In any American or European city you can flip through the radio dial accessing dozens of different stations. Why is it that in Australian cities Sydney has only nine commercial stations and other capitals even fewer?
The answer lies in the dead hand of Commonwealth regulation which dampens competition throughout the broadcasting industry. Not only does the regulation reduce consumer choice but it prevents competition and allows considerable profits for those lucky or fortunate enough to have a licence.
The super profits generated by this government institutionalised anti-competitive practice are not readily apparent in company balance sheets. According to the Australian Broadcasting Authority, the nation's 215 commercial radio stations made total profits of $95 million in 1997/98, up 26 per cent on the previous year. While healthy, such a profit level on revenues of $556 million is not exorbitant.
But the recorded profit of these businesses reveals less about the participants' true profits than is the case for businesses not cosseted from new competitors. In fact, the ABA/John Laws affair has demonstrated that a considerable share of the super profits from radio operations is garnered by the employees.
Laws and Alan Jones are together reputed to be earning in the region of $20 million a year from being radio jocks and the spin-offs from this -- that means on average they make ten times the annual earnings of Australia's greatest footballer! Those two salary bills alone would boost the industry's profits by 20 per cent. Their earnings explain why the personalities are more powerful than their ostensible employer.
While much of the remuneration they command is due to their undoubted skills in offering the public the entertainment they want, this is not the only factor. Equally important is government rationing the spectrum available to commercial broadcasters. This has created an artificial scarcity of programs and outlets for advertising. But the value of this is reflected more in the incomes of key talk back hosts rather than in the value of broadcasting licenses.
Although artificially created scarcity denies the consumer a better variety of programming, the extent of this is hidden. And, like all cases where a regulatory reduction in supply is in place, those fortunate enough to have the limited share will fight to keep out profit-spoiling competitors. The sharing of the spoils of super profits places a reforming government vulnerable to the self-serving screams of the industry's owners and key on-air employees. They will claim the industry would not be "viable" with more players; that the quality of the product would drop; even that jobs would migrate offshore.
Such claims have been found to be fallacious in industry after industry. Yet those making them in the broadcasting industry carry particular weight. They, as the Laws affair demonstrates, carry immense political and commercial weight. And this weight, like the jocks' remuneration, is increased by the constrained amount of competition. Another ten commercial channels would be likely to halve the listening audiences of the leading talk back hosts and reduce both their earnings and influence.
Franco Papandrea in a publication (Broadcasting Planning and Entrenched Protection of Incumbent Broadcasters) has chronicled the sorry history of vast and powerful interest groups being formed in the Australian broadcasting sector as a result of an ignoble history of political meddling. He shows that to protect incumbents, Australia was denied commercial FM radio until 1974, 34 years after its introduction in the US and 27 years after the first experimental stations in Sydney and Melbourne. Similarly governments denied Pay tv for at least 20 years until the 1990s. And even then, the Minister in 1992 (Mr Beazley) stacked the deck to ensure a high price for the government satellite business AUSSAT by preventing alternative means of delivery.
The ignoble tradition is being further followed with the digital tv decision. Forcing a novel, expensive and extraordinarily spectrum hungry system on the public will have a deadening effect on alternative uses of the spectrum. It may please two or three media interests (and displease others) but it is once again a government making all the wrong decisions and jeopardising the future development of the communications industry.
The time has come for governments to follow their general industry policy and to disengage from this industry. Its regulatory strangleholds are bad for consumer choice, stymie industry development and, at least in the case of radio, pose threats to the democratic process.
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