Feb 11, 2010

Free TV handouts: we don’t know the half of it

We've been seriously underestimating just how much money the free-to-air TV networks will be getting from taxpayers under the Government's outrageous licence fee rebates, reveal Glenn Dyer and Bernard Keane.

The competition regulator should step in and force Free TV Australia, the television broadcasting cartel lobbyist, to change its name. There's now no such thing. A Crikey analysis has shown that the promised licence fee rebates of 33% this year and 50% next year to the television networks will be much greater than previously thought. Rather than $250 million, the likely cost to taxpayers will be closer to half a billion dollars from the Rudd Government. Which means the free-to-air networks will cost us more than $20 a head for every Australian over the next 17 months. Based on likely growth in advertising revenue as the economy accelerates, big sporting events such as the Commonwealth Games and the advertising frenzy of a federal election, the rebate could conservatively yield about $240 million in 2010 and $300 million or more in 2011. Looked at another way, the roughly $500 million involved is 25% of the combined budgets of the ABC over the current and 2011 financial years.  Imagine the complaints from the television networks (and not to mention News Ltd, Fairfax and Foxtel) if the ABC got a budget increase of that scale. But this is effectively what Nine, Seven and Ten will be receiving. The Seven Network will share in about $187 million in the next 17 months, based on its December half year 38% share of television advertising revenues. The big beneficiary is Kerry Stokes and his family with whom, as The Australian noted yesterday, Kevin Rudd spent the night at Stokes’s Broome mansion.  Stokes owns 48% of the Seven Network Ltd, which in turn controls 50% of Seven Media Group, where the TV network in the five metropolitan markets and rural Queensland sits. About 47% of Seven Media Group is controlled by US buyout group, KKR, with a tiny stake held by Seven executives. The identity of the executives is unknown and the KKR investors are secret, but most are believed to be offshore.  They will all derive a benefit from the taxpayer in that the value of Seven Media Group will rise now that this extra money will roll in the door. Seven Media group was written down to nil value by Seven network a year ago. That is now a very obvious fiction. The millions coming from the Australian taxpayer to bolster the finances of the over-geared media group will ease any concerns bankers to the media group may have had about its finances, thereby relieving Seven Network and Stokes from having to tip in any money. Nine will get about $156 million, based on its ad share of a touch under 32% in the December half year. That will flow to PBL Media, controlled by CVC Asia, on behalf of unknown offshore investors, and executives including David Gyngell and Ian Law. As in the case of Seven Media Group, the licence fee rebate represents a direct transfer from taxpayers to the benefit of a small number of paid executives. Nine also shares its rebates with WIN, controlled by billionaire tax exile Bruce Gordon and his family.  Gordon has to spend six months of the year outside Australia because he doesn't want to pay Australian tax personally. Nine also controls the regional broadcaster NBN. These fees will help it finance the huge $250 million purchase price for NBN a few years ago. Ten is a listed company, 11.9% owned by Gordon as well, although Gordon doesn't have a board seat.  He will get the benefit of any increased dividend Ten pays as a result of these fees. It slashed dividends last year when it looked as though it could founder.  Ten shares its fees with its affiliate, Macquarie Media, which has also emerged from a near-death experience, this time by staying too long in the Macquarie Group orbit. Now it is free, but it has some struggling newspapers in the US that are a drain on finances. In each of the cases, the main networks, Seven, Nine and Ten, could claw back some of the rebates that end up at WIN, Seven affiliate Prime and Macquarie Media by way of higher affiliation fees. Those affiliation fees are a major source of easy money for the big networks. The rebates will be given with no strings attached -- not even a requirement that the money remain with the networks and not be returned to shareholders or sent overseas. Likewise with the struggling PBL Media: the extra money will help keep the bankers and their $3 billion-plus debt happy. That also means the value of the equity the executives have will rise as the viability of PBL Media improves. So it was no wonder Stokes, the younger, has hailed the rebate as an important outcome for the industry. "Not only does it help bring the Australian industry closer toward international peers, it recognises the growing investment in Australian content and the increasing need for quality local content in a digital environment," Stokes told a conference yesterday. Stokes said free-to-air television was facing a time of "unprecedented change", with competition from the internet and pay TV and the challenge of negotiating the switch over to digital television. "In this context, we welcome the recent government announcement to protect Australian content on commercial television," Stokes said. That is a load of self-interested, conflicted rubbish, just as the comments to The Oz by Free TV Australia chairman, former Queensland Premier Wayne Goss, are rubbish. According to Goss, "fees in Australia were much higher and completely out proportion to what they were in comparable countries". Free TV Australia CEO Julie Flynn said in the News Ltd tabloids this morning the rebates will enable the networks to keep their local content commitments. Both comments are simply spurious What others charge their broadcasters is simply immaterial to Australia. Our broadcasters do not compete with US, Canadian or UK broadcasters.  If spectrum licence fees were higher in the US, UK or Canada, then Australian broadcasters would be charged more for programming by the likes of CBS, ABC, NBC, Fox and ITV to recover the higher fees. You can argue that in fact our networks enjoy a programming subsidy because these foreign licence fees are lower than ours. When you throw in that it is taxpayers who provide much of the war chests for the major parties' electoral advertising campaigns, and it is taxpayers' stimulus package money that has kept the economy and big-advertising retailers afloat over the past 12 months, it is clear that so-called free-to-air  television networks are firmly fastened to the taxpayer teat. With Treasury fronting Estimates all day today, the Opposition should be demanding to know whether Treasury was consulted, and if so exactly what the hit on taxpayers will be from this sleazy Rudd handout.

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24 thoughts on “Free TV handouts: we don’t know the half of it

  1. Gavin Wood

    It would be interesting to know what the ABC or SBS could do with that extra funding instead…

  2. Niki Scevak

    I completely agree with the egregious payout and it’s simply sickening to see.

    However, I think you missed the last link in the chain. The money is very nearly certainly not allowed to be paid out via a dividend for Seven and Nine (by virtue of their large debt and presumably convenants protecting any such behaviour).

    So the money goes from the tax payer to the broadcasters to the banks who originally lent them the money.

    It’s more of the same though: “The Seven Media Group has obtained financing of about $2.5 billion from Morgan Stanley, Mizuho, Goldman Sachs and Citigroup.”


    “To fund the payment to PBL, PBL Media has underwritten financing from UBS for new debt of $3.75 billion non-recourse to PBL and CVC.”

    The debt is traded so the current owners are likely not the same.

  3. David

    Mr Rudd is getting to the stage where he is now treating those who put him where he is, with complete contempt. He was loud in his condemnation of the previous Govts pork barrelling, prior to the 2007 election and rightly so. Now he blatently and without shame, proceeds down a similar path, blatently. There are many many good and wise members of the Govt and they deserve better from this egotistical empty Prime Minister. He has either lost any sense of reality if he thinks those who were loyal to him in ’07 will retain that loyalty if he insists on treading the path of self adulation, aloofness, hollow words and a disregard for the loyalty shown to him. He can bank on one thing. There are many many Liberal supporters who deserted Howard but will return to the fold given the contempt Rudd is showing. Time may pass this phoney by, faster than he thinks.
    I will remain loyal to Labor this year,but that will be in spite of Mr Rudd.

  4. wildgoose

    OK, i’m sickend! What can we do as individuals to stop it? serious question?

  5. Richard Wilson

    I think Rudd is racking up as much public debt as he can but who is he borrowing from…lets see who is providing the money ? My guess is JP Morgan Goldman Sachs HSBC and Citigroup in what I call “dodgy funny money” US dollars while they still have value. He thumbs his nose at the people because as one of the elites he feels he is above us all and we have no right to question what is going on in secret behind closed doors. Barnably Joyce is right – he just wasn’t supposed to tell everybody.

  6. twobob

    Barnably Joyce is a jellyfish – he has no spine
    If he was worth anything at all he would be squealing about this very handout.
    But is he? No.
    Any ideas why not?
    Pretty bloody obvious really. The only real opposition to this pork barrelling crap are the Greens.
    The Greens who are continually under and miss reported by the MSM. Now why would that be?
    Oh year they don’t pork barrel the bastards that’s why!

  7. wildgoose

    I’m still sickened! All our money to millionaires for providing such crappy television that is so bad, I pay for Austar. Who the hell watches free to air anymore that wouldn’t swap it for a well funded ABC & SBS?????

  8. BH

    Well I disagree with the lot of you. When a huge number of people cannot afford to instal ‘payTv’ they need the FTAs to be very very viable. It is the only entertainment many people have.

    If this money results in better programs and the ability to fight Murdoch for sporting rights then I’m all for it.

    Murdoch said a few months ago that he thought Govts. should support newspapers to keep them viable. He wasn’t talking peanuts either. So sour grapes from PayTV which I pay for and which doesn’t deliver. No FTA available to many houses in my area.

  9. Scott

    Even if your assumption of massive increases in revenue in 2010 and 2011 are true (unlikely as real revenue increases in the TV networks have been non-existent since 2001), the rebates you indicate will still mean the Government is receiving $480 million in 2010 and $300 million in 2011 (representing the 66% and 50% of the licence fee) from the TV networks. Not bad when you consider that in 2008/2009, the licence fee received was a relatively paltry $286 million (without any rebate). When you look at the net difference over the next two years it’s still $280 million in the black.
    The ABC doesn’t need any more money. Surely $700 million a year is enough.

  10. wildgoose

    I think hospitals, roads, education are where the money should be spent. Why is entertainment TV a necessity for our tax dollars??? As BH says, whether you pay for it or its free, it will always be rubbish. The exception being ABC & SBS who I still think do a great job for the money the are underfunded with.

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