Murdoch grab The other story behind AAP’s sale

News Corp’s decision to launch a newswire could be part of a larger plan to torpedo AAP and further concentrate Murdoch’s media influence.

Bumper crop follows drought-breaking rains.

That was a headline in the Port Pirie Recorder on Monday, although it also ran in the Bombala Times, Barossa Herald, Bega District News, Katherine Times, Wollondilly Advertiser and dozens of other small media outlets.

Below the identical headlines ran identical stories, reporting new data from the Australian Bureau of Agricultural and Resource Economics and Sciences about winter grain plantings.

It was not, as journalists would say, a “sexy” story, but it was factual and thorough and no doubt of great interest to a lot of readers in rural Australia. The sort of story that helps justify the decision to subscribe to their small local paper.

No journalist at any of those papers actually wrote the story, though. Rather, they chose it from among hundreds produced that day and every day by Australia’s venerable news wholesaler, the Australian Associated Press (AAP).

And just as they relied on AAP for that story, small and medium-sized media outlets around Australia rely on its coverage of all manner of things. Some can’t afford to have a reporter in Canberra to cover federal parliament. Others can’t afford to follow politicians on the election trail or have a journalist sitting in the High Court or reporting on events overseas.

AAP has produced copy that has filled countless column inches and hours of airtime since it was established in 1935 by

Sir Keith Murdoch.

For 85 years, it operated as something of a benign monopoly, co-owned by several of Australia’s big media players, but available to all who would subscribe. AAP operated independently, producing dead-straight, factual and accurate content on all manner of subjects from courts to sport to politics – and grain plantings.

Since the end of June, though, it has operated as a non-profit enterprise, revived by a group of philanthropic investors.

AAP is, to borrow terminology from ecologists, a keystone species in the Australian media environment, a unique life form that

helps hold the system together, one on which many others rely.

According to its chief executive,

Emma Cowdroy, the wire supplies some 400 different media outlets – newspapers, websites and radio stations – more than half of them in rural and regional Australia. While many are very small, some of the big news organisations use AAP, too. The Saturday Paper uses the wire for photography, while AAP has bigger contracts with the ABC, SBS, Guardian Australia and the Daily Mail.

But this may soon change.

Having recently survived one neardeath experience, AAP remains in a parlous condition, facing both financial and political challenges. And, ironically, the most recent and serious threat to AAP’s survival comes from the son of its founder: Rupert Murdoch.

Murdoch’s News Corp has indicated it is looking to expand beyond retail news into the wholesale business, competing with AAP for clients. News wholesaling is a natural monopoly, and realistically the Australian market has room for only one news agency. The prospect of a price war – which Murdoch could weather, and which AAP has no reserves to engage in – could see AAP go bust.

The loss of AAP would have enormous consequences for media diversity in Australia, already the most concentrated media market in the developed world.

News Corp’s newspapers currently account for two-thirds of the country’s total circulation, and if it were to take AAP’s clients, the company would further increase its market saturation. It would also open the door to supplying news for a hundred or more FM radio stations, without News Corp having to wrangle a licence from the Australian Communications and Media Authority. Theoretically, it could also affect the national broadcasters, the ABC and SBS, which currently rely on AAP.

An AAP collapse could also allow News Corp to further extend the market penetration of its own retail outlets by giving them a competitive advantage through preferential access to content at the expense of other small operators. And it could further increase the political power of Murdoch’s media interest.

These prospects aren’t going unnoticed – including by the national competition regulator, the Australian Competition and Consumer Commission.

But the reality is that AAP, like almost all other media players in Australia, has been struggling financially for a long time. The decline, for some outlets, has been greatly accelerated by the coronavirus. By the count of the Australian Newsroom Mapping Project, undertaken by the Public Interest Journalism Initiative, there have been 136 media “contractions” – that is closures or decreases in service – since the start of 2019. The great bulk of those have happened since March this year, when the virus hit. If you add in temporary closures, the number rises to 182.

Smaller regional outlets have been hardest hit. News Corp alone has closed

36 of its outlets and moved another 76 of its publications from print to digital-only.

AAP does not rely on advertising revenue, but as the retail market has shrunk, so has the wholesale market. At a time when depleted news organisations might be expected to lean more heavily on wire service copy, they have cancelled or wound back their use, because they can’t afford it.

On March 3 this year came the bombshell announcement that AAP would close its doors on June 26, putting 180 editorial and 500 total staff out of work. The rationale publicly offered by its owners – Nine Media, News Corp Australia, The West Australian and Australian Community Media – was that the wire service was no longer viable. They blamed unfair competition from Google and Facebook for destroying AAP’s business model. The intention was to shut it down.

But privately another reason for the closure was given by AAP chairman Campbell Reid, who is also a senior News Corp executive, a former editor of The Australian and The Daily Telegraph, a former group editorial director and, currently, group executive for corporate affairs, policy and government relations.

According to a report in Guardian Australia, Reid told AAP staff that Nine and News Corp were tired of subsidising a service used by their competitors. He also said News Corp would develop its own breaking news service to supply its various outlets.

Six weeks later, the executive in charge of setting up that service, Mel Mansell, gave further detail of what was planned. In an interview with The Australian, he said the new operation, to be called NCA NewsWire, would operate as an independent unit within the company, supplying content to various mastheads.

“It is also going to be content that we will make available as required to clients outside our business,” said Mansell.

Which is to say, six weeks after announcing it was getting out of AAP because it was no longer viable, News Corp was planning to get into the news wholesaling business, replicating AAP services. This move fuelled suspicions the real agenda behind the plan to shut down AAP was to damage smaller competitors.

As it transpired, the corporate owners of AAP did not succeed in shutting it down. Instead it was acquired by a consortium of philanthropic investors, led by a former News Corp chief executive, Peter Tonagh. But that only happened after stern warnings from the ACCC that any attempt to block the sale would “raise concerns” under competition law.

The terms of the deal included a sixmonth non-compete clause, so News Corp cannot yet begin marketing its content to other media outlets. But AAP is bleeding cash.

The coronavirus-induced recession, says Cowdroy, has brought “the worst advertising market … the worst period for the [media] industry that I’ve seen in the nearly 20 years I’ve been at AAP”.

Compounding this, Australia’s biggest media players, News Corp and Nine, will no longer use AAP. And other organisations are not re-signing long-term contracts either because they are uncertain about their own future revenues or waiting to see how things play out once the non-compete expires.

Cowdroy recalls that in years past, when she was AAP’s general counsel, “I was writing contracts for three years. I’m now writing them for three months.”

For now, AAP’s donors are keeping the service alive, buoyed by public contributions to a crowdfunding campaign launched this week, which at time of printing had raised nearly $100,000.

The funds may prove vital – because, as yet, there is no support coming from government.

In recognition of the fact these are hard times in the media, the government offered $50 million in grants earlier this year, under the Public Interest News Gathering (PING) scheme. Applications opened on May 7 and closed on May 29.

According to the office of Communications Minister Paul Fletcher,

AAP was not eligible to apply because during this window the transaction between its former owners and the consortium of philanthropists was not yet complete.

Cowdroy tells a different story – that the government had granted AAP an exception from the cutoff dates because of its unique circumstances. The service asked for $5 million in PING funding.

“So, we applied on July 7 and we’ve followed up numerous times and we’ve not heard anything,” she says.

In a written reply to questions from

The Saturday Paper, a spokesperson for Paul Fletcher acknowledged that “AAP, like other news businesses, is facing challenging times” and plays an “important role … in supporting public interest journalism in Australia”.

The spokesperson said the minister would “continue to engage with AAP”.

But there has been no engagement, says Cowdroy: “We’ve not had a dollar and we’ve not had a response.”

All signs point to a coming showdown, a few months from now, between two mismatched national wire services: one backed by Australia’s biggest media company and the other a non-profit with meagre resources and high ideals.

The new AAP has adopted a charter committing to independence, accuracy, impartiality, balance and fairness.

Of course, many media organisations pay lip service to such standards. In the United States, Murdoch’s Fox News had the motto “fair and balanced” until a few years ago, when the slogan became such a subject of ridicule that it was changed to “Most watched. Most trusted.”

In this country, the Murdoch media has shown itself to be ferociously partisan. A number of commentators have linked this to the government’s inaction in supporting AAP against News Corp. The most strident assessment came from former prime minister Kevin Rudd.

“And what will Morrison’s Liberals do about this?” he asked this week. “Nothing. Why? Because Murdoch runs their protection racket.”

On ABC Radio this week, ACCC head Rod Sims warned that the commission would be watching for evidence of predatory pricing, or other means by which News Corp might try to force AAP out of business.

Price wars are not new for Murdoch. In Britain, in the 1990s, his companies were found guilty of selling The Times at a loss to undercut rivals.

But, says Michael Bradley, managing partner at Marque Lawyers and specialist in regulatory law, while predatory pricing is illegal, it’s also very hard to prove, and would be particularly so in this case.

“The first thing to note about that is that there’s never been a successful predatory pricing prosecution in Australia,” he says.

“It will be very difficult for the ACCC to stop them … under the current law.”

The way News Corp has structured its plan, Bradley says, “is very clever”.

“As rapacious strategies go, it’s a good one.”

Good for News Corp, but not for media diversity, or the country.