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Prime TV in salary freeze as regional networks plead for media reforms

Prime Media has frozen the salaries and slashed the incentive bonuses of senior executives as the regional broadcaster fronts a Senate inquiry for the third time in as many years to plead for the scrapping of media ownership rules preventing mergers between regional and metropolitan TV networks.

Details of the cost-cutting in executive remuneration were outlined on Friday in Prime's annual report, which showed the value of the Seven Network affiliate in "rapid decline" as it suffered a $93.5million loss in the 2016 financial year despite the success of such programs as My Kitchen Rules.

Chief executive Ian Audsley told shareholders that the growth of Netflix, Stan, ABC's iView and SBS On Demand, as well as live streaming into regional Australia by metropolitan networks, was threatening the viability of regional free-to-air TV.

"While Prime remains subject to media regulations introduced in 1992 that are out of step with current technology, new streaming services in our markets are unbridled in their ability to offer audiences and advertisers viewing and advertising flexibility that free to air television broadcasters, like Prime, are precluded from matching," Mr Audsley wrote in the annual report.

"The result is a deterioration of regional television advertising spends. And in Prime's markets, television advertising fell for the second year in a row, this time by almost 6 per cent."

Mr Audsley, Southern Cross Austereo Grant Blackley and WIN CEO Andrew Lancaster are expected to appear together before a Senate Environment and Communications Legislation Committee hearing on Monday.

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Fairfax Media, publisher of The Canberra Times, and Network Ten are also due to appear at the Sydney hearing.

The committee is reviewing the Turnbull government's proposal to repeal the "reach rule", which stops commercial TV free-to-air networks from broadcasting to more than 75 per cent of the population, and the "two-out-of-three" rule, which prevents companies owning more than two of a newspaper, radio or television outlet in the same city or region.

The proposed Media Reform Bill would introduce new local content obligations for regional TV licensees in the event of a sale or merger involving a metropolitan broadcaster.

The committee is due to report its findings by November 7, but Labor senators remain concerned about removing cross-media controls.

Monday will be the third time since 2013 that regional TV chiefs have fronted a Senate hearing on media reform. In that time Prime's market capitalisation has fallen from $388million to about $100million.

Writing in his company's annual report, Mr Audsley criticised the inertia of federal politicians despite meeting with more than 100 MPs to press the case for legislative change.

"Disappointing is the best adjective to describe the manner in which this issue has been handled by the Federal Parliament, and now, almost four years on from the release of the Convergence Review, which recommended wholesale reform, regional broadcasters find themselves in an unenviable position," he said.

WIN, the Wollongong-based broadcaster owned by Bermuda-based billionaire Bruce Gordon, told the Senate committee that the "two-out-of-three" rule was "constraining the three traditional mediums of TV, radio and press from having the ability to organise their businesses in an efficient and competitive manner".

"In a challenged regional media environment, having the potential to merge with or acquire a regional radio network and a regional newspaper publisher would provide the opportunity to bulk up and be better placed to defend ourselves from much larger, often foreign-owned, media organisations," WIN said in its written submission to the inquiry.

WIN also questioned the "practical application" of the reach rule when "the content and, importantly, news services of the Seven, Nine and Ten networks are broadcast across the entire country through their regional affiliates - who are often bound by these agreements not to alter the schedules".

WIN said the rule was "even harder to comprehend with recent announcements that Nine Entertainment Co will produce a local news service for Southern Cross Austereo in 2017".

For its part, Southern Cross Austereo says its plan to launch local TV news bulletins in regional areas under the National Nine News brand is not contingent on the media laws changing.

In its submission to the Senate committee, the broadcaster confirmed that its expanded local news offerings in the ACT, southern NSW, Victoria and Queensland markets would be "funded as a component of the affiliation fee paid to Nine for programming".

Southern Cross Austereo began carrying Nine's programs and branding in July under a five-year deal that delivers Nine 50 per cent of its affiliate's gross TV advertising revenue.

"Taking advantage of its existing news facilities and infrastructure, the production of the local news will be outsourced to Nine," Southern Cross Austereo said.

The hour-long bulletins would be "branded as National Nine News, which will contain dedicated sub-market news content".

"The local content will be produced using a substantial number of locally based staff, including video journalists," the company said.

Southern Cross Austereo last week reported TV revenue growth of 31 per cent since it dropped Ten programming and switching to the higher-rating content of Nine.

WIN blamed inaction on reform of broadcasting legislation for its loss of Nine's programming.

"The delay in repealing the outdated media ownership rules was a major contributor to the changes in program supply agreements … and the subsequent impact it has had on the regional television industry," the network said.

WIN now shows the lower-rating programs of Ten.

Southern Cross Austereo rejected WIN's claim, saying existing ownership restrictions were not a factor in its decision to switch feeder networks.

"In our view, the delay in the media reforms did not have an impact on the affiliation switch," a spokeswoman said.

As well as owning WIN, the 87-year-old Mr Gordon is the largest shareholder in both Nine and Ten, but is prevented from taking his holding above 15 per cent due to the media ownership limits.