Australia's Media Sector Is Poised for a Wave of Mergers

   By Rob Taylor

CANBERRA, Australia--Australia's media sector is poised for a wave of mergers after legislators agreed to the most sweeping shakeup of ownership controls in decades, hoping to help struggling outlets compete with digital rivals like Google and Netflix Inc. (NFLX).

Key independent Nick Xenophon, whose NXT Party wields bargaining power in the Senate, struck a deal with the conservative government to pass the reforms in return for funding to help smaller publishers and newsrooms employ more journalists.

Sen. Xenophon said the negotiations to shake up laws put in place three decades ago were "the most difficult and protracted and robust" he had undertaken. "The significance of this agreement should not be underestimated," he said. The legislation passed 31 to 27.

Australia's traditional media outlets, including Wall Street Journal publisher News Corp, have been hard hit in recent years by falling advertising revenue as audiences embrace digital platforms. Newspaper circulation has declined sharply as well.

The reforms, opposed by the opposition Labor Party, will abolish a 75% audience "reach rule" that had prevented free-to-air television networks like Nine Entertainment Co., Seven West Media Ltd. and the Ten Network Holdings Ltd.--recently acquired by U.S. television behemoth CBS Corp.--from buying regional affiliates that could access more than three quarters of the population.

They also removed a two-out-of-three rule that prevented large media companies from controlling free-to-air TV stations, newspapers and radio stations in the same market.

The reforms could give fresh impetus to a counterbid by News Corp Co-Chairman Lachlan Murdoch and Australian media entrepreneur Bruce Gordon to CBS Corp's A$201 million buyout of Ten Network Holdings, with both opposing the proposed deal in the Australian courts.

As part of the deal, Treasurer Scott Morrison agreed to ask the Australian Competition and Consumer Commission to conduct an inquiry into the impact of Facebook and Google on the traditional media industry, adding to a slew of inquiries by lawmakers into the tax affairs of both internet giants.

Media companies who unanimously supported the reforms argued existing controls were no longer relevant against new digital streaming platforms like Netflix, Google and Apple, as well as global media firms like The New York Times, BuzzFeed and the Guardian who have set up newsrooms in Australia.

News of an impending deal to end months of protracted political wrangling saw media stocks rise Thursday, including Southern Cross Media Group Ltd., Fairfax Media, Seven West Media and Nine Entertainment. Speculation has swirled that Fairfax and Nine could be first off merger blocks after passage of the reforms.

Write to Rob Taylor at rob.taylor@wsj.com

(END) Dow Jones Newswires

September 14, 2017 04:44 ET (08:44 GMT)

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