CHAIR—Welcome, Mr Warren. As you have heard, we have been asking people to be brief and concise in their opening statements, so I invite you to make an opening statement bearing in mind that we have read your submission.

Mr Warren—Thank you, Chair. I will be brief because I think our submission does explain why we believe this is the wrong legislation at the wrong time. We believe it is legislation that will significantly reduce diversity and significantly reduce employment in the industry, which, in its own way, will also significantly reduce diversity. At a time when technologies offer Australia’s media companies such enormous opportunities for growth, a package of legislation that will instead divert them down the mergers-and-acquisitions path is, we believe, a bankrupt and, indeed—from the experience of the 1980s—a bankrupting strategy.

While there are a handful of matters in this legislation that we support and think should go through, on balance the overall majority of the legislation will act to drive consolidation of ownership in the industry. And, by not being medium-neutral, it will act to further disadvantage some and drive discrepancies within the media industry, particularly by protecting free-to-air television at the expense of other existing players and potential new entrants.

CHAIR—Senator Wortley will begin questions. I believe she used to be attached to this group.

Senator CONROY—Thanks for the editorial.

Senator WORTLEY—Mr Warren, from reading your submission, I understand it is your view that under the proposed legislation it is possible for there to be a reduction in the number of voices in a market. Can you explain that.

Mr Warren—It is an inevitable result of this legislation that there would be a reduction of voices in the market. The one thing that media ownership regulation tells us—not just in Australia but around the world—is that it very quickly defaults to the legally allowable minimum. It is an inevitable result that there will be a reduction in the number of voices. The concept of voices is a bit problematic as a regulatory tool, but it will certainly lead to a reduction in the number of media players. That will not be an equal reduction, in the sense that we will not go from having whatever we have now to five equal players. But the effect of that consolidation will be that we end up with probably one really dominant player, two or three medium-sized players and then a couple of quite small and effectively irrelevant players.

Senator WORTLEY—Are there any markets in particular that you think it will have an impact on?

Mr Warren—It will have an impact in all markets. It will particularly have an impact outside the Sydney and Melbourne market, although it will certainly have an impact in the Sydney and Melbourne market. It will have an impact in some of those other markets for two reasons—first, because there will be fewer players and, second, because, as we know from the 1980s experience, this legislation will drive a debt-driven frenzy of mergers and acquisitions.

You do not need to have an MBA to understand that, once you take on debt to grow through acquisitions, you need to find the synergies and the cost reductions to fund that. Inevitably, they come out of jobs and they come out of resources. In fact, we have already seen some companies—APN were here earlier—start that process of reducing their internal costs. They have had a round of redundancies among their journalists and their advertising staff, which they say is about setting themselves up financially to grow through acquisitions.

Senator WORTLEY—I understand that Roy Morgan and Crikey recently surveyed your media members on the media law changes, and 84.8 per cent believe that the government’s media law changes would reduce the diversity of media in Australia. Why do you think your members so strongly oppose the changes?

Mr Warren—Because they are the people who are at the cutting edge. They are the people who, in many cases, endured the effect of the last round of changes in the industry in the eighties and know that the effect of this will be a significant reduction in jobs and a significant reduction in diversity. One of the most interesting things I found about the survey was not that so many people were opposed to the legislation because of its threat to diversity but that the survey also highlighted there is in fact an enormous amount of enthusiasm for the opportunities that new technology should offer for greater diversity and a criticism of the legislation for failing to open up those opportunities.

Senator WORTLEY—In your submission, you say:

… the Explanatory Memorandum suggests the new rules might see the entry into a single local newspaper market like Adelaide of a new newspaper.

Given that has not occurred to date, do you think that is likely?

Mr Warren—No, for the reasons that Senator Joyce foreshadowed in his question to the previous witness. The general experience where a new player has attempted to emerge in a monopoly market against a newspaper chain—and virtually all newspapers in Australia are part of a chain—is that the chain lost leads on their competing item through putting extra resources into news and journalism, by cutting their advertising rates and often by cutting their subscription or their cover price for as long as it takes to drive the new entrant out of the market.

Of course, once a new entrant is driven out of the market, the new services are rolled back, the advertising prices go back up and the cover price goes back up—indeed, often to a further extent than they were at the beginning, because, when the potential competitor has been driven out, the existing paper has to recover the costs they have expended in fighting off the competitor. We have seen that a lot in regional areas, both by Rural Press and by APN. There would be no reason to expect that News Ltd would react less or more favourably to an entrant treading on their turf. Indeed, we have seen News Ltd do very similar things when they have felt under challenge, such as in the Central Coast by Fairfax recently and in the free giveaway afternoon newspaper market in Melbourne. I am not criticising them for doing that. That is just the commercial reality of the way newspaper chains have always operated and will always operate.

Senator CONROY—We are often told that the internet is the saviour of media diversity. To your knowledge, are there many journalists employed by organisations other than the incumbent players reporting news online?

Mr Warren—There is a handful. We mentioned Crikey earlier, which is probably the one, albeit quite small, new voice that has emerged as a result of the internet. I think something like 80 per cent of journalists who are working on internet publications are working for one of the major publications—Fairfax, News, Ninemsn or the ABC. In fact, I think we will see an intensification of that over the next little period, because I think all the media companies are grappling with that challenge. As someone from the Sydney Morning Herald said to me the other day, how do they grapple with the fact that more people than ever before are now reading the Sydney Morning Herald but fewer people than ever before are buying it? That is one of the reasons I think that right now is such a wrong time for this legislation, beca