It’s 7am and you have just started your day by watching the morning news on your favourite channel. Your daughter is busy instant messaging her best friend on a social network, while your wife is busy doing last minute Christmas shopping on an online shopping site. On the way to work you call an estate agent on your mobile phone about a house you saw on a national property website. In your office you quickly scan the newspaper headlines, before checking the latest stock prices online. You order the printing of brochures for your company via email, using a search engine to find the printing company’s details. After work you stop at the shop to pick up copies of your family’s favourite magazines. A travel mag for you, a gardening mag for your wife and a fashion mag for your daughter. At home you and your family watch your favourite TV series on a satellite TV channel, before ordering a blockbuster movie on a pay-to-view channel. Your daughter spends the rest of the evening listening to music and playing games on her laptop , while you and your wife curl up in bed with the latest best sellers. Sound familiar?
News agencies, TV broadcasters, production companies, e-commerce websites, internet service providers, social networking platforms, internet search engines, magazine and book publishers, computer and mobile games, satellite and pay TV, music retailers, printing services, multi-media advertising and mobile phone networks are just some of the media & entertainment components that we take for granted in the 21st century.
What if you were told that every single media component or application accessed by you and your family were owned by one media conglomerate?
Over the past thirty odd years there has been a rapid acceleration of convergence in the global media industry. In 1983, 90% of American media was owned by 50 companies. By 2011 the same 90% was owned by 6 conglomerates. A trend that is reflected in most countries around the world.
According to the Forbes Global 2000 list for 2012, the biggest multi-national players in the media and entertainment industry were (by revenue):
1. Comcast (NBC, Universal Pictures, Focus Features and others)
2. Walt Disney (Walt Disney Studios, Lucasfilm, ABC, ESPN, Pixar, Miramax, Marvel Studios and others)
3. Vivendi (Canal+, StudioCanal, Universal Music Group, Activision Blizzard, Global Village Telecom and others)
4. News Corp (Fox, Wall Street Journal, New York Post, HarperCollins, The Australian, The Sun, The Sunday Times and others)
5. TimeWarner (CNN, HBO, Time, Warner Bros and others)
All of the above corporations were also listed amongst the top 500 global companies in all industries. With a combined market value of $265 billion they and a few smaller conglomerates control vast swathes of the international media market.
At no 18 on the list was South Africa’s Naspers ( no 8 based on 2012 market value). Naspers is a good example of the increasingly blurred lines between the media & entertainment industry and the telecommunication industry. It has national and international interests in digital media (pay-television, instant messaging platforms, and related technologies), print media (publishing, distribution and printing of newspapers, magazines and books), and private education services.
Its declared strategy is to create media content, build brand names around that content, manage the platforms distributing the content and then deliver the content through a variety of channels: TV, internet services, newspapers, magazines and books.
Today Naspers is the dominant force in almost every aspect of the South African media industry:
1. Pay-TV (DStv)
- 4 million subscribers in South Africa and a further 1.6 million in the rest of Africa (March 2012)
- most major sports broadcasting rights in South Africa belong to DStv
- TopTV, the only other pay-tv competitor in the South African market, was launched in May 2010, and has recently gone into ‘business rescue’ under section 129 of the Companies Act. It had 160 000 paid up subscribers by the end of September 2012.
- Naspers had a 25 year old monopoly on subscription TV. First through the analogue M-Net channel launched in 1986 , and since 1995 through DStv, a digital satellite service.
- In 1984 the current CEO of Naspers, Koos Bekker, and the then MD, Ton Vosloo, approached the South African Minister of Foreign Affairs, Pik Botha with a proposal for pay-tv. Their consortium, consisting of Nasionale Pers (as Naspers was known then), and various other newspaper publishers won the bid for South Africa’s first pay-tv licence, defeating 20 other applicants in the process. M-Net was born. The new channel struggled for two years, but managed to start making profit after the introduction of individual home decoders, and more significantly, a change to their broadcasting licence which allowed them to broadcast free to air for two hours per day. The exposure enabled them to increase their subscription numbers to critical mass. (Source: Anton Harber, ‘Gorilla in the Room’, www.mampoer.co.za, August 2012)
- Naspers through its subsidiary Media24 owns 64 newspaper titles in South Africa and is the biggest newspaper owner in terms of circulation – 39% of total circulation.
- Media24 controls almost 100% of the Afrikaans newspaper market as well as the biggest selling tabloid, Daily Sun.
- The four biggest South African media companies, Naspers, Independent News & Media, Caxton/CTP and Avusa, control 90% of domestic newspaper circulation
- Second placed Independent News & Media received 48% of total advertising revenue spent in the paid newspaper market, according to a 2009 MDDA report. It is the only foreign owned media group in South Africa, with the parent company based in Ireland, controlled by the O’Reilly family. Ex-CEO, Tony O’Reilly has been severely criticised for enforcing a culture of profit maximisation through excessive cost-cutting and centralisation of core functions, thereby destroying journalistic diversity amongst the local unit’s newspapers.
- Some of the 4 big media companies have been accused of predatory pricing: pricing below average or variable costs in order to exclude competitors in a market. This has forced countless independent or local newspapers to sell out or close down.
- According to a study commissioned by the MDDA (Media Development and Diversity Agency) there were 504 magazine titles in South Africa in 2009.
- Naspers via Media24 owned 55 titles outright and a further 34 titles via its 50% stake in New Media Publishing
- Media24 was indicated as the dominant force in the magazine market with control over 18% of the titles and with 66% of sales
- Its closest competitors were Avusa with 32 titles and Caxton with 31 titles
- Naspers through its subsidiary Media24 is the biggest owner of publishing houses in South Africa
- Caxton/CTP is considered to be the biggest printer of books, magazines, newspapers and commercial print in South Africa.
- Followed by Naspers/Media24 and its subsidiaries
- Access to affordable printing is often been perceived as a weapon to keep independent publications out of the market or force them to sell their business.
6. Film and DVD distribution
- Avusa through Nu Metro and Primedia through SterKinekor have been controlling virtually the whole industry for years in what can be considered a duopoly with a few minor players
- Avusa was taken over by Times Media Group in 2012
- Nu Mutro Home Entertainment controls 65% of the DVD retail and rental segment (National Film and Video Foundation of SA, 2011)
- Sterkinekor controls 61% of the cinema segment
- In September 2011 Primedia and Avusa were investigated for market allocation irregularities – agreements not to compete for customers in certain areas or not show particular films in certain cinemas.
- Their duopoly is mainly due to exclusive distribution rights obtained from the major movie studios. South Africa has long been an easy milking cow for Hollywood studios due to lack of competition and lack of bandwidth for companies like Netflix.
7. Digital Media
- The MDDA study highlighted that the big media companies in South Africa have moved their presence aggressively into the digital arena
- Naspers/Media24′s News24.com is the most popular site measured by Nielsen/Netrating based on unique visits
- Independent News and Media’s IOL portal is placed second
- Naspers controlled 48 out of 152 domestic magazine websites in 2009
- Naspers, Independent News and Media and Avusa owned 54% of newspaper websites in 2009
- An independent study into global digital media revenue earners rated Naspers as the 22nd highest earner worldwide, above TimeWarner, Walt Disney and Viacom, and one place below Amazon. The study was based on revenue earned from digital content including advertising.
Right, so now we have established that a few companies have an inordinate amount of control and possible influence over the information we receive, how we receive it and how much we pay for it. What’s the problem?
The dumbing down issue:
With more centralisation of ownership comes less diversity of opinions and information. As much as media executives protest and obfuscate the fact, there is a marked contrast in quality of local mass media content versus some independent media. Compare the quality of content on The Guardian (UK)’s website with that of Media24′s News24.com and you will get an idea. There seems to be a dedicated and very cynical pursuit of volume and profit at the expense of insight and journalistic integrity, at the heart of their approach. The lowest common denominator rules as long as it creates the most money.
When technocrats rule:
There is a certain type of personality that thrives on a self-perceived vision of how the world should work, and if ambitious enough (or maybe psychopathic enough) will go to any length to fulfil that vision. Some are driven by ideology and an addiction to power like the Rupert Murdoch’s of the world, while others prefer an outer façade of civilised propriety that hides an innate condescension to anyone else. When the latter type takes control of an influential entity like a media conglomerate, corporate integrity and democratic values crumble progressively and insidiously. The most effective dictator is the one who can hide his/her true nature.
The Nazi propaganda machine was very effective in convincing the German population of their divine right to trample on the rights of others. Apartheid South Africa had a similar influence on a certain part of its population. Many young bureaucrats and bright scholars of the seventies and eighties are today’s captains of industry in South Africa. They have travelled far and wide and they know what is best for YOU! The tragedy is that their fallacious philosophy has poisoned the mentality of the next generation. Baby technocrats who sycophantically aspire to the halls of power abound in South Africa’s educated middle class. Elitist, self-righteous and vainglorious they prefer the glossy packaging of self-enrichment to making a sincere and substantial contribution.
The Hypocritical oath:
Big media love to espouse their virtues. Upholders of freedom of speech and community values and assorted platitudes abound in their yearly reports and published company values. In reality, small media operations are put out of business because they can’t compete with the marketing, financial and technological might of the big guys. If the opposite was true we would not see a massive worldwide centralisation of media ownership. Media executives love to mention how their investment in new media technology and platforms has improved mass communication, open discourse etc. Sure, you invest in cheapest lowest common denominator communication, which creates a nice fast paced, low info dumping ground. It keeps the masses stupid and you keep on making money out of the volume.
Case study 1:
Technology is a beautiful thing. It has given us satellite TV, DVD players and video on demand. Nice, but what if the content supplier decides that only the biggest, over-hyped and massively marketed block buster is available for viewing or distribution? What if the content supplier is contractually en hoc to the studio that produced the piece of rubbish and is forced to promote it? What if that same content provider is also the owner of the website, newspaper, radio and TV station that shoves trailers and reviews for the piece of rubbish down your throat? What if the lovely, socially aware content provider has no intention of ever informing you of the quality independent movie that has just been released elsewhere? In South Africa we have a history of governmental authoritarianism and censorship. It makes for a communal mentality that’s easy pickings for corporate authoritarianism and censorship. Governments and corporations both want the same thing – your willing submission to what they have to sell. There is a sickening lack of access to alternative/independent entertainment in South Africa. And with access I don’t mean having a green salad and a bran muffin before watching the latest Lars von Trier assault at a cinema in Rosebank or Cavendish. Quality independent/foreign/art house movies and documentaries are often not available for rental or purchase, they are not screened at 99% of cinemas, and they’re definitely not offered as regular fare on any of the TV channels. The day Barry Ronge writes a review on a selection of movies shown at the South by Southwest film festival I will fall off my chair.
Case study 2:
Back to some boring old figures.
Naspers declared consolidated revenue of R39.5 billion for the financial year till 31 March 2012
Caxton/CTP declared R4.8 billion for their financial year till 30 June 2012
Avusa declared R5.96 billion for their financial year till 31 March 2012
Independent News & Media’s South African operations produced revenue of Euro 37.6 million for the 2011 financial year.
Naspers outstripped the combined revenue of its competitors by almost R28 billion. Where does all that money come from?
In 2001 Naspers bought a 46.5% interest in Tencent Holdings, a Chinese internet service portal. Tencent has since grown into the Chinese market leader with a market capitalisation of $57 billion in August 2012. Compare that to Facebook’s current market cap of $41.5B or Yahoo’s of $18.4B.
Currently Naspers holds a 34% stake in Tencent Holdings, which contributed R11.5B to its 2011/2012 revenue and R5.1B (74%) of its R6.9B consolidated earnings before tax. Through subsidiary MIH, Naspers also has 2 out of the 9 seats on the Tencent board.
In 2007 Naspers purchased 30% of Mail.ru, a Russian operator of communication, online gaming and social networks.
80% of Naspers’s current market value is derived from its Chinese investments, 10% from its Russian investments and 10% from its African operations. Since both China and Russia are not exactly crusaders for open media and press freedom, the question may be asked if the Naspers investments are shrewd and pragmatic, or are they cynical and focused on mere profit taking, bugger the moral implications?
Well, since Tencent operates in that paragon of media virtue, China, let’s take a closer look. According to the Reporters Without Borders’ Press Freedom Index for 2012, China rated 174th out of 179 countries. It managed this lofty position by amongst others: imprisoning 30 journalists and 69 netizens, and creating the world’s most sophisticated online censorship and surveillance system. Tencent together with other Chinese Internet leaders like Sina Corp (which owns the Sina Weibo micro-blogging website) and Baidu (search engine), agreed in November 2011 to implement the government directives on online surveillance. Basically becoming the enforcers of China’s inner layer of internet censorship.
For further reading on the many infringements on human rights and freedom of expression committed by the Chinese government: Reporter Without Borders at http://en.rsf.org/
In 2008 Naspers through its subsidiary, Paarl Web, signed a contract for R2.6 million to print propaganda pamphlets for ZANU-PF, the ruling Zimbabwean party. Embarrassed apologies were uttered by Naspers executives when the deal was exposed, but would that have been the case if the issue was not raised?
Naspers is a founding investor in MTN, one of the first two cellular phone operators in South Africa, the other being Vodacom. Koos Bekker, current Naspers CEO, was one of the founding directors of MTN. Operating licences were awarded to MTN and Vodacom in 1993, after which they have continued to dominate the South African cellular market with 35% and 50% overall market share respectively. This virtual duopoly has created vast profits for them and their investors. Out of 47 countries, South Africa has the third highest spend on cell phones as a percentage of Gross Domestic Product. It especially impacts pre-paid customers (generally the lowest earners) with some of the highest rates in the world.
Naspers subsidiary MWEB has expressed an interest in establishing the country’s first LTE (long term evolution) mobile network and become a fully fledged telecommunications operator. LTE, as successor to the current 3G networks, would be capable of much faster broadband speeds.
Considering Naspers financial clout and technological expertise this is a real possibility in the near future.
There is validity in challenging individual shareholders in big media about their complicity in the monopolising and morally questionable practises by those companies. You vote in more ways than one with your money and assets. Yes, it’s great to earn huge dividends and profits from your investments, but not if it keeps many at the periphery of economic and social participation. A country’s social cohesion and long term prosperity depends very much on the quality, diversity and ease of access to information. With any right comes a responsibility, something that’s seems to be overlooked by South Africa’s economically empowered elite and the country’s biggest media conglomerates.
Commercially driven, ultra-powerful mass market media is primarily loyal to its sponsors: shareholders, advertisers and in some totalitarian cases, governments, rather than the public interest. Media convergence is motivated by increased profits, reduced risks and maintaining a competitive edge. This reduces quality and diversity of information and indirectly contributes to the censorship of critical thought.
The internet has been championed as the saviour of independent media and opinion, but that relies heavily on accessibility. Powerful media companies dominate the internet through marketing campaigns and huge technological clout. One particularly disturbing trend is the centralising of blogs on media conglomerates’ sites, which could cause independent voices to be subsumed by the media conglomerate’s brand.
South Africa was recently placed 36th out of 61 countries in the inaugural Web Index, a new global survey of the impact of the internet on the countries and citizens of the world, conducted by the World Wide Web Foundation and led by Web inventor Tim Berners-Lee.
The survey assessed the impact of the internet worldwide, incorporating indicators that assess countries on the political, economic and social impact of the web, as well as indicators of web connectivity infrastructure and use. South Africa, in 36th place, is the second-highest ranking African country behind Tunisia. However, the country ranked only 45th for the extent of internet use in the country.
According to a study commissioned by Google South Africa, the country had 8.5-million internet users in 2011, about 17% of the population. The low penetration is mainly due to high broadband costs and compares unfavourably with Nigeria’s 29%.
Legislation – In France nobody is permitted to control more than 30% of the national distribution of daily newspapers. In Italy no publisher may control more than 20% of circulation at the national level and 50% at the regional level. Many democratic countries prohibit companies which already have a strong presence in one media sector from crossing over to others. In the Netherlands, for example, no company which controls more than 25% of the newspaper market can obtain a licence for broadcasting. Compare this with the current situation in South Africa, which may worsen in future if big media companies use their financial and technological clout to encroach further on digital media and telecommunications ownership.
Media ownership – ownership via a trust supported by a media group’s employees or civil society. It would ensure financial and editorial independence and remove pressure to produce profit at all costs. A similar model has been successfully operated by the The Scott Trust Limited, which owns the UK’s Guardian Media Group. Current opportunities would be Independent News and Media’s South African operations, since the group has been struggling internationally and seem to be keen to sell off their local assets. A caveat would be that political involvement or domineering commercial partners should be avoided.
Cheap broadband internet access – countries with a high internet penetration rate tend to do well economically. Government investment in faster, cheaper broadband through deregulation, subsidies and infrastructure development is crucial.
Advocacy groups – The Open Society Foundation founded by international investor and philanthropist, George Soros, implements initiatives to advance independent media. Civil society participation in such initiatives are hamstrung by the ignorance of threats to fundamental rights brought on by lack of education and the complacency of the privileged segment.
Access to information is a fundamental human right:
Everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers. (Article 19, Universal Declaration of Human Rights)
Everyone shall have the right to freedom of expression; this right shall include freedom to seek, receive and impart information and ideas of all kinds, regardless of frontiers, either orally, in writing or in print, in the form of art, or through any other media of his choice. (Article 19, UN resolution: International Covenant on Civil and Political Rights; March 1976)
The South African constitution contains a Bill of Rights that guarantees that every citizen has the right to freedom of expression, which includes freedom of the press and media, the freedom to receive or impart information or ideas, freedom of artistic creativity, academic freedom, and freedom of scientific research.
It is every citizen’s responsibility to guard those rights jealously, regardless if they are being threatened by repressive governments or monopolistic, profit obsessed media conglomerates.