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Kenya: CCK Regulating for Inefficiency |
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Monday, 18 January 2010 |
Frank Maina, the owner of Saracen Media, argues that the new media regulations do not help the improve the quality of media content, but effectively regulate for inefficiency, which is to the detriment of both business and consumers.
If the Communications Commission of Kenya (CCK) has its way, multimedia broadcasters are in for a tough time: The commission is looking at creating new regulation so as to level the playing field and yes, wait for this one, protect media owners and pricing.
The intent of the new regulation does seem unusual: “We have proposed that there should be a need of separation of one business from another, so that one cannot subsidize the other,” a key regulator is quoted as saying in Business Daily.
For starters, it does sound a little worrying that anyone would want to enforce inefficiency in an industry. By and large, in many commercial instances, the reduction in operational costs often benefits the end consumer. This often comes from the use of shared resources to deliver services to different consumers. While in broadcasting the use of shared sales, content creation and other infrastructure does save media owners money, asking media owners to hire new sales executives, set up new training programmes, relocate some stations (shared buildings may be considered a subsidy) as well as buy new phone lines and stationery for some stations might sound a little detailed on the housekeeping end, if not bent on making life unreasonably expensive.
Cross ownership of media is often feared for its potential to create centralised influence sources owned by the same industry or political groups, and so limiting or making it hard for one group to influence large masses of consumers is often seen as good for society and the industry especially from a government perspective.
This argument made sense a few years ago but has been increasingly defeated by the development of new mass media. The Iranian and the Chinese governments, among many others in tightly regulated media environments, can write books on this. The internet has made media concentration near impossible. So the CCK’s motive of creating broader playing fields of influence needs a little reality adjustment. Radio and TV are just two choices among several media.
Many people will tell you that having many broadcasters equals more freedom of press and expression. History indicates that the independence and strength of broadcasters is often more important than their numbers. The new legislation proclaims the intent to create more broadcasters to free the flow of thought. If it works as described, it may just create many small and weak outfits that are easy to bully and thus weaken and reverse the balances created in the last few years. Bigger and stronger media houses, for all their undisputed flaws, are also able to push back on bad governance – sometimes a little more than many governments prefer.
Politics aside, more media owners may also not be good news for advertisers. Fragmentation will create many small pockets of audiences to be reached via many small stations, whose incomes the CCK seems intent on protecting going by what is reported. Thus reaching the same consumers will require more stations in a structurally price-protected environment.
Regulating fair play is, of course, useful, but creating price protection structures is questionable and may actually work against the industry. We buy media on a cost comparative basis where we look at every medium and evaluate its efficacy in reaching our audiences. Any action to create multiple channels and then price fix will create expensive radio and TV media. The sensible advertiser’s strategy will then be to veer away from the more expensive and fragmented media vehicles. The well intending people at the CCK will then drive us all to other less expensive and flexible media. Going by the experience of other governments around the world, I am sure they would rather deal with the vagaries of brick and mortar regulation and information control. This regulation may thus achieve the exact opposite of its protective intent.
The proposed regulation also has important investment effect: The CCK proposes to evaluate and issue licenses every five years. Asking media owners to make multi-million shilling investments and then license for five year periods does seem like a huge escalation of business risk. Many broadcasters in this country have, for many years, attracted audiences and investment due to their independence and the requirement to renew licenses every five years does create new business and content hazards. To manage these hazards may require that they shorten payback periods on their investments and that will have an inflationary effect on media rates, and worse, protect the established media owners who can price much lower than start ups on account of recouped investments. Now that hardly opens up the market.
Where regulation is concerned, letting market forces determine most of the vagaries of a business often leads to sustainable equilibriums. Venturing into price assistance often creates distortions and bootlegging in the long term. Someone will arbitrage the inefficiency created when large audiences become cheaper than small ones or when broadcasting costs make more sense when equipment is used across stations. It happened in liquor, currencies and coffee, broadcasting may be no exception. While the broadcasting fraternity comprises of largely good and upright business, people this new regulation would tempt an angel.
Frank Maina is the owner of Saracen Media.
Republished with kind permission from the (Nairobi) Star.
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