AustLit

COMMERCIAL TELEVISION NETWORKS

Networking in commercial television is such an ordinary part of life that it is particularly difficult to understand that it was once seen as such a threat to the public interest. The rise of the internet and mobile communications has delivered a world in which many people are immersed in electronic networks that can deliver news and information.

Networks in commercial television refer to groups of stations that are linked by any or all of common ownership, common programming or a common sales force to sell advertising. Throughout the history of commercial television in Australia, the attitude of the government towards networks has been variously oppositional or benign. To a large extent, this has been due to changing policy settings on two related policy issues: media ownership and control, and localism. The latter refers to the idea that stations should be providing services that are designed primarily to meet the needs of the licence area they serve.

It is not hard to see why networking is attractive to broadcasters. First, it is a natural inclination for industrial markets of most kinds to move towards concentrations of ownership, if for no other reason than to reduce competition and maximise returns. Second, there are economies that can be made by pooling the cost of program acquisition and production—particularly when local production costs have always been greater than those of importing programs. Third, networks allow for greater strength in negotiation with national advertisers. This imperative has only increased since the rise of national buying agencies since the 1980s.

For the government and public-interest groups, the opposition to networks has been primarily about fears that concentrations of ownership and control will increase the power of media owners and their degree of influence on news and information, and on public debate. This fear is not unreasonable, since those with media power have not refrained from using it from time to time—thus the concern with promoting diversity of ownership and encouraging localism as means of contesting concentration. Localism also springs from the fundamental idea that the spectrum is a public resource and the broadcasters have an important public duty to understand and meet the needs of the public, not only for entertainment, but also for information and education.

Fear of networking and promotion of localism arose with radio. The creation of a national network of ABC radio stations controlled by the government was to be a counterpoint to the essentially local nature of commercial radio. In 1935, rules were enacted to limit ownership to one station in a market and no more than two nationally. When television commenced, this rule was applied and the Australian Broadcasting Control Board (ABCB) given the power to regulate networking in commercial television.

There was no common ownership between the first four commercial stations in Sydney and Melbourne, but this did not mean there were no ties of common interest. These surfaced fairly quickly. In 1957, the owners of the four stations started talking about how they might be able to extend their interests into Brisbane when television started there. When applications were called, all applicants were associated in some way with the Melbourne and Sydney stations. In the first test of the ABCB’s power to regulate networking and support localism, the ABCB decided to reject all the applicants and call for fresh applicants. However, the government overruled the ABCB and the licences went to companies associated with John Fairfax & Sons and the Herald and Weekly Times (HWT). In Adelaide, Rupert Murdoch was the only genuine local applicant to get a licence, the other licence being associated with the HWT. In 1960, Sir Frank Packer extended his reach by gaining control of GTV9 in Melbourne.

The first four-city network was established in 1962 under the name Network Seven, consisting of ATN7 (Sydney), HSV7 (Melbourne), BTQ7 (Brisbane) and ADS7 (Adelaide)—all connected to the HWT and Fairfax interests. The purpose of the network was to co-operate in the areas of live national programming, foreign program purchases and advertising sales. However, this degree of cooperation did not mean there was a single network programming feed, and member stations’ program schedules varied considerably.

The expansion of commercial television to regional and rural Australia in 1959–60 brought a confrontation between the established broadcasters and the government over networking and control of program distribution. The Sydney and Melbourne broadcasters argued strongly that programming for the new broadcasters should be networked from the capital cities— and indeed they were associated with many of the applicants for the licences. Their case was that this would be a cheaper way to provide a service, and the new licence areas would get two commercial services instead of one. However, the preference for localism by the government prevailed, and each new market was licensed for only one commercial station, free from any control by the city stations.

When country television started, the stations formed a company, Australian Television Facilities (ATF), to acquire and distribute programs. This was a form of cooperation that fell far short of networking. However, the new stations in Newcastle (NBN3) and Wollongong (WIN4) faced a problem because they were adjacent to Sydney, and many households had been watching Sydney television for years. Although they could produce their own local programming and ATF had purchased rights to foreign programming, the Sydney stations owned the prints of film programming and would not release them. In early 1963, the Postmaster-General issued an order designed to prevent this happening, but it was struck down shortly after by the High Court.

The impasse was broken by Rupert Murdoch. In 1963, he bought into WIN4, and then outbid the Sydney stations for new US programming, threatening to start broadcasting into southern Sydney from Wollongong in competition with the Sydney stations. To avoid this, Frank Packer invited Murdoch to buy into TCN9, and together they bought into NBN3. With these deals, programming was released to the country stations.

The issue of networking came up again in 1964, when the licences were awarded for the additional commercial channels in the capital cities and the companies holding the licences were listed on the stock exchange. A round of trading between Frank Packer, (Sir) Reginald Ansett and others resulted in Ansett having an ownership interest in more than two stations. At the same time, John Fairfax & Sons bought into CTC7 in Canberra. This seemed to be in breach of the ownership and control rules until it was found that ownership of any number of non-voting shares was permissible. The Menzies Coalition government changed the legislation to introduce the concept of a prescribed interest, set at 5 per cent of all classes of shares; however, it could not undo the ownership changes that had already taken place.

Between 1964 and 1980, there were few significant changes in the ownership structures of commercial television. The capital city stations continued to develop programming and sales networks, while the country stations grew increasingly more profitable from their local monopolies. But in 1980 the question of networking came under intense public and legal scrutiny as a result of the acquisition of ATV in Melbourne and Ten in Sydney by Rupert Murdoch’s interests. This situation occurred as a result of the takeover of Ansett Airlines by Murdoch and Sir Peter Abeles, which put them in control of the stations. Although there was no breach of the ownership rules, the Australian Broadcasting Tribunal (ABT) ruled against the transaction on the basis that it was not in the public interest for one company to dominate the Ten Network. The appeal to the Administrative Appeals Tribunal (AAT) turned into a full review of networking and the government’s policies towards it. The AAT ruled not only that the transaction was not illegal, but that both cross-media ownership and networking were not against the public interest.

The launch of the first domestic communications satellite in the mid-1980s greatly facilitated networking, and it was strongly advocated by the commercial television sector that one of its main uses be the distribution of television. In policy terms, the Hawke Labor government was motivated to see television made available to all Australians. Thus arose the idea that people in regional Australia should have access to the same level of services as those in the capital cities. In 1984, prior to the launch of the satellite in 1986, the ABT conducted an extensive inquiry into satellite program services. This inquiry highlighted two things. One was that, despite the very profitable nature of regional television stations, the diversity of programming was less than in the capital cities. The other was referred to as a ‘structural imbalance’ in the commercial television sector, which gave greatest power to the stations in Sydney and Melbourne.

The Hawke government considered both how to ‘equalise’ city and regional services and how to address this structural imbalance through changes in the ownership rules. In 1985–86, Communications Minister Michael Duffy proposed a plan to restructure the ownership of commercial television. This plan would have created a series of regionally based networks and held in check the interests of the larger media companies. It may also have moved the commercial television sector to a structure similar to that in the United States, where network power is balanced by independent stations and a viable market in syndicated programming. However, this plan proved to be politically unpalatable. Instead, Treasurer Paul Keating’s political solution was adopted to abolish the two-station rule and replace it with an audience reach rule, meaning that individuals could control stations that reached up to 75 per cent of the Australian population. At the same time, a prohibition was introduced on cross-media ownership.

The solution to equalisation was at first thought to be allowing regional stations to apply for supplementary licences, but this was rejected in favour of aggregation of markets in eastern Australia. Remote Australia began to be served by a direct satellite broadcast system. This meant that what had previously been three separate markets were made into one, and the stations were allowed to broadcast to the whole market.

The effect of these two changes was the immediate entrenchment of networking of ownership and programming. The audience reach rule, combined with the need for companies like John Fairfax & Sons, the HWT and News Limited to divest their television interests, created new capital city networks of ownership. The stations in the newly aggregated markets also had to affiliate with one of the capital city networks in order to guarantee a supply of programming. These affiliation agreements usually required the network to supply the programming in return for a share of the advertising revenue of the affiliate. The government also had to provide financial relief to the regional stations so they could undertake the capital work involved in aggregation.

These changes set the pattern we see today, in which there are three national programming networks, three capital city ownership networks (the Nine Entertainment Co., Seven West Media and Ten Network Holdings) and three regional ownership networks (WIN Corporation, the Southern Cross Media Group and Prime Media). The capital city networks control almost all the programming across the commercial television system. The variations from a national feed are mainly for insertion of local news and weather, local advertising and delayed coverage of live sporting events.

Localism as a part of broadcasting policy has all but disappeared. In the period of public licence renewal inquiries from 1975–92, a great deal of attention was paid to this as measure of performance. Licensees were required to demonstrate they had undertaken research to ‘ascertain’ the needs of the community they served and then demonstrate how they had acted upon this.

REF: N. Herd, Networking (2012).

NICK HERD