FIRST PART OF INVESTIGATION INTO PUBLISHING COMPLETED
PRESS RELEASE
PRESS RELEASE
ANTITRUST AUTHORITY ON NEWS PUBLISHING: REVIEW THE SYSTEM OF PUBLIC ASSISTANCE WHICH IS TOO HETEROGENEOUS, MODIFY POSTAL BENEFITS, LOWER BARRIERS TO NEW PUBLISHING INITIATIVES. THESE ARE THE THREE CHANGES NECESSARY TO STRENGTHEN THE GUARANTEE OF PLURALISM IN NEWS MEDIA
First part of the fact-finding investigation into newspapers, periodicals and multimedia completed
In publishing, the objective of protecting competition has to be balanced with the safeguarding of multiple sources of information and, in this context, any regulatory reform of public subsidies and of antitrust limitations must take into consideration the particular characteristics of an industry that is the nerve-centre of democracy. This is one of the results of the first part of the fact-finding survey of the print news media that the Italian Competition Authority completed on 12 July. The 70-page analysis uses comparative tables and graphs to illustrate the issues of subsidies and limitations on mergers (while the second part of the survey will deal with distribution).
Public intervention in favour of pluralism currently takes three forms: economic aid to publishers, limitations on mergers, and restrictions on distribution methods. As has been said, the first part of the survey, which studied assistance to publishers and limitations on mergers, is published now in order to provide a contribution to the government’s plans for reform of the industry. The distribution aspects, instead, require further study which will be carried out in the coming months.
A) SUBSIDIES. As regards subsidies to publishers, the Authority noted that a lowering of the barriers to entry by assisting new publishing initiatives may be a useful way of fostering pluralism. Nevertheless, in order for public contributions to be effective to that end, the payment method must be defined according to criteria that will assist the start-up of the new publication in a timely manner but not create subsidy-dependency. For example, it would be helpful to review the regulation that delays the payment of subsidies for new publications until the end of the fifth year of activity and instead to fix a maximum limit for the period subsidies may be paid.
B) POSTAL BENEFITS. The main form of indirect aid is the reduction of postal rates for subscription sales. From the point of view of the use of public monies, this is by far the most extensive form of support for publishers. The overall value of the reduced charges for publishers, according to figures from Poste Italiane, was Euro 303 million in 2005 and Euro 299 million in 2006.
Yet it emerged from the survey that these measures were not effective in increasing subscriptions but ended up benefiting Poste Italiane, the only conduit for the subsidies, by preventing the development of full competition in the market for delivery services. It would be better, then, to broaden the range of suppliers in this area.
C) ANTITRUST LIMITATIONS. As for restrictions on mergers, Italian regulations prevent acquisitions by media companies that would result in control of over 20% of the total circulation of daily newspapers in Italy, or 50% of inter-Regional copies. On this point, the Authority believes that fixing upper limits a priori, though in the general case an unwarranted restriction on companies’ growth prospects, is justified in this case, given the specific characteristics of the media, in order to safeguard pluralism. So regulators and law-makers must identify measures that create the correct balance between the freedom to carry on an entrepreneurial activity and the right to a plurality of opinion.
D) FREE PRESS. Although there is no great overlap in the targets of the two types of publication, there exists nonetheless strong competition for advertising between free daily papers and papers that must be purchased, especially for local advertising. The free press has in some cases been effective in satisfying a latent demand for advertising space from small-to-medium sized companies having strong local roots.
The advertising revenues of the free press, though growing strongly, do not yet represent even 10% of those of the established dailies.
E) SPECIAL V.A.T. ARRANGEMENTS. In addition to the above-mentioned subsidies, media companies also benefit from a special “single phase” regime in the application of V.A.T., whereby the publisher, on direct sales, pays a reduced rate of V.A.T. of 4% on the sale of books, newspapers and magazines. That rate is also extended to certain products sold with a publication, under given conditions. For example, a DVD or videocassette is also subject to the 4% rate (instead of the 20% applicable in normal sales outlets) if it represents an integral support for the publication, such as an illustration of its contents.
F) PROBLEMATICAL ASPECTS OF PUBLIC SUBSIDIES. The first consideration that arises from the review of the various types of public assistance afforded to the publishing industry is the heterogeneous nature of the criteria and of the methods for paying the contributions: it is difficult to find a consistent logic to the arrangements that can be seen as protecting pluralism. The present situation seems to be the result of a progressive overlaying of measures not always having convergent aims and based on differing parameters as regards attribution and size. Moreover, some measures have been applied in a discontinuous manner, making it difficult for publishing businesses to do long-term planning. Direct contributions may play an important role in safeguarding pluralism to the extent that they help to encourage the establishment and market success of new publications, bringing ideas and information that increase the existing range. This is most important in an industry like that of the publishing of dailies and periodicals, where there are high barriers to access because of the large start-up costs and the need to become well known and attain a minimally efficient size, beneath which it is hard to obtain positive economic results.
More generally, one must ask whether the absence of a maximum time limit for the entitlement to subsidies does not breed a systematic dependency by some publications on public aid, thus reducing the stimulus to do everything possible to break free and achieve full autonomy.
Finally, a common refrain was the need to set stringent entitlement criteria so as to avoid abuses and opportunistic conduct, and to monitor the use of the resources by the beneficiaries.
On this score, it is worth pointing out that the actions of those who are only interested in securing subsidies and have no real interest in publishing not only lead to a waste of public money but risk undermining the very pluralism the rules are intended to encourage. In effect, in these cases public support paradoxically provides a competitive advantage for “phoney” publications over small publishers who can really make a contribution to the variety of content.
Similarly, direct contributions should not end up benefiting large groups and those that cooperate with them. Specifically, it does not seem even-handed, from a competitive point of view, to assign subsidies to local papers that collaborate with major publishers, often distributing their product jointly with the national paper in a particular geographic area.
Rome, 16 July 2007
TABLES
Percentage split of net advertising revenue by medium
| Medium | 2002 | 2003 | 2004 | 2005 | 2006 | % Change 2004-2006 |
| TV | 54.1% | 54.8% | 55.7% | 55.6% | 54.7% | -1.8% |
| Press | 38.7% | 37.7% | 34.8% | 34.8% | 35.2% | 1.2% |
| Radio | 2.8% | 4.1% | 4.9% | 4.9% | 5.1% | 4.2% |
| Billboards | 2.6% | 2.6% | 2.4% | 2.4% | 2.2% | -8.6% |
| Cinema | 0.8% | 0.9% | 0.9% | 0.9% | 0.7% | -21.8% |
| Internet | - | - | 1.3% | 1.5% | 2.1% | 61.7% |
| Total revenues (€ bn) | 6 | 6.1 | 6.7 | 6.9 | 7.1 |
Split of public subsidies for publishing (2006 estimates)
| Millions of Euros | Share | |
| Contributions to journalists’ cooperatives (covering up to 60% of costs) | 82 | 16% |
| Contributions to newspapers of political movements and parties (covering up to 60% of costs) | 59 | 12% |
| Other direct contributions | 13 | 3% |
| Total of direct contributions | 154 | 31% |
| Compensation for postal charges | 303 | 62% |
| - of which to publishers belonging to ROC | 174 | 36% |
| - of which to non-profit organizations | 104 | 21% |
| - of which to book publishers | 25 | 5% |
| Compensation for telephone charges | 35 | 7% |
| Total of indirect contributions | 338 | 69% |
| TOTAL CONTRIBUTIONS | 492 |
Source: Processing of data supplied by the Publishing Department of the Prime Minister’s Office and by FIEG. The estimates are based on the most recently available data for each type of subsidy: 2005 for postal and telephone charges, 2003 for direct contributions.
| POSTAL SUBSIDIES TO ROC PUBLISHERS, 2005 | |||
| Publisher | Subsidies | Share | |
| ARNOLDO MONDADORI EDITORE S.p.A. | 18,877,876 | ||
| IL SOLE 24 ORE S.p.A. | 17,822,223 | ||
| R.C.S. QUOTIDIANI S.p.A. | 13,763,592 | ||
| Total of 10-20 million euro category | 50,463,691 | 29% | |
| Average contribution in this category | 16,821,230 | ||
| | |||
| PERIODICI SAN PAOLO | 6,966,300 | ||
| GRUPPO EDITORIALE L'ESPRESSO S.p.A. | 4,689,442 | ||
| AVVENIRE NUOVA EDITORIALE ITALIANA | 3,603,599 | ||
| CONQUISTE DEL LAVORO S.r.l. | 2,996,742 | ||
| DE AGOSTINI EDITORE | 2,581,004 | ||
| ATHESIA DRUCK | 2,536,023 | ||
| ED. LA STAMPA | 2,415,521 | ||
| ERINNE S.r.l. | 2,319,132 | ||
| HACHETTE RUSCONI S.p.A. | 2,304,336 | ||
| MONDOLIBRI S.p.A. | 2,106,761 | ||
| PROMOMEDIA | 1,681,570 | ||
| TOURING CLUB ITALIANO | 1,354,208 | ||
| GRUNER UND JAHR | 1,267,525 | ||
| ACI-MONDADORI | 1,184,221 | ||
| EDITORIALE BM ITALIANA S.r.l. | 1,076,215 | ||
| MOPAK | 1,052,939 | ||
| SFERA SERVICE S.r.l. | 1,051,885 | ||
| S.E.S.A.A.B.EDITRICE | 1,051,491 | ||
| PROVINCIA PADOVANA DEI FRATI MINORI | 1,003,249 | ||
| Total of 1-10 million euro category | 43,242,164 | 25% | |
| Average contribution in this category | 2,275,903 | ||
| | |||
| 4,972 Publishers | 80,394,145 | ||
| Total of category up to 1 million euro | 80,394,145 | 46% | |
| Average contribution in this category | 16,169 | ||
| | |||
| OVERALL TOTAL | 174,100,000 | ||
Source: Processing of data supplied by the Publishing Department of the Prime Minister’s Office.