I have been buying shares in NEC over the last couple of months as well as shares in PRT (Prime Media Group), mainly because I see the 'old media' sector as being way over-sold but also to a lesser extent because of the likely changes to the Broadcasting Legislation Amendment 2016 (Media Reform Bill).
For those that haven't been following the story, the Liberal Party have passed a bill in the lower house making changes to the current Media laws that were made before anyone even knew what the internet was.
These changes contain two major reforms - the change to the media reach rule (this prevents networks from broadcasting to more than 75% of the population). With the introduction of the internet it isn't hard to see that a digital subscription to any media platform can be reached by 100% of the population making this law well and truly obsolete but making it very hard for companies like NEC to compete competitively.
The second reform is a change to the two out three rule - this rule prevents media companies from owning more than two of the following in the same market - a TV network, radio station or a newspaper.
As I have mentioned, the Bill had already passed the lower house and as the Liberal Party has still won a slim majority no amendments need to be made. The Bill was passed to the upper house to be debated but due to the Double Dissolution the Senate and the House of Representatives were dissolved and an election was called.
Counting for the Senate seats must now be almost over and we await the final make up of the Senate. Next comes the swearing in of the new Senate Members and then the new Senate sitting calendar. Once this calendar has been made available we should be able to see when the Media Reform Bill is up for debate. Unfortunately for us the reform bill is likely to be well down on the Nations list of priorities and it may be a while before the bill comes up for debate.
As it currently stood before the election, the Labour Party was also in favour of the change to the reach rule. (With the introduction of the internet it would be impossible to argue otherwise).
The Two out of Three rule though is likely to face some changes before being passed by the Senate. The Labour Party have previously stated that it may give a competitive advantage to larger international companies at the expense of local media companies.
Some good news that some may have missed is that during the 2016 Budget the government reduced the Broadcasting Licensing fees by 25% ie from 4.5% to 3.375%. This alone means a $150M reduction for the networks. This along with the advertising spend during the election should hopefully make for a fairly healthy annual report.
Please note that I am far from an expert in how the upper and lower house function (not even sure that most politicians know), the above comments are only to the best of my knowledge and I look forward to any posters that may be able to add or correct any comments I have made.
NEC Price at posting:
$1.14 Sentiment: Buy Disclosure: Held
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