ownership and control. The media has proved it is unwilling or unable to host such a debate but such an inquiry, drawing upon the British, American and Canadian experience, is essential. The inquiries could look into the acceptable level of ownership and control and to determine whether legislation is required.
The argument for legislative action does not rest on objections to Murdoch the man. Everyone's right to freedom of expression is imperiled if any person is deemed unfit to own media simply because of character. The nub is not that Murdoch is a demon. It is that so much power cannot safely be put into so few hands, no matter who the owners are.
Paul Chadwick is a Melbourne journalist and author. He was a founding member of the Free the Media coalition and is currently writing a book on the recent media takeovers.