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Media reform hearings: Broadcasters call for level playing field with digital invaders

Concerns around creating a level playing field to compete with international competition the likes of Facebook, Google and Netflix alongside a desire from the TV companies to see license fees reduced dominated the latest round of the ongoing Senate inquiry into the media reform.

For the second time this year the Environment and Communications Legislation Committee heard submissions from media execs as they decide whether to comment changing rules which prevent broadcasters reaching more than 75% of the population and the two-out-of-three rule stopping them from owning TV, radio and newspaper assets.

Once again the crux of the legacy broadcasters argued they should be scrapped as they do not apply to digital players such as Netflix, Google and Optus.

Seven West Media call for ‘comprehensive’ package of changes

Speaking at the Senate Inquiry into the bill, Tim Worner, the CEO of Seven West Media, said the company would like to see a “comprehensive package of changes so we can understand that changes for our business”, noting the company has “maintained a consistent position” to media ownership changes, saying they have “not sought changes to the ownership laws nor do we oppose them”.

Tim Worner:

Tim Worner: Seven West Media

“This is the approach when the laws were last reviewed in 2006 and the result was a far-reaching package of reforms,” Worner said.

“The current bill only considers two ownership laws in isolation. There’s been no consideration of the other three ownership laws or the impact of changing only some of them.

“To us it has been a distraction. More important than that, we urgently need to address higher priority issues for our industry and make changes that will enable commercial television broadcasters to keep up with new ways of doing business and hold their own against new and largely unregulated competitors.

“If we do not do this, a free and reliable service that is greatly valued by Australians and accessed by 13m of them every day, is at risk.” 

Worner argued the “single most important regulatory change that needs to be made as a matter of urgency” is to remove the current license fee – money paid by commercial, free-to-air broadcasters to the government in return for public airwaves – which he says needs to be brought down to match “international benchmarks”.

The licence fee for TV and radio broadcasters was cut by 25% in the May budget.

“More than anything else license fee reduction would genuinely help commercial television broadcasters to more effectively compete with new sources of competition from the likes of Netflix, Facebook and Google,” Worner said.

Worner cited the recent World TV Production Report 2016 which claimed Netflix has spent more than twice as much on original programming as the entire Australian TV market.

“Not much of that Netflix money is being spent here in Australia. Netflix employs precisely one person in this country and I’m not even sure if they live here,” he said.

“The whole ecosystem of Australian production is at risk if we do not adjust the regulatory settings that are stifling commercial television broadcasters.”

When questioned on how Seven West Media would spend the money it would save if license fees were reduced, Worner said the company has an existing “track record of reinvesting that money”.

“We do have a track record, we’ve said we’re going to do that. If you look at what Australians like to watch, they like to watch Australian programming, so we’re going to have to do that to remain relevant and a vital part of the community,” Worner said.

Seven West Media maintained its position around anti-siphoning laws, asking for the laws to be “extended to new content platforms”.

“We’re asking for an assurance that changes to anti-siphoning are not made as a quid-pro-quo for media ownership changes. Over 70% of Australians exclusively rely on free-to-air television for their news, their sport and entertainment content” said Worner.

“The anti-siphoning lists needs to be maintained, not dismantled nor cut back or another word I’ve heard used, trimmed. We agree it should be extended to new content platforms.”

He rejected the idea that Seven West Media would consider supporting the Bill if there was another amendment added: “We’ve been unwavering in saying we need to see a complete package of reforms because we have a chance to do something for our industry here.”

Network Ten

Network Ten CEO Paul Anderson was in agreement with Worner, focusing on the need to reduce the license fee.

Anderson: "Disappointed"

Paul Anderson: This sector urgently needs a reduction in television license fees

“Without our continued investment, Australian audiences will lose free access to Australian content and the local production sector will face a very uncertain future.

“In order to continue investing billions in a strong Australian voice on screen, this sector urgently needs a significant reduction in television licence fees and the removal of outdated pre-Internet media ownership restrictions.

“At 3.375% of gross revenue, Australian commercial free-to- air television networks pay more than any other free-to- air broadcasters in the world.”

Anderson argued Australia should adopt a model similar to that of the UK which sees broadcasters pay .18% of revenue which covers spectrum access and a license fee.

“On that basis we should be paying no more than 0.2% of gross revenue,” Anderson said.

“And this major disadvantage comes at a time when fierce competition from online players continues unchecked by any licence fee or local content obligations.”

Echoing comments made by Worner, Anderson took aim at Netflix: “Despite Netflix commissioning 71 new television series this year at a cost of around $6.4b dollars, not one of those series is Australian, and Netflix does not employ one person in this country.”

However while Seven West Media is against the bill, Network Ten is in support “because it is an important step in dismantling  a set of rules and regulations that are making Australian media companies less competitive and threatening diversity and a strong local voice.”

Network Ten is opposed to splitting the bill.

“Splitting the bill and allowing some media companies to benefit from regulatory reform while leaving others constrained will potentially leave those still regulated worse off than under the status quo,” said Anderson.

Fairfax Media

For Fairfax Media, the focus is on abolishing the two out of three rule in an effort to allow local media companies to better compete with international companies. That would open the company up for a mooted merger with Nine Entertainment Co.

Greg Hywood, Fairfax Media CEO, told the committee: “One of the most persistent issues has been the pervasive and increasing influence of the giant global search engines and social media platforms on the Australian media industry.

“From Fairfax Media’s point of view, the extent of which these organisations, based off-shore, are diverting advertising revenue away from and undermining Australian media companies, that invest in local content and journalists and pay taxes, is one of the prime justifications for abolishing the current two out of three restriction.

“This artificial and out-dated restriction is a disincentive to investment in Australian media and a severe break on our ability to compete against global competition.”

Greg Hywood:

Greg Hywood: We’re attempting to invest in Australian media on a smaller and smaller amount of money

Hywood argued that abolishing the two out of three rule would allow for “optionality” for Fairfax Media to get-together with another media company if it made sense to do so financially.

“We’re attempting to invest in Australian media, attempting to provide jobs for journalists which provide the transparency that is so valuable to this community on a smaller and smaller amount of money,” he said.

“Therefore if you’re restricted at monetising your content just around a small range of available platforms it restricts your ability to monetise that content effectively or to its maximum.

“What we’re asking for is the optionality. That doesn’t mean necessarily that free-to-air and Fairfax get together, but it does provide us that option if that improves the economics of our business. We’re really just asking to be able to make that choice if it’s economically viable.”

Notably Hywood rejected concerns around fierce Fairfax rivals News Corp benefiting from the removal of the two out of three rule.

“If anybody should be concerned about the rise and rise of News Corp it should be us, we’re the traditional rivals. Our view is this discussion is rather irrelevant at the moment. If you actually look at News Corp’s assets in a two-out-of three environment, they have effectively got four-out-of-four as it is,” he said.

“They’ve got their newspapers, there is a  family connection for the radio business, there is effective control of Channel 10 and they have Foxtel on top of that. All two-out-of-three would do is give them more economic benefit out of Channel 10 but that’s not going to change much.

“News has got the assets it wants and the rest of the industry needs to be able to access and talk to each other about improving our performance across the board.”

Hywood said the newspaper industry is not asking for protection from the government but rather is “asking for some liberation”.

“What we’re asking for is a level playing field. We are very confident in our ability to deliver commercial arrangements to sustain quality journalism,” Hywood said.

“The issue is traditional publishers need to compete as well as they possibly can for a cut of the advertising pie and at the moment they can’t. It’s as simple as that.”

Regional broadcasters

The “optionality” issue was a view echoed by regional broadcasters Prime Media, WIN and Southern Cross Austereo.

Ian Audsley, Prime Media CEO, speaking on behalf of Prime, SCA and Win, told the committee: “The issue at stake here is the future viability of local regional content on free-to-air television and the sustainability of independent regional free-to-air television.

Ian Audsley

Ian Audsley: The existing media laws are outdated

“Regardless of the increasing availability of content accessed via the internet, regional Australians continue to rely heavily on free-to-air television for information and entertainment.

“It is fabulous that we can choose to see House of Cards on Netflix if we are happy to pay the subscription fee and the download cost but it is not telling an Australian story.

“The Guardian, Crikey and SMH.com.au may keep me up to date with what’s happening in Sydney and the world but it won’t tell the residents of Launceston, Mackay or Ballarat what’s happening in their own town.

“Local programs have become less viable over time with a challenged TV advertising market due to increased competition from unregulated tech giants like Google and Facebook, decreasing viewer numbers, particularly younger audiences, high infrastructure costs particular to regional television broadcasting and an affiliation model which has seen the escalation of programming fees paid to metropolitan networks who at the same time stream that same programming into our licensed markets and compete for our audiences.

“WIN, Southern Cross Austereo and Prime are in unanimous agreement that the existing media laws are outdated and act as a brake on regional media being able to organise itself in an economically efficient manner that can sustain local content that we know is important to regional viewers.

“We support the provisions of the bill to abolish the 75% reach rule and the two out of three cross-media owner rule. The bill is a very positive first step in media reform which is needed in a rapidly changing media environment.”

When asked what merger activity would potentially be explored if the two out of three rule was abolished, Southern Cross Austereo CEO Grant Blackley said he would “talk to all”.

Grant Blackley:

Grant Blackley: We’d look at any and all parties

“I’d talk to all, and why wouldn’t I? And if the freedom to talk to all rather than a select few was upon us that breeds the right state of affairs for our shareholders where we’re looking at all options without having a pre-conceived idea.

“We’d look at any and all parties to see what level of investment and diversity we could create through a merger, acquisition or a sale. We’d at least have the freedom to have the conversation.”

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