No quotas for multi-channels: Free TV

Encore spoke with Free TV CEO Julie Flynn about the future of FTA broadcasting, local content quotas on the digital multi-channels and the announced license free rebate, as part of a special report on the changing television landscape and its impact on content creators – part one of five.

Free TV believes the multi-channels will not survive if the government imposed a local content quota on them, and that current regulations must be reviewed considering the increasing importance of pay TV, the NBN and IPTV.

Encore: What is Free TV’s stance in terms of content obligations?

Julie Flynn: We believe that the free-to-air digital multi-channels, which will drive the switchover to digital TV, are currently at a critical stage in their development, and if viewers are going to continue to receive the benefit of these additional free services, it is vital that the regulatory environment reflects the unique and emerging nature of these services and is not overly burdensome.

These services operate under a very different business model from the primary services; we’ve invested considerably in formulating the channels which we hope will become commercially viable despite the much smaller viewer number and the fact that household penetration rate at this stage is still only at 61 percent. That’s a good figure, but not 100 percent yet.

These channels will not be able to continue in their current form if content obligations were imposed on them, and we believe that that would threaten their ongoing viability in any form. That’s because it’s unlikely that a multi-channel could generate sufficient revenue to offset the significant fixed cost of complying with Australian and children’s content quotas.

The content quotas represent a substantial financial penalty on Free TV broadcasters at a time when we are already facing increasing competition from largely unregulated emerging commercial media platforms. So, in other words, pay TV has virtually no minimum obligations; IPTV has none.

If you apply the same set of rules to digital multi-channels, you’ll just end up with three channels that all look the same, so where’s the diversity in that?

For these reasons, the content standard and the children’s TV standard should not apply to the FTA digital multi-channels, and certainly not prior to switch off of the analogue signals. Some of those analogue channels are switching off as soon as the end of June, so amendments are required urgently to allow us to continue under the current operative scheme, because the way the act is currently drafted, if you switch off in Mildura then suddenly you have to supply all these things. That legislation in 2006 was before the government had come up with a phased switch off.

We’re saying, ‘whatever you decide to do at the end, don’t do until the end, 2013’.

Without urgent amendment, more local content and captioning obligations would apply to the regional broadcasters’ multi-channel streams, and then apply to the metro broadcasters to supply the content, so that clearly doesn’t make any sense because the regional broadcasters don’t have the capacity to provide self-funded additional content. They would not risk a regulatory breach and as a result, would have no option but to suspend carriage of the distinct multichannel content, which we think would be to the detriment of the regional viewers.

The government has announced a review of all media regulation in a converged media environment, and we very much welcome that review. It is long overdue, and we support the need to have a look at the regulatory environment; the regulations we operate under currently were put in place prior to there being pay TV, IPTV and the National Broadband Network (NBN), which is a game changer for everybody.

We’ve made out position very clear; we are on the record of saying that we do not believe that those multi-channels should be subject to the content obligations, certainly not at this stage. And we’re no walking away from our current obligations, but this industry is not in a position to have them doubled or tripled.

And this is why you’ve requested for a permanent exemption from local content obligations for the multi-channels…

We’re basically saying that this is the appropriate time to look at this; it should all now go into the review of regulation into the future. Our position was that we should have a look at this closer to switch off when we know what’s going on, but now that we actually have a review, our position is that these are all matters to be determined by this review. We do not think that any of those obligations should be imposed on broadcasters now, but certainly that the future of any of these issues should be part of the major review. And we’re not aware of any comparable jurisdiction overseas which is imposed onerous public service obligations on commercial digital multi-channels.

Are there any plans to use the announced license fee rebate towards the local content objectives?

We don’t have any rebate money yet. We have made a commitment to the government that we will not walk away from our existing obligations. That money is still subject to passage through the parliament but again, that is a regulation that has not been reviewed since 1987. We pay well in excess of any comparable overseas country. We think there should be a permanent reduction in license fees of at least 50 percent. The government has agreed to give a two-year license fee reduction and a review, and that review we presume will also go part into part of this other broader review.

Even if we were to get a permanent 50 percent reduction in license fees, we would still be paying well in excess of any comparable country overseas. The best way for me to describe it is, if you look at the UK, they have already had a third review of public service broadcasting. They’ve slashed license fees; they’ve removed children’s content obligations by making it a tier 3 obligation back in 2003; they’ve moved to relieve the commercial public service broadcasters of their local news content obligations in the regions and now they’re looking at advertising. They’re looking at a range of issues.

We’re not going down that path, what we’re looking for is some immediate relief on our license fee obligations that will enable us to continue to be the major underwriters of Australian content which we are currently.

How would you respond to the concerns raised by organisations such as SPAA or the MEAA, that local content is being shut out of the digital multi-channels?

This is a really important moment for Australia to start the debate and a conversation that’s been had everywhere else,-particularly in the UK, about how we are going to continue to deliver local content in an environment where there’s an NBN delivering hundreds of IPTV channels which won’t even be considered as broadcasting.

That is going to be a complex conversation which will require the contribution of SPAA, the MEAA, the broadcasters, the wider community, the parliament, etc., because what we’ve seen overseas is that this puts heavy pressure on the delivery of local content on local providers. And we, as the FTA industry, will be looking for a more level regulatory playing field coming out of any review of regulation in a converged media environment.

We need to have a new debate and we need to start breaking away from the old beating-them–over-the-head-with-a-meat-mallet approach that gets taken towards these issues, that ‘they must do this and they must do that’, and start looking collectively and co-operatively at how we’re going to fund Australian content. How are we going to fund children’s programming?

In the UK they’ve been talking about top-slicing the BBC license fee and giving some of it to the commercial public service broadcasters so they can continue to deliver local content.

We just need to have a much more open debate looking at things as they are now and not pretending it is 1994 or 1995 and there’s no such thing as pay TV, IPTV and NBN.

-by Micah Chua

This series will continue tomorrow with an interview with Ten’s  head of programming and head of corporate communications, Beverly McGarvey and Jeanette McLoughlin.


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