General considerations on cross-media ownership involving broadcasters should be limited so that "information monopolies" are not created. Thus the principle has evolved that a newspaper in one city cannot own the broadcasters in that city, but may own a station in another city.

This is a formula that appears to fit the demographics and geography of a country like the United States of America more readily than others but the principle has merit and the Freedom of Expression Institute believes that it should be applied in South Africa as far as is practically possible.

However, we recognise that in certain instances the principle cannot be applied - the rural areas of the country are an example. Thus it is accepted that exceptions will have to be made but we submit that those exceptions must be withdrawn should the circumstances change.

Thus the overriding concept should be that no broadcast licences will be granted to an ownership where the outcome is the creation of a media monopoly - except where there is no alternative when certain conditions will be applied to the licensee.

In the big conurbations there are other factors which affect the definition of a media monopoly. These relate to the position a newspaper occupies in that environment - are there several newspapers, is it the market leader in its sphere and is it a daily or weekly? If there are only two daily newspapers in an environment would the granting of a licence to one give it an unfair advantage over its competitor?.

M-Net

The position of M-Net presents conundrum for South Africa in terms of cross-media regulation and the FXI is able to describe what the nature of the problem is and to hazard a solution. However, we appreciate this opportunity to be able to do so in a public forum, so that the issue can be presented for discussion, in the course of which, we hope, solutions will be arrived at.

The key to the problem will be a formulation of cross-media regulation which can be applied to M-Net without giving it unfair advantage and without threatening its viability.

M-Net came into existence as a consortium of newspaper interests which were given a special dispensation by the former government to obtain a television licence to enable them to recoup advertising revenue which was being enticed away from the print media by the TV services of the SABC. The decline in newspaper advertising revenue was dramatic following the introduction of SABC TV in South Africa and the financial viability of the newspaper groups concerned were clearly at risk. According to Prof Eric Louw of the Rand Afrikaans University, daily newspapers drew 33% of total adspend in 1977 which declined to 17% by 1992. In addition, the economy slumped from the mid 1970s causing total advertising revenue to fall.

The newspaper interests consisted of the four major newspaper groups which controlled the country's biggest daily and Sunday newspapers with smaller holdings for two independent newspaper operations.

This method of providing compensation for newspapers losing out on advertising revenue to SABC TV was, however, not as successful as was first thought.

The newspaper groups were required to invest large sums to enable M-Net to achieve viability and, in fact, dividends began to flow only four to five years after the start of the operation. Receipts in the first years of profitability offset that large investment. Since then expansion has again taxed the profits of the company and our information is that in reality the newspapers have had only one good year out of M-Net to compensate of the loss of advertising.

M-Net has been listed on the Johannesburg Stock Exchange sand its shares have been sold to a wider ownership, though newspaper interests still control the major portion of its share holding. Nevertheless, the decision to sell shares to a wider ownership is an important one, because it represents a departure of the principle on which M-Net was founded, namely only to compensate newspapers for the loss of advertising revenue.

Further, there have been substantial changes in newspaper ownership of M-Net over the last year. Independent Newspapers Plc has bought Argus Newspapers Ltd, but without the holding in M-Net. This holding has been retained by Argus holdings, the former parent company of Argus Newspapers. This means that nearly half of the country's English-language newspapers no longer have "access" to this mechanism of "compensation".

The only newspapers which now benefit from the M-Net share holding are those in:

• Nasionale Pers: Die Beeld, City Press, Rapport (50% owned);
• Perskor: The Citizen, Rapport (50% owned)
• Times Media Limited: Sunday Times, Business Day, Financial Mail, Eastern Province Herald, Evening Post and Weekend Post.
• Independently owned papers: Natal Witness and Daily Dispatch

The Argus Newspapers Ltd publications which no longer benefit include: The Star, Argus, Cape Times, Natal Mercury, Daily News, Sunday Tribune, Diamond Fields Advertiser and the Sowetan (part-owned).

Presumably the controlling shareholder in Argus Newspapers Ltd - Independent Newspapers Plc - believes that the profitability of these newspapers are no longer contingent upon the M-Net share holding.

This situation plus the fact that there has been relatively little "compensation" for the loss of advertising revenue, raise the question of whether the substantial breaching of the principle in the case of Argus Newspapers Ltd - namely the creation of a source of compensation for the newspaper industry - does not overturn the conditions upon which the licence was granted and therefore the fact of continued cross-media ownership in M-Net.

In addition, the future of TML at this stage is unknown. Anglo American has announced that it plans to unbundle parts of JCI to black ownership. This leaves an option for JCI or Anglo American to strip it of its M-Net shares and to relist it on the stock exchange as a new leaner TML. This would place it in a similar position to Argus Newspapers Ltd.

There is little doubt that the present monopolistic consequences of the newspaper holdings M-Net would be in contravention of most international cross-media regulations. Through the newspaper holdings in M-Net there are cross-media ownerships in virtually every city in South Africa. In the case of TML, the Sunday Times is a national newspaper with widespread circulation throughout the country. It is also the market leader. M-Net's reach is also national and therefore TML is distributing newspapers in virtually all the same towns and cities where M-Net is received. Clearly TML and M-Net are in contravention of international standards of cross-media ownership. TML's position becomes increasingly worse when one considers that Business Day is also distributed nationally as is the Financial Mail though cross-media ownership would probably apply more directly to these paper's roles in Johannesburg and Gauteng.

Nasionale Pers and Perskor face a similar situation in respect of their jointly-owned Rapport, also a national newspaper. For Nasionale Pers, the same situation exists in the Western Cape in respect of Die Burger and in Gauteng and adjacent provinces in respect of Die Beeld and City Press. Nasionale Pers could perhaps own electronic media in the Eastern Cape and in KwaZulu/Natal, but it would be barred from most others if international standards were applied. In addition, Nasionale Pers owns a number of consumer magazines. Perskor sells the Citizen in many areas in South Africa and would encounter problems in respect of this publication though these, too, would probably relate to Johannesburg and Gauteng. In addition, Perskor is the holding company of Republican Press, which owns a number of profitable consumer magazines sold nationally. In addition, it also owns a large stable of regional newspapers in towns and rural areas.

Argus Newspapers is well-placed financially to acquire electronic media interests for itself which the M-Net situation would enable it to do if it so wished and if the JCI operations included removal of TML's M-Net shareholding, it is not impossible that TML could find itself in the same position.

The question which arises from the M-Net situation is that if it is not resolved the IBA will find it impossible to make cross-media regulations for other media without being unfair? Can the IBA make regulations which say, for example, that a newspaper in Klerksdorp cannot open a radio station in Kelrksdorp, but only in another town? The M-Net situation makes a nonsense of any such rule.

FXI believes that the only solution is for the M-Net shareholding to be altered. One consequence could be to force the newspapers to unbundle their M-Net interests but this could pose problems. Will they get their money's worth. Recent experience has shown that SA businesses are not keen to but into the media - though their attitude may change when it comes to a TV station.

But another issue arises. While the newspapers have not made as much out of M-Net as they had hoped, the increase in commercial TV and radio stations that will emanate from the activities of the IBA will cause and additional drain on the total advertising cake and the newspapers may very well come to rely on the revenues that M-Net expects to earn in the future.

We come finally to the conclusion that the problem could be solved by the formation of a Trust to run M-Net and so enable profits to be channelled to newspapers. The condition would be that the newspaper groups would have no control over the M-Net trust. This may not be an ideal solution but it would provide a breathing space to assess the consequences until a final assessment of the situation could be made in, say five years or so. This is not a clean solution because the benefits of the operation - the profits - still flow to the newspapers but it does allow the principle of cross-media limitations to be applied elsewhere.

These measure imply consequences which the newspaper companies may not find acceptable. The selling of shares in M-Net may cripple M-Net and the Trust may not satisfy the newspaper companies which could argue that their money is tied up in an operation over which they have no control.

However, it is quite clear that the present situation in respect of M-Net cannot be sustained.

We wish to emphasise that we are not calling for the dismantlement of M-Net in this submission, merely that the present ownership structure may have to be altered.

We have some concern that the major shareholders of M-Net may argue that they each individually hold only a certain percentage of shares in M-Net, and that cross-media regulation should be applied through placing limitations on the amount of shares held individually by a newspaper company in another media operation. In the case of M-Net, however, it is the combined effort of the concentration of ownership by a consortium of newspaper groups which exacerbates the problem. In any event, as pointed out in this submission, every individual company is probably in contravention of international standards of cross-media regulation in respect of distribution patterns of their publications and the broadcasting reach of M-Net.

Another issue in regard to M-Net which further exacerbates the situation is the fact that it, according to our understanding, owns two TV channels.

This is excessive in a country which is seeking diversity of media. We cannot see any reason for a commercial broadcaster having control of two channels in the SA environment and submit that it be limited to only one channel.

Commercial media

However, in reality it is acknowledged that it is natural for media enterprises to diversify into other forms of media. It is often only media organisations who are willing to take the financial risks associated with the media industry. This is because they are more familiar with the specialised business approach called for. Particularly in the case of newspapers, it stands to reason that they may want to establish a radio station in the same town or area, because they already have a poll of journalists collecting the news and publishing the news. Such a news service could easily be adapted for radio broadcast purposes, and professional presenters and technicians may have to be employed, but there would be no requirements for additional field reporters.

We would urge the IBA to consider the granting if broadcast licences in such circumstances, and particularly if no other potential broadcaster exists in the town or areas, but with a specific condition attached. This is that should another licence application be received after a newspaper has already established a broadcasting station, then the new applicant should be required to show that it is financially and otherwise capable of running a broadcaster station. The newspaper owner of the existing broadcaster should be informed, that in the interests of diversity, it will be given a year's notice of the IBA's intention to require it to divest itself of the broadcasting licence. It's other option of course, could be to retain the broadcasting station and to sell the newspaper.

The general rationale above would be to prevent any cross-media ownership which results in a monopoly.

While the situation in a small town where there us only one media can be reasonably easily be ordered along the lines above, the issue becomes complicated in an area where there are many publications of differing types (dailies, monthlies, weeklies, Sundays, etc). Our suggestion is that the IBA will have to be flexible and consider the situation from the point of view whether a monopoly is being created. For instance, if a monthly journal decides to ask for a licence would this constitute the creation of a monopoly? We doubt it.

The situation becomes more flexible if there are several broadcasters as well as a range of papers. Within urban environments, the IBA will have to take into consideration the extent to which media diversity already exists, which means is could issue broadcast licences to newspapers where one or more broadcaster already exists. The wider Johannesburg area, fir instance, a newspaper seeking to open a radio station could not be accused of monopolising views and news, or the advertising market. We doubt, however, whether a general rule could be applied and suggest each application should be decided on merit.

Community media

However, should a community media operation in terms of its audience penetration attract the attention of a commercial media interest who may wish to take it over so that it could be turned into a profit-making commercial venture, then the normal principles of cross-media ownership should be made to apply to it.