Media magnates await their cue: Overhaul of the rules on cross-ownership would be a boon to TV moguls, publishers and video game firms. Jason Nisse explains

UNDER pressure from leading press barons and other parts of the UK media, the Government has ordered a wide-ranging review of the rules against cross- media ownership. Total deregulation would almost certainly lead to a spate of takeovers and the emergence of a small number of dominant groups. We answer questions on the multimedia revolution.

Why has Peter Brooke decided on a review?

Rules set up by the 1990 Broadcasting Act which governed takeovers and mergers in commercial TV were becoming progressively unworkable. Under pressure from the main TV bosses, the National Heritage Secretary, Peter Brooke, decided late last year to act. TV companies argued that having a large number of small independent TV companies made it difficult to find agreement on scheduling and other important issues. Michael Heseltine, President of the Board of Trade, also reckoned that British media companies were too small adequately to compete internationally.

Mr Brooke's first stab at the problem a couple of months back was widely criticised as failing to deliver the kind of deregulation required. Mr Brooke stopped well short of throwing the sector open to a takeover free-for-all. Though any two ITV franchises can now be combined under one roof, Mr Brooke's limited package of reform is seen as favouring ITV bosses such as Gerry Robinson at Granada and Michael Green at Carlton - who can now consolidate their position in the industry - and being unfair to newspaper proprietors.

Under pressure from the press barons, Mr Brooke last week announced that more radical alterations would be considered.

Why is cross-media ownership banned at present?

The ban goes back to the Broadcasting Act, felt by some to be one of the worst pieces of legislation ever enacted. Described by its critics as being out of date before it came into force, the Act was always going to be an awkward series of compromises since the original concept - that ITV franchises be sold to the highest bidder - was dreamed up by members of the Tory right but the task of framing the legislation was given to a liberal with friends in the media - David Mellor.

The Act said that a large ITV company could buy a small one but not a large one, that foreign and non-media companies could not buy ITV companies until 1 January 1994, and that newspaper publishers could not own more than 20 per cent of a broadcasting group and vice versa. The reason for this was to prevent undue concentration of influence in the media.

But doesn't Rupert Murdoch own half of BSkyB?

Yes but technically BSkyB, despite being based in Isleworth, is not a British broadcaster. It is beamed down to earth on a Luxembourg-registered satellite and therefore is not covered by the Broadcasting Act. By contrast BSB, which was eventually forced by financial necessity to merge with Sky, was covered by the Act. Its shareholders used to complain about this unfair distinction until they found themselves forced into bed with Sky. Mr Murdoch's papers can, and do, promote BSkyB in their pages. And BSkyB's dominant position in the delivery of satellite TV channels means that the market operates as if Tesco, Safeway, Sainsbury's and Waitrose were all owned by the same group. Rivals have argued that this means the media playing field has a one-in-three incline with Mr Murdoch at the top.

What are the terms of reference?

At the moment, there aren't any. Mr Brooke has asked for submissions by 25 February. A report is planned for the autumn but if the changes need primary legislation, it is unlikley to come into force before the spring of next year. Mr Brooke has asked for input by the Department of Trade and Industry on issues such as telecommunications, competition policy, trade policy and newspaper ownership, so Mr Heseltine, a keen supporter of full-scale deregulation, will have a big say.

Will it regulate the multimedia revolution?

Hopefully. The Department of National Heritage says it wants rules that are flexible enough to deal with the changes in the market. At the same time, it wants to protect consumer interests by ensuring diversity of product and ownership. It is a tightrope to walk, and the track record in framing intelligent regulations is not encouraging.

What are these great technological changes and how will they affect the consumer?

We already have cable and satellite TV, compact discs - storing massive amounts of information that can be accessed in the home - and interactive television. We are soon going to see videos delivered down phone lines, music released in the form of video games and super highways delivering TV pictures, music, information, telecoms - just about everything but groceries.

What everyone is now getting excited about is digital compression - which will mean that up to 20 TV stations can be carried on the signal that currently carries just one. In theory, this means that there could be thousands of TV stations serving interests as diverse as jazz music, train spotting and Thai kick boxing.

The limitation on the development of new media markets is not the technology but the software - the information and entertainment that people want. Historical parallels are in video and newspapers. Sony found its technically superior Betamax video system sidelined in favour of VHS because decent movies were unobtainable on Betamax. Likewise the newspaper revolution produced only three new national papers because producing the information to fill newspapers is an expensive business. This is why programme makers and publishers, with their massive libraries, are in demand. This is why QVC, the shopping channel, and Viacom, the programme distributor, are in a multi-billion dollar battle for Paramount. This is also why publishers want to link up with the owners of TV channels.

Do we need large British media groups?

A substantial part of our media is already owned abroad. A large chunk is owned by an Australian company, Canadians have traditionally controlled many of our national newspapers, most of the cable TV franchises are owned by US firms, and a large part of the programming on TV comes from the US or Australia.

With English being the pre- eminent language in the media revolution, the UK is well placed and European firms are not slow to recognise this potential.

In the battle for TV rights and the development of new media interests, there are niche markets for small, fast-moving businesses, as Flextech and Hat Trick Productions have proved. But to compete for valuable media rights and to promote them with the vigour needed to ensure their success, groups need to be large.

Will a few large groups dominate?

Undoubtedly. With Carlton taking over Central, LWT looking likely to be subsumed by Granada and MAI rumoured to be bidding for Anglia, this is already taking place.

Who will be the leading British players?

Granada and Carlton are already heading the race from one direction, Reuters is a leading contender from another. Pearson, Reed Elsevier, Associated Newspapers, Mirror Group Newspapers, the Telegraph group and Emap look strong, with MAI and United Newspapers not far behind.

But the two groups that cannot be ignored, though they are hampered in competing on a level playing field at the moment, are British Telecom and the BBC. If the shackles come off them, the competition will shudder.

So who will dominate in 10 years' time?

Many of those who already dominate will become more powerful. The likes of Time Warner, Bertelsmann, Sony, Matsushita and News Corporation, assuming it does not catch a cold with Star TV, will be leaders, as will QVC if it wins the fight for Paramount, plus Sega or Nintendo, or both. The UK could be exceedingly well placed. Reed and Reuters are already potential world beaters.

Will greater concentration of ownership mean more consumer choice or less?

Logically there must be more choice - there will be more methods of delivery and there has to be something on them. New services will grow up to serve the audiences. A good analogy is the US. The three TV networks became conservative and similar, so they suffered from competition from cable TV and Fox, the fourth network, which has targeted minority groups and particularly the black community.

Mr Murdoch has long maintained that censorship, political bias and the power of the media baron is naturally undermined by the proliferation of media choices brought in by new technology. But nobody really knows the answer. Governments desperately need to address the issue.

(Photograph omitted)