free and fair - free tv australia

Free and fair: the future of commercial television in a converged media world

All Australians have access to quality free-to-air television that delivers the best of local and international content for free.

Free TV broadcasters are the major investors in Australian content, technology and people.

Free TV broadcasters are adapting and competing in a digital world where technological developments and changes in viewer behaviour are driving unprecedented change.

There is more content on even more devices allowing viewers to choose what they want, when they want and on the device of their choice.

But media regulation is still firmly locked into the old analogue world.

We need a more even playing field which allows all media players to compete fairly and meet the challenges of the future.

Otherwise, the overwhelming majority of Australians who rely exclusively on free-to-air services will lose access to free quality Australian programming.

Contents

An investment that delivers the very best for free 4

Convergence: more content, more choice, more competition 8

Old rules don’t deliver 10

Quality free-to-air TV services are already at risk 12

A fair and sustainable contribution 14

A plan for a free and fair future 16

The future of free-to-air television is now… 18

2 Free and Fair – the future of commercial television in a converged media world 3

The future is here

Free TV facts•$1.23 billion annual investment in Australian content

• 14 million Australians tune in every day

•3 hours 9 minutes average time spent watching TV everyday

•FreeTVdeliveredtoallofAustralia

•25,650 hours of Australian content in 2010 on main channels

• 6,400 hours of Australian content on multi-channels so far this year

•716 hours of first run drama and documentaries in 2010

•2,450 hours of sport

• 7,500Australians directly employed in the sector and over 7,500 employed directly and indirectly in production

•$3.8 billion paid in licence fees for 15 years to 2009 (CPI adjusted)

• $941 million in licence fees 2008 – 2011 • 10timeswhatUSbroadcasterspaid • 5timeswhatUKbroadcasterspaid

•315 hours of news and current affairs content every week

• 102localised main channels across regional Australia

•$2 billion investment in converting to digital television

•9 unique channels

•Costtoconsumer–free

Over 50 years, Free TV broadcasters have invested heavily in people, content and technology, so all Australians can see the best television content for free.

In 2010 –11, Free TV broadcasters invested $1.7 billion in programming. This included $1.23 billion in Australian content across a range of genres.

*Figures Compiled by Free TV

** Australian Communications and Media Authority: Comparison of Compliance Results – Metropolitan Commercial Television Networks

The Project

4 Free and Fair – the future of commercial television in a converged media world Free and Fair – the future of commercial television in a converged media world 5

Programming Expenditure 2010 –2011*

25,650 hours of Australian programming broadcastlastyear

The Block

Packed to the Rafters

Overseas content

Australian content

72%

28%

Australian content

Overseas content

Australian content - Quota hours broadcast

2006 2007 2008 2009 2010

55% quota

Hours broadcast - % of 6am to midnight

55%

64.97%

*Source: Australian Broadcasting Authority

**Source: Australian Bureau of Statistics

Australian Content – Quota Hours Broadcast**

Hours broadcast – % of 6am to midnight

55% quota

An investment that delivers the very best for free

Investing in the best Australian content Free TV broadcasters are committed to Australian content.

We have a proven track record of transmitting Australian content well above the required quota, including for first release Australian drama programs.

•In2010 –11FreeTVbroadcastersinvested$1.23billioninAustralian content, including drama, children’s programs, news and current affairs, sport and documentaries

•Thistranslatesto25,650hoursofAustralianprogrammingonourmainchannelsand6,400hoursonourdigitalmulti-channels

•FreeTVbroadcastersshowed716hoursoffirst-rundrama and documentaries

•Allof2010’sTop40programswereAustralian,includingthenumber1programin2010when5.2millionpeopletunedin

Investing in the local production industry Free TV is the major underwriter of the local production sector.

It enables the industry to develop the skills to compete globally. Many Australian productions and formats have made their way to international screens. This promotes Australian culture, showcases our talents on and off screen and secures and strengthens our local production industry.

By switchover in 2013, metropolitan and regional broadcasters will have invested a massive $2 billion in digital television. Digital television has delivered:

•6newchannels•Betterpicturesandsound•Captioningforthehearingimpaired•Electronicprogramguides•Parentallocks

Free-to-airbroadcastersarealsobringingviewersthebestthattechnologyhastoofferwithcatch-upTV,mobileTVandotherinteractive services.

This investment is unique This investment in:•Thebestcontent•People•Diversity•RegionalAustralia•Technology

isuniquetocommercialfree-to-airtelevision.

This investment is at risk This investment is at risk because whilst the media market

globally has fundamentally changed, Australia’s broadcasting regulation has not kept pace.

Investing in the best – for free


Investing in the best people The Australian production industry is diverse, vibrant and a major

employerofAustraliantalent.Australianfree-to-aircommercialtelevisionnetworksdirectlyemploymorethan7,500peopleandatleastanother7,500moredirectlyandindirectlyinlocalproductions – from writers, to producers, crew and actors.

The quality and skills of people working in, and funded by, Australiancommercialfree-to-airtelevisionalsohelpstomakeAustralia an attractive place for overseas filmmakers to create blockbusters such as The Matrix, Australia and The Great Gatsby.

Investing in diversity•315hoursperweekofnewsandcurrentaffairsdelivering

a diversity of voices and opinion•OngoinginvestmentinlocalnewsandinformationacrossAustralia•Avitalsourceofinformationinemergenciesandnaturaldisasters,

as in the Queensland floods, Victorian bushfires and Beaconsfield mining emergency

Investing in regional Australia Regional commercial broadcasters have a major presence across

regional Australia with 1,700 transmitters reaching over 7 million Australians, providing 102 localised main channels to individual communities. This enables communities to receive local news and provides an advertising platform for local businesses.

This local presence allows regional broadcasters to support local communities in a range of important ways.

Investing in and developing technology Forover50yearswe’veinvestedinanddevelopedcuttingedge

technology and we are committed to using technology to deliver thebestfree-to-airservicesintheworld.

Frombroadcastingnightcricket,togivingviewersafirst-personexperienceoftheactionthroughrace-cams,totheworld’sfirst3DTVprogrameverseenonfree-to-airtelevision,Australianaudiences have benefitted from our pioneering technological innovation. And our extensive investment in broadcast infrastructure means Australians audiences can enjoy high definition television programs for free.

Top image: Neighbours. Bottom image: Innovation in Cricket coverage

7,500 people directly employed and 7,500 directly and indirectly in production

National Nine News

Australians now have more choice than ever before in how, when and where they access content.

It’sontablets,laptops,PCsandmobilephones.Contentisnow more dynamic and accessible than ever and is delivered by an endless array of content providers.

High speed broadband is accelerating these changes.

SmartTVswhichdeliverover-the-airandInternetcontenttoonedevice, have turned ‘the box’ into an entertainment hub linking TV with music, social networks, apps, games consoles and much more.

IPTVserviceswillintroduceanarrayofnewcompetingservices.The Government is facilitating these new services with large spectrumawards(DigitalDividend,2.5GHz,bothexpectedtofacilitate video delivery) planned in the next 18 months. It is also fundinga$37billionhigh-speedNationalBroadbandNetworkwhich will deliver “hundreds and hundreds and hundreds”* of new channels.

We are just at the tip of the iceberg. The media landscape will only become even more competitive with Google, Apple and Netflix/Fetch TV, to name just a few, launching new content offeringsintheshort-term,andmanymorecontentandinformation-basedofferingstocomeinthefuture.

Free TV broadcasters are not sitting on the sidelines as these new technologies and services become available.

But only a fair and balanced regulatory environment will allow all media players to compete fairly and meet the challenges of the future.

8 Free and Fair – the future of commercial television in a converged media world 9

Convergence: more content, more choice, more competition

*Senator Stephen Conroy – AIIA, July 2009

**Roy Morgan single source Jan – Dec 2010 (peopleaged14+,sample18,254)

***TheCEASAReport,shareofadvertisingrevenue for 2000 and 2010, television share

for 2010 also includes SBS

Catch-up TV, Seven Network, Nine Network, Network Ten

Internet 12.9 hrs

Magazines 1.5 hrs

Newspapers 3.1 hrs

Radio 13.4 hrs

Television 20.8 hrs

Magazines 1.5hrs

Television 20.8hrs

Internet 12.9hrs

Newspapers 3.1hrs

40%3%

6%

26%

Radio 13.4hrs

25%

Time Spent with Media – Average Hours per Week** Share of Advertising Expenditure %***

2010

2000

Tele

visi

on

New

spap

ers

Oth

er P

rint

Onl

ine

Rad

io

Pay

TV

Out

door

Cin

ema

30.7

26.9

37.5

26.8

20.3

15.516.6

7.6 7.3

2.8 3.5

0.8 0.7

3.1

2000

2010

In 1992, the Soviet Union had just been dissolved, the Internet was in its infancy, pay TV had not been introduced to Australia, Google was still years away and Mark Zuckerberg was 8 years old.

1992 was also the year the Broadcasting Services Act passed Parliament.TheActcreatedanewregulatoryframeworkforTV,radio and newspapers.

This framework has enabled broadcasters to build successful commercial businesses while at the same time delivering important public policy outcomes, such as free access to quality Australiancontent.Australiansvaluetheirfree-to-airtelevisionservices very highly and do not want to lose them.

Since 1992, the competitive environment has changed significantly putting substantial pressure on this model. There are now more ways than ever to enter the market and get content to consumers.

Same content, different rulesThese new media entrants are not subject to the same level of regulation, fees, minimum content requirements or industry code of practice obligations.

Butatthesametime,theobligationsoncommercialfree-to-airbroadcasters have increased, rather than being rebalanced toreflectthenewcontent-plentyenvironment.

Creating a level playing field across media platforms does not mean applying the same old regulations to all.

It is possible to create a fair and balanced regulatory framework which reflects the new media world, recognises the role of television and which is flexible enough to accommodate future developments.

Licence fee 9%

gross annual revenue

Access to spectrum

Temporary licence fee

relief – ends June 30 2012

Unlimited unregulated

market participants

Licence fee of 9% of gross annual revenue

from July 1 2012

Return 40% of spectrum for digital dividend – spectrum sold to unregulated players

Government funded NBN to enable new unregulated

competition

Access to (more limited)

spectrum

Local content

obligations unchanged

Underwrite Australian content

production

Previously Balanced Ecosystem (1992) Current Unbalanced Ecosystem (2011)

•VibrantFTATVmarket•Balancednumberofplayers

due to scarce spectrum•Massmarketaudiences

•Strongmulti-platformcompetition•Valueofspectrumdeclining•Investmentinnewtechnologyandinnovationrequired•TVadvertisingrevenuesareflat•Highercostoflocalcontent•Highercostoflicenceversusrevenue

•Expensivelicencefees,but in line with international precedents

•Achievableregulations on local content

Fixed number of market

participants


Old rules don’t deliver

The free-to-air platform of today is still governed byoutdatedlawspassedin 1992

Masterchef

Sunrise

Free-to-air television is the only platform that delivers Australian content, children’s content, news and current affairs, sports coverage and general entertainment – for free to all Australians.

In an increasingly crowded media market, ours is the only sector willing and able to deliver this investment to the Australian public.

The vast majority of new content services will not be free. Free access to media and information is critical to individual participation and inclusion in society.

The overwhelming majority of Australians who rely exclusively on free-to-airserviceswillbedisadvantagediftheseservicesdisappear.

Delivering these services is very expensive and the costs are increasing

The delivery of these services is already at risk because of:•Theunbalancedmediaregulatoryenvironment•Significantcostsofthedigitaltransition•Veryhighfixedcostsofpublicserviceobligations•Reducedspectrumaccess,and•Theemergingrangeofcompetingviewermodels

Programming costs now account for almost 40% of revenue, an increase of 10 percentage points in the last five years. In this environment, any increase in our Australian content obligations is unwarranted and unsustainable.

Free TV Industry Programming & Profit Trends

2004 2005 2006 2007 2008 2009

Free TV Profit - $M*

Free TV Total programming Expenditure - $M*

Financial Year Ended

*Source: Australian Broadcasting Authority

**Source: Australian Bureau of Statistics

$200m

$400m

$600m

$800m

$1,000m

$1,200m

$1,400m

Free TV Industry Programming & Profit Trends

Source: ACMA Broadcasting Financial Results

Programming Expenditure as % of Revenue

2004 2005 2006

30.6%

32.7%

34.4%

2007

33.1%

2008

35.1%

2009

39.5%

Programming Costs as % of Revenue


Most Australians rely exclusively on Free TV services

Australia’s Got Talent

Quality free-to-air TV services are already at risk

Underbelly

Free TV Total programming Expenditure – $m*

Free TV Profit – $m*

UKNew ZealandUSACanadaAustralia

259

287277

231

281

164

27

5 4

2519 19 19 20 20 21

1 1 1 1

83

67

19 18

What needs to be done to ensure quality free-to-air services in the future.

Communications policy and legislation must be reformed in 2012.

Evenaftertherebate,thelicencefeeswepay(inadditiontonormal taxes) are ten times higher than what U.S. broadcasters pay and at least five times higher than in the U.K. Fees must be permanently reduced to reflect the new competitive landscape and to enable us to continue to meet our public interest obligations.

We are committed to meeting our already significant Australian content obligations. There should be no additional obligations.

In addition there needs to be fair compensation for the carriage of our services on competing platforms. As the rules currently stand, our competitors can retransmit our services without consent or compensation. In other major markets, broadcasters are fairly compensated.

Onerousandunfairadministrativeburdensshouldberemoved,such as:

•Outdatedtime-basedclassificationsystem•Complexadvertisingschedulingrules•Bureaucraticfinancialandownershipreporting•Burdensomeregionalnewsandinformationrecordkeeping

These and other changes are required urgently. Whilst comprehensive legislativereformisalong-termproject,therearereformswhich can be undertaken immediately to ease the acute pressure the industry is facing.

Free TV has a plan that can be implemented now to ensure a fair and sustainable future.


Source:VentureConsulting,ACMA,CRTC,Ofcom,BSA,FCC,WB,Zenith

The Biggest Loser

Free-to-air Licence Fees – AUD $m, 2008 –2011

2008A

2009A

2010A

2011F

With no licence fee rebate

With no part II waiver

A fair and sustainable contribution

Home and Away

16 Free and Fair – the future of commercial television in a converged media world Free and Fair – the future of commercial television in a converged media world 17Offspring

Licence feesApermanentreductionofatleast50percentinlicencefees–will bring them more into line with international standards and address the massive structural changes to the industry. This will allow broadcasters to maintain our investment in quality television services free to all Australians.

Australian contentMaintain existing Australian content quotas and sub quotas, but no additional obligations on digital channels – to ensure continued investment in sustainable and innovative Australian content on Free TV.

Retransmission feesRetransmission rights for Free TV broadcasters – to give us the right to determine if and how our services are carried on other competing platforms and the right to appropriate compensation, as is the case in the US.

Children’s TVIn a world of endless choices, children’s content quotas which applyonlytoFreeTVbroadcastersareoutdated.Onerousadministrative requirements should be removed and consistent advertising restrictions on marketing to children should apply across all platforms.

Community standardsAplatform-neutralapproachtoclassificationofcontentandconsumerinformation,andamodernisationoftimezones–toensure consistent regulation of content, regardless of how it is consumed and to recognise increased viewer choice and control.

Local newsA reduction in the regulatory and administrative burden on regional television – to reflect the proliferation of alternative sources of information.

AdvertisingAstreamlinedsystemofself-regulationforadvertisingwhichisconsistent across platforms and a simplification of hourly limits – to remove anomalies and inefficiencies in advertising regulation and reduce complex compliance rules.

News and current affairsA consistent set of rules and safeguards for news and current affairs to be administered by a body or bodies with relevant expertise.

Regulatory consistencyA new objective of regulatory consistency to be built into the new regulatory framework.

Competitive content marketRobust competition and copyright laws – to protect content rightsandtoaddresspotentialanti-competitivebehaviourin the bundling of exclusive, premium content in the new communications environment.

Market structureNo new commercial television licences – entry of new licensees would give viewers lower quality programs, fewerdramaprograms,cut-backstonewsandcurrent affairs and less local content.

Channel A spectrum Allocate spare Channel A spectrum for community TV and as an innovation space for existing broadcasters – to provide a migration path for community TV and to ensure Australian audiences don’t miss out on innovative new broadcast technologies.

Licensing and spectrumMaintainexistinglicensingandspectrumarrangements.Existinglicences and spectrum arrangements have served the community well – and any changes have the potential to impact on millions of viewers.

ImplementationLegislative amendment in 2012 on urgent issues such as licence feereliefandAustraliancontentrules,whilstlonger-termlegislative reform continues.

A plan for a free and fair future

A more balanced and fair regulatory framework will ensure that all Australians continue to receive high quality Australian programming regardless of income or geography.

Our plan will:•MaintainexistinglevelsofAustraliancontent•Facilitateclearanceofdigitaldividendspectrum•Maintaindiversitythrougharangeoflocalnewsandcurrent

affairs services•Continuetoprovidefree-to-airtelevisiontoallAustralians

regardless of income or geography

Legislative change in 2012 is essential

“ The future for our industry is happening now and it is full of opportunities. Viewers love the fantastic Australian content brought to them by free-to-air television. It’s not just a huge part of our history it’s absolutely our future. Seven is finding new ways for Australians to engage with our stories as we charge into the exciting digital future. Once you start thinking outside of the box, so much becomes possible. We have changed but the rules haven’t. As we renew and refresh our business and build momentum across all platforms, we need to make sure the rules and regulations are future proof and that they support our ability to keep bringing the best Australian stories to all Australians.”

David Leckie, CEO Seven West Media

“ Free-to-air television is the heart and soul of the Australian media landscape. Our channels are watched by millions each day and we remain the cornerstone of Australian content. We are proud of our history in delivering great Australian drama, news and current affairs and sport. But we are focused on the future. As an industry we are ready to handle the challenges and make the most of the opportunities of a converged media world. Our focus will remain the same: to provide all Australians with great entertainment for no charge.”

David Gyngell, CEO Nine Entertainment Co.

“ In a rapidly evolving media world free-to-air television is remarkably resilient because it delivers great content that Australian viewers continue to value. We need to ensure that the industry is fit for purpose in the new media world; lean, adaptable, creative and willing to take risks. We are doing our bit to make sure that in facing the changes that technology and consumer behaviour are driving, we do not lose the strong Australian voice that makes us different and which Australian viewers clearly wish to see maintained.”

Lachlan Murdoch, Interim CEO Network Ten

“ Australia’s regional commercial broadcasters are an integral part of our communities. We have millions of viewers spread out across our vast continent. And we are delivering them a whole new digital world of choice. We have invested heavily to ensure that regional viewers can receive the very best Australian, local and international content, for free. We need a regulatory environment which reflects the evolving nature of regional media and which allows us to respond dynamically to the changing needs of regional Australians.”

Doug Edwards, CEO Prime TV, Chairman Regional Broadcasting Australia

The future of free-to-air television is now…

Only a fair and balanced regulatory framework will ensure free-to-air television can continue its strong investment in Australian content and its delivery of universal, free access to quality television services.


free and fair - free tv australia

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