The impending closure of Australian Associated Press raises concerns among small players about restricting competition

This article is more than 6 months old

This article is more than 6 months old

Staff of newswire Australian Associated Press, which will be shuttered in June, were told that major shareholders Nine Entertainment and News Corp said they no longer wanted to subsidise a breaking news service for their competitors.

The AAP chairman, Campbell Reid, who is also a News Corp executive, and AAP chief executive, Bruce Davidson, addressed staff on Wednesday morning.

Reid told staff that Nine and News Corp felt they were propping up a newswire that helped competitors. He also said some news organisations had cancelled their subscriptions.

Publicly, AAP has blamed Google and Facebook for its woes, saying the wholesale theft of its content destroyed its business model – Reid told Guardian Australia the closure should be a “wake-up call” for the industry.

Why AAP's closure is a brutal hit to Australia's concentrated media market Read more

However, it is believed AAP’s shareholders, which also include Kerry Stokes’s Seven, were unhappy at paying millions to keep the company going while non-shareholder subscribers paid far lower fees for the same service.

The immediate trigger for the decision by Nine and News to close the newswire is believed to have been that executives at the media giants thought it was close to financial collapse and it would be cheaper to hire journalists to deliver breaking news than continue running AAP.

The New Daily and its associated titles, the ex-Fairfax regional papers controlled by Antony Catalano and the Australian branch of the UK Daily Mail all subscribe to AAP and make heavy use of articles it supplies.

Guardian Australia is also a subscriber and is particularly reliant on AAP’s photographic archive.

The closure raised concerns among smaller players that it would restrict competition.

Staff have been told that AAP’s board has been considering the future of the group for more than six months, but customers were not asked to pay more or help restructure the company and on Wednesday had not been formally notified that the service was closing.

However, the Australian Competition and Consumer Commission does not generally investigate decisions to close businesses because they are unprofitable.

“Generally, an arrangement or understanding between parties would need to have the purpose, effect or likely effect of substantially lessening competition in a market for it to raise concerns under competition laws,” an ACCC spokeswoman said.

The former ACCC chairman Allan Fels, who is now the chairman of the Public Interest Journalism Initiative, said there was “probably no legal issue” but the closure could have an uncompetitive effect by weakening the position of News’ and Nine’s competitors.

AAP is Australian democracy's safety net - its closure will affect us all | Margaret Simons Read more

“There’s an adverse affect on everyone, and possibly a greater one on smaller players than the owners,” he said.

Reid told staff in AAP’s Melbourne bureau that News Corp would develop its own breaking news service.

It is believed Nine is also considering a similar move.

Reid said that News Corp was “committed to the supply of breaking news” and added “we don’t have to supply it for everybody else in Australia who’s telling us that they don’t want it”.

He said there were plans to have a breaking news service “established for News Corporation’s purpose”.

Reid apologised to staff who learned of the closure through the Nine newspapers.

Staff were told the decision was not formalised by Nine and News Corp until this week.

A source close to Seven, which owns about 8% of the company, blamed the “very sad” closure on a shrinking media industry in which executives are obsessed with cost cutting and have reduced what they will pay for the AAP service.

Facebook Twitter Pinterest Staff in Australian Associated Press’s Canberra bureau at Parliament House are told AAP will be closing its office there on 26 June. Photograph: Mick Tsikas/AAP

Paul Hamra, the managing director of Solstice Media, which publishes the New Daily, Adelaide’s InDaily and a new Queensland website, InQueensland, said he was concerned the closure would help create a duopoly between News and Nine.

“It gives more strength to the bigger players, and fewer voices,” he said.

“The danger is that being the only voice, do they become the source of truth?”

Guardian Australia understands that on Wednesday morning Reid and Davidson were confronted by angry staff who accused management of misleading them about the viability of the company for six months.

It is not clear how long AAP has been in financial difficulty, with company accounts showing it made a small profit of about $930,000 in 2019, following a loss of about $10.5m the previous year.

Staff were told on Tuesday that AAP, Nine and News Corp had been in discussions about shutting the newswire for six months before the final decision was made in December. The editor-in-chief, Tony Gillies, was told in January.

Alex Druce (@AlexDruuuce) For those who've asked, we were told yesterday that discussions about shutting the newswire had been taking place with Nine and News for six months before a final decision was made in December. Monday's story in the SMH/Age was the first the AAP newsroom knew about it. https://t.co/tKcc2hzZRO

Guardian Australia understands that bureau chiefs were told at a meeting with Gillies last week that AAP would not face further staffing cuts.

However, senior editors were told there would be a meeting this week about “staffing issues”, sources said.

Sources close to AAP said senior staff “weren’t operating under the assumption that it was going to close”. In the past month staff have been hired, moved interstate, and in one case been given a letter of support for a home loan application guaranteeing ongoing employment. Journalists were issued with new phones last week.

Elsewhere there were signs the company was not making long-term plans.

Commercial property sources said the company did not renew the lease on its Rhodes headquarters, which expires this year. Building owner Altis Property Partners declined to comment.

Nine and News Corp had also begun pulling back. News Corp last month ended a six-year-long arrangement of hosting AAP reporters on six-month secondment in its major metropolitan newsrooms.

Nine cancelled its subediting deal with AAP subsidiary Pagemasters in May 2019, hiring 24 subeditors to the newsrooms of the Age, the Sydney Morning Herald and the Australian Financial Review.

Nine has been pulling back on its use of the newswire since its $4bn takeover of Fairfax, a major AAP shareholder, in 2018.

“Over the years you got pressure from all the big shareholders at one time,” one AAP source said. “But now with both organisations under financial pressure they were forced to think differently about how to create their editorial.

“They began to ask how prepared are we to pay for outsourced content?”

Nine Radio, formerly Macquarie Media, cut its subscription to AAP last year. The News Corp-owned Sky News also cancelled its subscription in 2018.

Staff have also privately expressed frustration that major subscribers have hidden their reliance on the service by writing through or not clearly attributing AAP copy, and suggested executives at News and Nine were in for a rude shock when they discovered how much of their product was written by the wire service.

Reid told Guardian Australia the damage the internet giants were doing to the media industry had reached a tipping point.

“That is the reality,” he said. “That is at the heart of why AAP is closing. No one should kid themselves otherwise.”

He said it was essential that Google and Facebook start paying for content.

“Today, people can pilfer content for free on the internet and the unfettered market power of Google and Facebook and the significant imbalance in bargaining power has decimated media business models,” he said.

Nine declined to comment.