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18/2/2010: EDITORIAL – A FISTFUL OF DOLLARS (MORE) FOR THE NETWORKS

If the film industry played the political card, it could get the sort of largesse that commercial TV networks have always had – and are still getting, says Andrew L. Urban.

With the latest $250 million ‘no strings’ gift from the taxpayers via Comms Minister Stephen Conroy to the commercial TV networks (licence fee rebates, February 2010), it’s a good time to suggest that the Australian film industry needs to take a lesson from the commercial TV networks if they want to really squeeze Governments of all colours for money. Over the years the networks have managed to extract not only cash but extraordinary levels of legislative protection. How? Because they once had the power to change Governments. That’s no longer true, but the film industry does still have that power and always will. It just hasn’t used it. Never mind ‘telling our own stories’ or worthwhile realism about our society: get political. Make films that could change Governments…. be a threat like Kerry Packer was.

The history of protectionist regulations has helped shield the free to air networks from competition in ways that would run foul of the ACCC if they weren’t implemented by Government – and the discredited anti-siphoning scheme is just one of them. As we taxpayers and the entire screen industry awaits the Government’s plans (if they have any) following the review of that scheme undertaken at the end of 2009, there is little optimism that meaningful change will be implemented, given the experience to date.

"the traditional fear of TV networks has softened the spines of politicians"

In the corridors of Canberra, the traditional fear of TV networks has softened the spines of politicians to such an extent that they would rather do the wrong thing by the public than by the networks.

That weakness has been so well exploited by the old TV networks that the most brazen anti-competitive actions have been re-packaged as consumer benefits. And it’s not just the subscription TV sector who has complained. In its 2009 review, the Productivity Commission was highly critical of the anti-siphoning list.

In its submission to the review, the ACCC has also criticised the anti-siphoning regulations. The ACCC wants to see the anti-siphoning list drastically reduced – both in absolute numbers of sports covered, and the number of events listed within particular sports. The use it or lose it provisions should be formalised in legislation and strengthened. In its current form, says the ACCC, the scheme is more burdensome than necessary and should be modified.

Traditionally the networks have not broadcast up to 75 per cent of the sports events on the list – either live or on delay or even in excerpted form. If this scheme is meant to protect consumers, it’s obviously not doing a very good job of it, quips Foxtel CEO Kim Williams. In a speech he gave to the Network Insights Conference in Sydney in November 2009, Williams said: “In the past we didn’t protect the stage coach from the train, propeller aircraft from jets, CB radio from the internet, or VHS from the DVD. So it’s time we stopped protecting the old television networks from subscription and other forms of digitally-based competition. In today’s world, when delivery systems are converging rapidly, our watchwords must be choice, competition, flexible responsiveness and efficiency, not protecting incumbency.”

And the feeble claims that anti-siphoning helps the consumer are constantly debunked. In January 2010, for example, the news that ONE HD’s new football show would soon kick off “will be greeted with mixed feelings from fans of the game,” wrote Adrian Musolino on The Roar sports opinion website.

“Football fans seem to have an aversion to free-to-air commercial networks being involved in football, undoubtedly as result of the contrast between the outstanding commitment to the game of SBS and Fox Sports compared to the disastrous involvement of Channel 7 with Soccer Australia and Channel 9’s 2002 World Cup blunders (those dreaded time-zone delays!).”

"notoriously shoddy"

The 7 & 9 Networks’ coverage of tennis Grand Slams is also notoriously shoddy. Even covering the Australian Open in Melbourne, where there is no time zone challenge, 7 broke away from the live coverage every day for the 6pm news, followed by Today Tonight and the obligatory Home & Away. The Network kept up a stream of news updates throughout its live coverage, which would have been adequate without the 6pm bulletin repeating it all. Likewise, 9’s coverage of the US Open and Wimbledon finals is compromised by similar programming decisions, all of which annoy and frustrate the fans for whom anti-siphoning is meant to deliver live sport coverage.

Media policy academic and Director of the Australian Research Council Centre of Excellence for Creative Industries and Innovation at Queensland University of Technology, Stuart Cunningham is one of the long term defenders of government regulation “for explicitly cultural benefit eg the commercial TV content regulations,” and continues to defend them. “The content regulations on pay TV for local drama have been a clear incentive for the industry to invest in this area. But I also clearly acknowledge much content regulation is a trade-off. Regulation is a less-worse option, not all bad or all good,” he says.

“Anti-siphoning is a case in which the public interest argument is being eroded not only by growth of pay etc, but also in the internal inconsistencies and contradictions in the FTA case and in practice. The only defenders of the so-called public interest arguments are the increasingly isolated and conflicted free TV interests. Their capacity to maintain a purist public interest argument has been significantly damaged by their contradictory desire to be allowed to multi-channel their sports properties now that multi-channelling is beginning to be well established and will inevitably grow in consumer uptake as household conversion to digital rapidly increases towards the analogue shut off,” says Cunningham.

"a combination of fear and disdain"

Anti-siphoning is only one aspect of Government protection that the networks have enjoyed. Motivated by a combination of fear and disdain when subscription TV launched, the networks convinced the Government that this new service should not be allowed to carry advertising. The Government complied, with regulation that barred ads for the first two years of its operation. In any other circumstance, that would be judged a most restrictive trade practice.

But even when Foxtel and Austar were finally allowed to sell ads (doesn’t sound right in a free market economy, does it), they were compelled to keep ad revenues below 50% of total revenue. Kerry Packer and his competitors had ganged up on the sector in an attempt to protect their own advertising sales revenues.

More recently, the networks were allowed to run FREE TV ads on their own channels (campaign against subscription TV services) without those ads being counted as part of their advertising quota. An estimated $50 - $60 million worth of advertising aimed at their competitors - without a cent of lost revenue.

Perhaps the most surprising thing about it all is how this clumsy but chummy arrangement was enacted in full public view – with little public outrage (not counting the subscription TV sector). Of course it was always presented as policy to provide consumer benefits. Free access to major sporting events on free TV was the slogan behind which the conspiracy was conducted.

At the end of 2009, almost 6 million households had taken fixed broadband and 8 million Australians chose to watch a subscription television service.

Price Waterhouse Coopers has forecast that over the 2011-2013 period the compound annual growth in advertising revenue for the old TV networks will be 2.3 per cent while for magazines, the internet and subscription television it will be 4.2 per cent, 12.2 per cent and 7.5 per cent respectively. “This trend is no conspiracy against the old TV networks. It’s simply the marketplace at work. And the answer must not be to offer the networks ever increasing and always renewed amounts of protectionism,” warns Williams.

His words were still echoing around the blogs and newspaper columns of Australia when Communications Minister Stephen Conroy announced another round of protection for the old TV networks on Sunday, February 7, 2010. Media Day reported: “Australia’s commercial broadcasters are receiving further protection from the federal government, with communications minister Stephen Conroy yesterday announcing a set of license fee rebates totalling around $250 million in the next two years to help continue to meet required levels of local content. The rebates will “ensure TV audiences have strong levels of Australian programs” and recognize “the new technologies and commercial challenges facing the sector including the switch to digital television,” Conroy said.

Writing in Crikey, Canberra based Bernard Keane (Feb. 9, 2010) sank the Minister’s justification: “Stephen Conroy said in his press release: ‘The Government recognises that the commercial television broadcasters will require some assistance to maintain Australian content production, while investing in a new delivery platform nationally.’

"based on compensating the free-to-air broadcasters"

The only problem with that is that the free-to-air broadcasters have repeatedly – repeatedly – been compensated previously for the transition to digital television. The entire digital television framework introduced at the start of this decade is based on compensating the free-to-air broadcasters. Here’s what they get already:

* a moratorium on competition, with a ban on a new free-to-air network despite plenty of spectrum for it;
* 7Mhz of spectrum for broadcasting, handed to them for free and without any bidding process, ostensibly so that they could drive digital take-up for digital switchover in 2008;
* a ban on subscription television buying attractive sports content via the most restrictive anti-siphoning list in the world (most of which the free-to-airs never show);
* regional broadcasters are getting $260m over an extended period to directly offset their digital transmission costs.”

ASTRA (the subscription TV industry association) says it is surprised and disappointed by the decision. “Taxpayers are yet again being asked to subsidise the businesses of foreign owned broadcasters to help them meet existing content obligations – it’s an outrageous affront to Australians, said Petra Buchanan, ASTRA’s CEO.

“Giving the old TV networks yet more protection just to maintain existing standards is the antithesis of modern media reform,” she said in a statement issued February 8, 2010. “It is couch potato policy that reduces their incentive to invest, compete and innovate, and ignores innovators such as the subscription television sector, which has no trouble meeting its own Australian content obligations year after year without a cent of Government assistance. By using taxpayers’ money to prop up the old players, innovation and competition in the television space will continue to be curbed.”

What’s more, the $250 million handout requires no local content action by the networks – who were briefing financial analysts how it would go straight to the bottom line. Profits, that is. An editorial in The Australian (Feb 10, 2010) reminds us of the long history of this sort of shameful practice: “ … cutting licence fees in an election year smack of the Howard Government’s helping Kerry Packer’s Nine Network by maintaining restrictive cross-media ownership laws. Now, as then, viewers and taxpayers are the biggest losers.”

"What is this Government thinking? Or rather, why isn’t it thinking?"

Then there is the question of misleading the public: the Feb. 7 Ministerial press release about the $250 million gift is titled: ‘Government to protect Australian content on commercial television.’ But Conroy admitted on Feb 12 to the Australian Financial Review that the rebate contained no requirement for the networks to produce more local content nor to maintain current levels. In fact, “there is no test for them to meet,” Conroy said. Misleading parliament is a serious and punishable offence even in the current circus atmosphere; misleading the public should be equally penalised.

What could the film and TV production industry do with the largesse handed to the old TV networks? Just taking the latest gift of $250 million over two years, we suggest it would make a terrific investment in a package of producers and writers over the same period. And we’d get something for it, instead of boosting the profits of TV networks, many of whose shareholders are foreign corporations.

What is this Government thinking? Or rather, why isn’t it thinking?

Published February 18, 2010

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MISLEADING THE PUBLIC:
The Feb. 7, 2010 Ministerial press release about the $250 million gift is titled: ‘Government to protect Australian content on commercial television.’ But Minister Conroy admitted on Feb. 12 to the Australian Financial Review that the rebate contained no requirement for the networks to produce more local content nor to maintain current levels. In fact, “there is no test for them to meet,” Conroy said. Misleading parliament is a serious and punishable offence . . . misleading the public should be equally penalised.

DOING THE WRONG THING:
In the corridors of Canberra, the traditional fear of TV networks has softened the spines of politicians to such an extent that they would rather do the wrong thing by the public than by the networks.

THEY WOULD SAY THAT:
“The only defenders of the so-called public interest arguments are the increasingly isolated and conflicted free TV interests. Their capacity to maintain a purist public interest argument has been significantly damaged by their contradictory desire to be allowed to multi-channel their sports properties now that multi-channelling is beginning to be well established and will inevitably grow in consumer uptake as household conversion to digital rapidly increases towards the analogue shut off,” says media policy academic Stuart Cunningham.

PROTECTING INCUMBENCY:
“In the past we didn’t protect the stage coach from the train, propeller aircraft from jets, CB radio from the internet, or VHS from the DVD. So it’s time we stopped protecting the old television networks from subscription and other forms of digitally-based competition. In today’s world, when delivery systems are converging rapidly, our watchwords must be choice, competition, flexible responsiveness and efficiency, not protecting incumbency.” –
Kim Williams AM, CEO, Foxtel







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