There’s one industry where the age of entitlement is unlikely to ever end, at least while Australians continue to watch evening news bulletins — the commercial television industry — which is a recipient of some of the most generous largesse in the economy.
As we noted last week, the previous government handed the commercial television networks a 50% tax cut, reducing licence fees for the publicly owned spectrum they use from 9% to 4.5% of revenue, which has cost taxpayers hundreds of millions of dollars since 2010, on the basis that it’s getting more costly to meet local content requirements.
The networks now want licence fees removed altogether, which would, remarkably, give them access to the immensely valuable broadcasting spectrum for free. Such outrageous demands aren’t atypical of the free-to-air cartel, which has previously tried to argue they should retain their analog spectrum after digital switchover because they’d need it for 3D TV (remember that?). The cartel insists that they shouldn’t have to pay licence fees because new media don’t pay licence fees, which assumes FTA broadcasters have no more privileged a market position than Google, or Apple — in which case, they should be happy to either give up their spectrum and switch to internet distribution, or happy to allow competitors access to the broadcasting spectrum.
Hmmm. Maybe not.
The networks have been spending more money on local productions, but it’s nothing to do with fee cuts. It’s because programs like Winners & Losers, House Husbands, Offspring, Wonderland, The Block, My Kitchen Rules, The Biggest Loser, The Voice (pictured) and The X Factor all attract millions of viewers and hundreds of millions of dollars in ad revenues a year because of their popularity with viewers. They will go on doing this, regardless of the fee levels, because of the demand from viewers and advertisers. Not to continue to invest in local production would be commercial suicide for the networks. Even news and current affairs is starting to get more money, with Seven joining Nine in an hour-long news broadcast in many markets.
But if Communications Minister Malcolm Turnbull wants a proper broadcasting efficiency review he could look at some other indulgences provided to the commercial networks that likely exceed the level of funding provided to the ABC.
In November the pay TV industry body ASTRA made a submission to the Commission of Audit arguing free-to-air television would enjoy a $6 billion-plus subsidy over the next four years — a figure mainly composed of ABC and SBS funding and the licence fee rebates. In its attempt to dismiss ASTRA’s claims, free TV made the hilarious argument that the sale of spectrum freed by digital switchover should be counted as a kind of offset to government support for the FTAs — as if the FTAs were gifting public spectrum back to the taxpayer, rather than it being taxpayers’ spectrum in the first place.
And just over two years ago, ASTRA commissioned Access Economics to assess the level of government support for the free-to-air television industry. Like any “independent report”, especially one from Access, we ran a sceptical eye over it. Unusually, we found the report wanting, but not in terms of overestimating the generosity of support from government, but underestimating it. True, Access did include digital switchover assistance (which also figured in the November 2013 claims) where the main beneficiaries were not the broadcasters but consumers, which it shouldn’t have. But Access also shied away from estimating the benefit to commercial broadcasters of the ongoing ban on a fourth network, which would have been in the hundreds of millions of dollars a year.
Access Economics was highly conservative in estimating the benefit to the commercial broadcasters of the anti-siphoning scheme, which directly transfers hundreds of millions of dollars from the pay-TV sector and sports rights owners to free-to-air broadcasters. Access only costed the benefit of anti-siphoning versus moving to a “use it or lose it approach”, a calculation it had previously done, which was worth over $400 million a year alone.
It’s thus likely that the commercial free-to-airs get a benefit of around $1 billion a year or more from the current broadcasting regulatory framework, even if the value of a fourth network would have reduced since 2011.
The primary benefit Foxtel has obtained from regulators in the last couple of years has been the Australian Competition and Consumer Commission’s waving through, with some fairly token conditions, of its merger with Austar to create a pay-TV monopoly. News Corp also grabbed the 25% in Foxtel and the other 50% of Fox Sports that had been owned by Cons Media, which was controlled by James Packer.
Pay TV also doesn’t have licence fees and doesn’t use terrestrial broadcasting spectrum (it distributes via a mix of cable, internet and satellite broadcasting) and isn’t captured by the various media ownership laws in place that relate to FTAs (like the 75% reach rule or the two out of three and media voices rules). But free-to-air TV gleefully pointed out yesterday that according to Oztam data pay TV’s penetration rate in the Australian TV market continues to fall: audience size estimates for the current quarter showed that pay TV’s share had fallen from 29.9% in the first quarter of 2012 to 28.1% this quarter, its lowest figure in six years.
The FTA cartel would claim that pay TV has struggled because of the “highly valued” offering of the FTAs, including “sustained delivery of important public goods” such as news and current affairs, Australian drama and “iconic sporting events”, all for free (never mind the advertising). Instead, it’s a demonstration of the fear politicians have about their capacity to influence voters; even News Corp, which has long pushed for pay TV to be freed from the shackles of anti-siphoning, can’t come close to matching the political muscle of the networks. The age of entitlement in broadcasting policy isn’t what it used to be, but it’s still extraordinarily generous to the FTA cartel. And they feel as entitled as ever.