Market Structure and Innovation Policies in Sweden

Abstract

The Swedish media policy system stems from the Nordic idea of the welfare state, where the state has an obligation to enlighten its citizens and ensure equal social- and cultural possibilities for all. Similar to its Nordic neighbours the Swedish news media industry is characterised by financially strong and relatively large public service institutions that enjoy high levels of public confidence and trust in society. At the same time there is a developed commercial media sector that is protected by the rules of press freedom. In fact, the Swedish press freedom act, installed in 1766, is the oldest of its kind in the world. Historically high newspaper readership figures are now declining in Sweden like the rest of the western world. At the same time the decline of traditional media usage has been shifted into early adoption of internet services, where Sweden (alongside its Nordic neighbours) today have some of the world’s highest levels market penetration of mobile broadband.

The Swedish media policies which were developed during the growth of the welfare state during the 1960s throughout the 1980s, are now trying to adapt to this new dynamic, digital environment. Whereas the concepts of diversity, impartiality and enlightenment are still valid, policy makers are struggling to reshape them into a rapidly changing media landscape.

1 Market Structure and Media Ownership

The Swedish news media policy system stems from the Nordic idea of the welfare state, where the state has an obligation to enlighten its citizens and ensure equal social- and cultural possibilities for all (Duelund, 2008). Similar to its Nordic neighbours, the Swedish news media market is characterised by financially strong and relatively large public service institutions that enjoy high levels of public confi dence and trust in society (Medieakademin, 2015). At the same time there is a developed commercial media industry that is protected by the rules of press freedom. In fact, the Swedish press freedom act, installed in 1766, is the oldest of its kind in the world. Historically high newspaper readership figures are now declining in Sweden like the rest of the western world. Traditional news media usage is shifted to digital services, where Sweden (alongside its Nordic neighbours) today have some of the world’s highest levels market penetration of mobile broadband (UNESCO, 2015).

The Swedish media policies which were developed during the growth of the welfare state during the 1960s throughout the 1980s, are now trying to adapt to this new dynamic digital environment. Whereas the concepts of diversity, impartiality and enlightenment are still valid, policy makers are struggling to reshape them into a rapidly changing news media landscape.

The Swedish news media market is dominated by a small group of large media corporations. The domestic newspaper, television and radio broadcasting industries are all characterized by high ownership concentration, a process that has gained momentum in recent decades. Several of the country’s leading media groups are also vertically integrated and are active on a number of different platforms (see Table 1). This being said, it is worth noting that the main actors on the Swedish news media market are a relatively heterogeneous group, both in terms of origin and ownership. They include both old and well-established “media families” (such as Bonnier, Hjörne and Ander) and domestic and foreign publicly traded media conglomerates (such as Modern Times Group, Schibsted and Discovery Communications). The list of the largest media groups also comprises the administrative foundation that owns the public service broadcasters. In the press, a significant number of local and regional newspapers are run by newspaper publishing groups owned by non-profit foundations.

Table 1 Largest media groups in Sweden in 2014 (in terms of sales/turnover)

1.1 Newspapers

The press is arguably the single news media industry that has been most directly affected by the ongoing digitization of the news media market and the entrance of new, global online competitors. In Sweden, a country traditionally characterized by its strong newspaper market, the consequences have been profound. Sales figures are down, as are readership numbers. Between 2008 and 2014, the Swedish newspaper industry lost a quarter of its sales volume—a result primarily of plummeting revenues from print advertising. Though online advertising is increasing at a steady pace, the growth does not make up for the loss in printed ads. Online revenues from the audience remain exceedingly modest (MRTV, 2015a).

Like most Western newspaper markets, the Swedish press is characterized by a concentration of ownership. In 2014, the eight largest newspaper groups controlled 89 % of the market in terms of (paid for) circulation. In 2004, the corresponding figure was 72 %. A list of Sweden’s largest newspaper groups is presented in Table 2.

Table 2 Evolution of market share of newspaper publishing groups (paid for circulation)

The Bonnier Group is the largest publisher of newspapers in Sweden, and has been for several decades. In 2014, the five newspapers of the Bonnier Group reported a joint circulation of approximately 650,000 copies daily, representing one fourth of the total newspaper market. The Bonnier newspaper division comprises Sweden’s largest newspaper Dagens Nyheter, evening tabloid Expressen and the business newspaper Dagens Industri—all with national coverage—as well as regional newspapers Sydsvenskan (Malmö) and Helsingborgs Dagblad (Helsingborg). The latter was acquired in 2014. In 2014, the newspaper division accounted for 20 % of the total revenues of the Bonnier Group, and reported a profit margin of 7 % (EBITDA).

Following a number of acquisitions of newspapers in the first decade of the twenty-first century, Gothenburg-based Stampen Group positioned itself as the second largest newspaper group in Sweden. In 2009, the group controlled 16 regional and local newspapers in western and central Sweden, representing roughly 16 % of the total national market (Sundin, 2010). Faced with increasing financial difficulties in the last few years, the group has been forced to sell most of its newspapers. In 2015, the eight newspapers of the so called Promedia Group, in which Stampen was the controlling shareholder, were taken over by the minority owners (in return for the groups’ printing division). As a result of this deal, the newspaper division of Stampen has shrunk to six newspapers in 2015.

The number three position on the list of Sweden’s largest newspaper group is held by Norwegian media conglomerate Schibsted, which since the mid-1990s owns the metropolitan newspaper Svenska Dagbladet and evening tabloid Aftonbladet. Not only is Schibsted the only foreign owner on the Swedish newspaper market, it also is the only newspaper owner in Sweden that is publicly traded. Aftonbladet is the dominant online news provider in Sweden, reaching approximately half of the population on a weekly basis and accounting for roughly one third of the total online ad sales of the entire Swedish press. Aftonbladet is, so far, the only Swedish newspaper for which the growth in online ad sales has offset the slump in ad revenues from print (MRTV, 2015a).

Positions four through six on the list of Sweden’s largest newspaper groups are held by three foundation-owned regional newspaper groups: Mittmedia, Norrköpings Tidningars Media (NTM), and Gota Media. A common feature for all three groups is that they are almost exclusively oriented towards newspaper publishing. The increasing presence of foundation-ownership in the newspaper market is a significant characteristic of the Swedish press (Ohlsson, 2012). In 2014, foundations controlled roughly 30 % of the entire newspaper market.

Positions seven and eight, finally, are occupied by two family-run media corporations, NWT (the Ander family) and Herenco (the Hamrin family), which are two of the oldest newspaper groups in the country. For several decades, the NWT and Herenco groups have belonged to Sweden’s most profitable media corporations. Whereas NWT has used its profits to invest heavily in the Norwegian newspaper market, Herenco has chosen to branch out into other, non-media, industries, making the newspaper division a dwindling part of the group portfolio.

1.2 Television

When it comes to the development of the so-called legacy media in Sweden in recent years, television stands out as the medium that has been coping the best with the increasingly tough competition on the Swedish news media market. Despite a small drop in terms of both total viewership and advertising sales in 2014, the Swedish television industry has been able to retain and to some extent even increase its share of the audience and advertising markets in the past decade. In 2014, the average Swede would watch television for 2½ h/day. This means that Swedes did not watch less television in 2014 than they did 10 years ago (MMS, 2015). In 2014, television accounted for 17 % of the Swedish advertising market, an increase by 2 percentage points since 2004 (MRTV, 2015b).

Despite an increasing globalisation in the field of television, the Swedish television market is still dominated by domestic actors. In 2014, Swedish-owned channels represented over 80 % of the total viewership (MRTV, 2015b). A list of the largest television corporations in terms of audience shares is presented in Table 3.

Table 3 Evolution of market share of television broadcasters (viewership)

Public service broadcaster Sveriges Television (SVT) maintains the position as the nation’s biggest broadcaster. SVT reported a market share of 35 % in 2014. This means that SVT has lost roughly 6 % of the market since 2004, which was the year before the beginning of the gradual switch-off of the Swedish analogue terrestrial network. The introduction of digital terrestrial television, which in Sweden was completed in 2007, meant a dramatic increase in the number of channels available for the average TV viewer.

The second largest television network in Sweden, and the biggest commercial one, is the group of channels owned by the Bonnier Group. The group, which had a market share of 29 % in 2014, comprises 16 channels, including TV4, the largest commercial TV channel in Sweden. Numbers three and four on the list of Sweden’s largest broadcasters are two publicly traded international media conglomerates, Swedish-based MTG, and US-based Discovery Communications. Both television broadcasting groups are offering a selection of channels and programmes that is of a distinct entertainment character.

1.3 Radio Broadcasting

The concentration of ownership is even more pronounced in the radio broadcasting market. The Swedish market for radio is divided between three actors. Public service broadcaster Sveriges Radio (SR) is by far the most dominant player, with a daily reach of 58 % and a market share in terms of listenership of almost 80 % (see Table 4). Funded by licence fees, the annual revenue of SR is over four times that of the total advertising investments on the radio market. Radio continues to represent a very small part of the total advertising market in Sweden. In 2014, the advertising revenues in radio were only a tenth of those in television (MRTV, 2015b).

Table 4 Daily reach, listening time and market share of the largest Swedish radio broadcasters in 2014

Swedish radio is a medium in slow decline as far as audience reach is concerned. Radio consumption is increasingly characterized by age gaps. Both the public service and commercial broadcasters are struggling to attract the youngest age groups. The analog terrestrial network holds four national channels, all of which are run by SR. The commercial industry is not entitled to any national channels, but assigned to some 100 local frequencies.

The Swedish commercial radio market is completely dominated by two networks, SBS Radio and MTG Radio. In particular, SBS Radio has strengthened its position in the past few years. Through acquisition and partnership agreements, the company has more than doubled its possession of local broadcasting licenses, from 31 in 2008 to 71 after 6 years. Measured in shares of the audience, SBS Radio was almost twice as big as its main competitor in 2014. In 2015, the SBS Radio group was sold by Discovery Communications to German Bauer Media.

The content of Swedish commercial radio is characterized by standardization. The programming of both networks consists almost exclusively of popular music and shows a distinct entertainment profile. The attempts that have been made to provide ad-financed channels with a broader and more varied programming have all failed as a result of poor profitability. In this respect, the decision of the Swedish government in 2015 to abandon the plans to introduce digital radio in Sweden was a setback for the radio industry. The digital technology would have opened up the radio market for commercial channels with a national reach.

2 Regulations

Media legislation in Sweden is based on a strong recognition of the freedom of the press. Sweden was in fact the first country in the world to adopt “the principles of publicity and press freedom” recognizing in its constitution of 1766—as part of the Freedom of Information Act—the freedom of the press and the right to access to official documents (Arriaza Ibarra & Nord, 2014: 60; Hallin & Mancini, 2004: 147; Olsson, 2011: 79).

The Swedish media system is essentially characterized—as in the other Nordic countries—by an institutionalized regime of self-regulation also described as the Democratic Corporatist Model (Hallin & Mancini, 2004: 170). This model is defined by a strong journalistic professionalization, a highly developed mass-circulation of newspapers, a substantial degree of state intervention in the structure and organization of the media, a system of press-subsidies and a strong tradition of regarding broadcasting as a public service (Hallin & Mancini, 2004: 144–45; Nord, 2008: 98). The regulation of the press is therefore not based on legislation but grounded on self-regulatory and voluntary measures. The system is basically supported by four national organizations: The Swedish Newspaper Publishers’ Association; The Magazine Publishers’ Association; The Swedish Union of Journalists; and The National Press Club.¹ These organizations constitute the Board of Press Cooperation, and are responsible for the Charter of the Press Council and the Standing Instructions for the Press Ombudsman.² They also participate in financing the Press Council and the Office of the Press Ombudsman.³ The Swedish Press Council (Pressens Opinionsnämnd) was founded in 1916 and it is the oldest press council in Europe (Fieldenm, 2012: 5). It consists of a judge, a representative from each of the four aforementioned organizations and three representatives of the general public. It has the responsibility to determine irregularities in the press activities and protect press freedom from interference by third parties. Online-only publishers can also join the Swedish Press Council if they “have registered for a certificate of publication and have appointed a legally responsible publisher” (Fieldenm, 2012: 34). The Press Ombudsman deals with complaints about the editorial content of print media (newspapers, magazines and their website) made by the public.

As far as media ownership is concerned, concentration at the national level is the dominant trend both in the newspaper and broadcasting markets (Nord, 2011: 7). However, competition authorities have never intervened in this wave of mergers and acquisitions (Ots, 2010). In addition, the Swedish press market is supported—as it happens in the Democratic Corporatist media model—by state subsidies in order to ensure diversity and plurality of the newspaper market as well as to guarantee a wide dissemination of newspapers across the country (Hallin & Mancini, 2004: 161). An ad hoc public authority called Press Subsidies Council (Presstödsnämnden) was responsible for administering these subsidies according to specific criteria that however do not take into account the type of content. Press subsidies are currently based only on the newspapers’ printed circulation. As of August 2015, the function of the Press Subsidies Council has been transferred to the Swedish Broadcasting Authority (MRTV). There are essentially two forms of support, one for the distribution of newspapers (distributionstöd) and one to contribute to the operational costs (driftstöd). However, these press subsidies have not been able to challenge the growing ownership concentration on the Swedish newspaper market (Ohlsson, 2014; Ots, 2009, 2012).

In the field of radio and television broadcasting, Sweden is characterized—as already mentioned above—by a dual system of public and private operators. The current broadcasting industry is dominated by a public service organization financed by a licence fee (Arriaza Ibarra & Nord, 2014; Gustafsson, Örnebring, & Levy, 2009) with a number of commercial broadcasters in a deregulated environment. Generally speaking, media ownership is still quite concentrated in the hands of a few conglomerates that are mainly nationally or regionally based (Gustafsson et al. 2009). Since the mid-1920s radio and, then television, broadcasting in Sweden has been dominated by the monopoly position of the public service broadcasters (SR and SVT). The end of public service broadcasting’s monopoly occurred in the 1991 with the first government license assigned to a private commercial channel (TV4).⁴ This has resulted in the creation of a dualistic broadcasting system with competing public service channels financed by compulsory license fees and private channels financed by commercials (Nord, 2008). The current national radio market is mainly dominated by public service broadcaster SR (Nord, 2011). On the other hand, the private national television market has essentially three main actors: Bonnier (TV4), MTG and Discovery Communications. Although there have been many debates about the necessity of regulations, Sweden has no industry-specific regulation against media ownership concentration (Nord, 2011: 7). It means that—formally—normal competition-based merger control applies to mergers and acquisitions or joint ventures if they were to occur in the mass media industry. In particular, chapter 4, article 6 of the Swedish Competition Act⁵ provides that companies involved in a merger or acquisition must notify the Swedish Competition authority if “the combined aggregate turnover in Sweden of all the undertakings concerned in the preceding financial year exceeds SEK one billion, and at least two of the undertakings concerned had a turnover in Sweden the preceding financial year which exceeds SEK 200 million for each of the undertakings”.

The main agency that legally regulates commercial broadcast media is the Swedish Broadcasting Authority (MRTV). The public service companies are instead regulated directly by the government. The authority is empowered to decide on questions relating to fees, transmission of licenses and registrations required for commercial broadcasting. The agency was established in 2010 with an amendment to the Radio and Television Act.⁶ The Radio and Television Act represents the main legal framework for commercial audiovisual media in Sweden regulating the licenses necessary to transmit radio and television in the terrestrial network (Arriaza Ibarra & Nord, 2014: 60; Swedish Broadcasting Authority, 2014: 122). It contains rules relating to the contents of the broadcasts, provides conditions for advertising, sets specific regulations to ensure the accessibility of the broadcasts to persons with functional impairments and provides other general regulations concerning the broadcasting of television and radio programs. Specifically, the act also includes two competition-enhancing policy provisions for commercial radio and television requiring the Broadcasting Authority to protect the public from possible excesses of market power. In particular, the act provides that “No one is allowed to hold more than one license to broadcast analogue commercial radio within a transmission area, unless there are special grounds for this”.⁷ In addition, license to broadcast commercial radio may be revoked if “a natural person or a legal entity, without the permission of the Broadcasting Authority, controls more than one license to broadcast analogue commercial radio in a transmission area, directly or indirectly through a company in which the acquirer has a holding which corresponds to at least 20 % of all the shares or participations, or has sole determining influence as a result of an agreement”.⁸ Finally, Chap. 4, Sect. 15 of the radio and television act specifies that a license to broadcast TV and Teletext may be transferred only if this is approved by the Broadcasting Authority and approval may only be granted if the transfer will not increase the concentration of ownership among those with licenses to broadcast TV and Teletext more than to a limited extent, and the transfer will not cause a reduction of diversity in the range of media services requiring a license.⁹

3 Media Innovation Policies

In terms of concrete media policy measures, policy-makers have found media inno vation difficult to address. One reason is that policy measures historically have been tied to specific existing business models, delivery channels, or market structures. Innovation—into products or business models that does not yet exist, or change towards an uncertain future—has been difficult to formulate in practical policy design. During some periods of time (most recently during large parts of the 1990s and 2002–2005), there has been a dedicated development support available for newspaper companies. The support, which has been budgeted at 15–30 million SEK annually, has been implemented to facilitate necessary investments in upgraded technical equipment and software. During the 1990s, the focus was on stimulating investments in printing and pre-press areas. Though the support was aimed at ensuring long term survival of newspapers, evaluations showed that the support mainly has been used to cover the most desperate needs of newspapers in acute financial difficulties (SOU, 2006: 8). On directive from the government, the Swedish Broadcasting Authority is currently designing a new innovation support with an annual budget of 35 million SEK that aims to be more platform neutral than its predecessors. The draft policy design that was presented in May 2015 proposed a subsidy which free sheets as well as subscribed newspapers could receive in order to develop electronic publishing services (Presstödsnämnden, 2015). According to the proposal, the state would via the subsidy cover up to 40 % of costs associated with electronic content development (e.g. staff training), innovations regarding electronic distribution or publishing (e.g. new formats for digital storytelling), or the development of digital business models (e.g. design and test of new digital sales models and paywalls). The broadcasting authority motivates the innovation subsidy with the democratic importance of the press, declining revenues from advertising and subscription, and the need for electronic development in order to follow shifting audience preferences and news consumption patterns (Presstödsnämnden, 2015). The initial response from the newspaper industry has been primarily positive and the companies recognize a huge need for improvements in areas where the subsidy could used for—mobile applications, live streaming, simpler subscriber logins, customer data management, automatization and personalization, just to mention a few. In order to come into effect, the new subsidy will have to be passed by the Swedish parliament and approved by the EU.

In the area of public service broadcasting, Swedish Television (SVT) Swedish Radio (SR) have been proactively extending their operations into the digital domain via digital archives, streaming services, interactive programming, and digital services. As an example, via its streaming service SVT Play, the public service broadcaster has been a forerunner on the Swedish VOD market. In 2010, the center-right government introduced public value tests that would ensure that the creativity of the public service institutions did not take it outside the public service remit. According to the policy, the public service broadcaster itself should announce substantially new services to the Swedish Broadcasting Authority which tests its market impact and public service value. Still in 2015, the Public Service companies have however not announced one single innovation to the authorities. This could be interpreted either as signs of very efficient self regulation from the Public Service companies, or just a practically ineffective soft policy design. The increasing dedication of public service funds by both SVT and SR to online operations have been openly criticized by the commercial broadcasters for distorting the market for online services.

Hypothetically, the public service value tests is a novelty in that it puts the state in a position to guide and restrict innovation and development within the public service institutions (Arriaza Ibarra & Nord, 2014). In the past, the clear separation between the state and the public service broadcasters has been regarded as a funda mental principle. This recent shift can be seen as part of a long term liberal tendency in Swedish media policy where the influence from commercial media companies has been allowed to grow (Ots, Krumsvik, Ala-Fossi, & Rendahl, 2016).

4 Summary and Best Practices

In times of rapid market change and digital transformation, Swedish news media policy has sometimes been accused of hindering rather than promoting innovation. Some policy initiatives such as the investments in broadband infrastructure, or supporting the adoption of home PC’s, have been seen as having positive effect on the technological advancement of the Swedish news media market. Others, like the current Swedish press subsidies have been accused of creating market rigidities rather than change. Rather than pushing for innovation, subsidies tend to encourage production of media products with traditional forms of distribution, traditional subscription models, and traditional formats (Ots, 2013). Simultaneously it has put digital news media at a relative disadvantage. Policymakers are becoming increasingly aware of the need to stimulate innovation and change in the news media industry.

In conclusion, the policy makers are currently seeking for ways to adapt to the rapidly shifting conditions and structures of news media markets. There is a growing understanding of the needs for reform of the media policy system in the direction of innovative, technologically dynamic policies that looks to the democratic needs of citizens rather than those of struggling industries (Ots, 2009). A media investigation, initiated by the government, is currently exploring these territories, but if and how this translates into actual policy is yet to be seen. Though the investigation itself has the ambition to embrace the digital future, it has so far, purposely or not, dealt with innovation policies only in passing (SOU, 2015: 94).

5 Innovation Policy Recommendations

With regards to the impact of the market structure on the issue of media innovation, the prevailing notion within the Swedish news media market—the local press in particular—is that there is a need for the ongoing concentration (or consolidation) of ownership to continue. Unlike the commercial broadcasting industry, which is dominated by three major multinational corporations with relatively abundant resources (Bonnier, MTG, and Discovery), the Swedish newspaper industry is still mainly controlled by a handful of regional newspaper groups (e.g. Ots, 2012), which for obvious reasons are struggling to keep abreast with global players such as Google and Facebook, particularly in the advertising market. It is reasonable to believe that the process towards fewer but larger newspaper groups will continue.

We subscribe to the notion that media innovation policy should start from citizens rather than industries (see also Ots, 2009). Innovation policy in this sense should focus less on saving legacy media and more on providing equal opportunities regardless of content form, format or means of distribution. Based on this perspective, we recommend increased market harmonization where the similar regulations, subsidies, and taxation apply for all platforms and media sources. The practical focus of policy needs to shift from regulating industries or companies to incentivizing outputs that enable citizens to engage themselves in building a democratic society.