171.  Those who argue for a relaxation of the rules on media ownership assert that consolidation allows savings to be made through economies of scale, without cutting spend on actual journalism. Although this argument was refuted by others (see paras 179 to 183 below) it was put forcefully by many witnesses.

172.  Russell Whitehair from The Newspaper Society told us that consolidation of the local and regional newspaper industry "brings extra resource, it brings economies of scale but it does not detract from the focus that those companies will have in serving each local community" (Q 626). Peter Wright, the Editor of The Mail on Sunday, said that his paper benefited from being part of a large group because they were able to share printing presses which would be very expensive if they were a stand alone business (Q 510). Rebekah Wade, the Editor of The Sun, said that the journalism at her paper benefited from having an owner who could afford to invest in new printing presses and give her good budgets for journalism. She suggested this was particular unusual at a time when other newspaper groups were cutting editorial budgets (Q 1476).

173.  Simon Kelner, the Editor of The Independent, argued that editorially there are many advantages to being underpinned by a large multi-national media organisation "There are many benefits for our papers around the world in being able to use the journalism that is in The Independent. It is not just a one-way street; we quite often use reports from our papers in a remote part of South Africa, for instance, or a political piece from Ireland or Australia. It is a two-way street in that respect" (Q 670).

174.  The ITV companies argued in advance of both the 1996 and 2003 relaxations in the ownership rules governing Channel 3, that consolidation would allow for a more efficient and streamlined commercial television channel, better able to invest in original programmes and thus meet the challenge from a burgeoning number of cable and satellite channels.

175.  The radio industry is currently campaigning for a relaxation of its complex ownership rules. Radio Centre told us that "Removing the current mono-sector ownership restrictions on radio will allow Commercial Radio groups to seek superior economies of scale through consolidation and the sharing of resources, thus safeguarding their ongoing investment in the content which listeners value at a time when competition for advertising revenue has never been fiercer" (p 402). Radio Centre does not, however, wish to see a relaxation in the rules governing mergers between newspapers and radio stations in the same local area (p 402).

176.  In relation to radio news a trend of particular interest is "news-hubbing", which is the sharing of news resources amongst local stations in a similar area that have shared ownership. Radio Centre argued that, "Clearly news-hubbing is made much easier when stations are under concentrated ownership … there is no evidence that balance and diversity of opinion have suffered as a result of these smaller groups' news-hubbing arrangements. With companies of this size, sharing news operations allows for a higher quality of news production and more formalised editorial structures, with anecdotal reports suggesting that this tends to reduce the incidence of mistakes with regard to fairness, accuracy and impartiality. In addition, common ownership helps stations to gain better access to external content, revenue and marketing opportunities" (p 405).

177.  While several witnesses noted the business benefits brought by consolidation within sectors of the media, there is less evidence that cross-media consolidation brings similar benefits. Charles Sinclair, the Chief Executive of DMGT, told us:

"we have owned a variety of media assets in television, radio, newspapers and magazines, in the way we run things we have been rather disappointed in the cross-media benefits. They have been notably absent in any type of editorial synergy. Our television assets, when we owned them, never had anything to do with our papers. Even our national papers editorially are very separate, and all they really share are printing presses and distribution systems. They even have separate advertising sales forces and completely separate editorial groups. We do share printing with the regional newspapers, but that is about as far as it gets. We never got anything out of our very limited ownership of local radio. So cross-media I would say was an aspiration which broadly, in our case, did not deliver much in terms of commercial benefit" (Q 2596).

180.  While there are benefits from economies of scale such as shared printing, the logistics of sharing can impact on quality. For example if a local newspaper group has centralised printing resources this will impact on those publications in its range which are printed last or based furthest from the centralised printer. In some cases, these publications will have to be printed a day in advance which will impact on the immediacy and relevance of stories.

181.  Additional evidence comes from the United States, where the effect of consolidation on localism is a matter of great debate. It is perhaps an indicator of what could happen in this country. In the 1990s, the US government significantly relaxed the radio ownership rules. As a result, large multi-national companies started buying many local radio stations. For a decade Clearchannel was the industry giant, owning nearly triple the number of stations of its nearest rival. To many in the industry, the influence of multi-national companies was a worrying development. Critics claimed that unique local programming was being jeopardised by greater homogenisation of opinion, news and music. Clearchannel was at the forefront of public criticism that national programming was subsuming local interests. For example, in Minot, North Dakota in 2002, the New York Times claimed that the local Clearchannel station did not report a train derailment of toxic chemicals. This was widely attributed to centralisation of news production.

182.  In 2002, the US Federal Communications Commissions (FCC) sought to relax further US ownership limits at the local level. This proved controversial. Two of the FCC commissioners published dissenting views and several parties sought court reviews of various aspects of the decision. In 2003 the changes were blocked by the courts. During our visit to the US we met staff of the FCC who are engaged in another review of ownership rules. Studies commissioned by the FCC have indicated that as companies expand, so does diversity within each market. However, during our visit we also met representatives of the Consumers' Union which is one of the bodies that sought to block the FCC's deregulatory proposals in 2003. The Consumers' Union have accused the FCC of fixing the design of the studies on the effect of ownership. They claim to have found FCC e-mails detailing which academics to employ if particular study results were wanted (see appendix four).

183.  Several parties, including some industry representatives in the US, took the line that consolidation actually had the effect of reducing investment in original journalism as new owners sought to maximise returns to investors and shareholders. Darius Walker, the New York bureau chief of CNN, told us that consolidation has been bad for diversity and quality. He said that the drive for money and more profitability invariably meant that news and research were sacrificed, reducing quality and the number of voices available. Leonard Downie Jr of the Washington Post made the same point about "chain owned newspapers" that cut back on journalism to maintain their profits. In their oral evidence, the National Union of Journalists countered the Newspaper Society evidence arguing that, for example, Newsquest had reduced its editorial staff by 2000 in the last three years as it consolidated its ownership of local papers (Q 775).