Abstract
The final report of the Convergence Review was published recently with many points of contention. While many pundits believe that the television is a dying media and will be over taken by the IPTV and the internet, there has been overwhelming number of research which proves otherwise. The television industry is in fact the medium of choice for Australians and therefore, this paper saw it necessary to analyse the impact that the proposals contained within the review will have on the industry. While it does seem that the television industry will have to meet higher standards, thus favouring its consumers, the paper found it difficult to measure the financial impact on the industry. This is because the review did not specify important information, especially in terms of the exact costs and percentage expenditures required by the industry. Therefore, while the review posts a win for consumers it remains to be seen what will happen once the proposals get implemented in 2013.
Introduction
By 2020, digital television (DTV) will replace
analogue broadcasts in Australia. Up till now television (TV) signals have been
analogue waves, broadcast from towers and received by home antennas to be
displayed on analogue TVs. This form of broadcasting limited the number of
channels viewers could watch while taking up a lot of bandwidth. However, with
digital technology, TV signals and other information are broadcast more
efficiently and with better quality picture and sound. Television stations can
also broadcast over more channels using the same bandwidth. However, with the
advent of convergence and especially with the internet’s prevalence in
Australians’ lives, the Department of Broadband, Communications and Digital
Economy saw the need to review out-dated media regulation and thus embarked on
the mission of the Convergence Review. The review which took about a year to
compile, published its final proposals in the middle of 2012. There are many
points of contention with the review and this paper decided to focus especially
on the television industry in Australia. This is because television, despite
contrary belief, is still the medium of choice among Australians.
In a research done by Think TV, a marketing
representative of Free TV Australia, it found that TV pays back more than any
other medium, in terms of returns on investments (ROI) and that the sales
effect of a TV advertisement continues to be strong for up to about two years,
while the effects of other media on sales fade quickly. It also found that when
advertisers pull back on advertising on TV, brands may take up to six years to
recover their market position (Clift, 2011). According to research firm Ovum,
digital terrestrial TV would reach about 5.894 million households in Australia,
with an additional 823,000 accessing mainstream TV via satellite, by 2015. Pay
TV will also reach 2.175 million households, while IPTV services are expected
to grow impressively; from just 90,000 now to 342,000 in 2015 and that figure
is still only a fraction of the reach which free-to-air TV will have (Kidman,
2012). Therefore, it is important to understand how the proposals in the review
will impact this dominant medium. Hence,
this paper will now pick out proposed regulatory changes in the Convergence
Review to critically analyse its impact on the dominant television industry.
Convergence
Review: Proposed Changes Affecting Television in Australia
Content Service Enterprises
Due to the increasingly
convergent nature of media, the review coined the term “Content Service
Enterprises” (CSE) to describe media organisations, including print, broadcast
and online entities. However, only those CSEs which earn annual revenue of $A50m,
generated from professionally produced content, and with a monthly viewer
numbers of 500,000, will face the proposed regulations. This means that
organisations such as Telstra, Apple, Google and its YouTube web video
off-shoot will may be classified as a CSE (Australasian Business Intelligence, 2012) . This new
classification will not affect the delivery of digital television in any way as
television is an industry that has always been regulated and will continue to
be while it exists. The new content rules may also make Google re-think the
introduction of Google TV into Australia as it will be subject to the CSE
regulations as soon as it meets the set threshold (Turner, 2012) . Hence, this could prevent Australians
from enjoying a brand new technology, which goes against the spirit of
introducing the National Broadband Network (NBN) and to decrease the digital
divide.
As
IPTV will soon become prevalent in Australia following the NBN rollout, this
will also present a threat for free-to-air and pay TV broadcasters. This is due
to the fact that IPTV services can escape classification as a “broadcasting
service” if it is distributed via the internet or provided on-demand on a
point-to-point basis. Thus, it does not need a licence under the Broadcasting
Services Act (BSA), unless is provided over a proprietary network and not
on-demand. But that is unlikely to be the case. In fact, IPTV is just like
watching traditional TV, except it is delivered over broadband rather than
through an antenna or cable. So, it is unclear why it bears less regulation
than broadcasters who have to carry the burden of regulations such as content
quotas and advertising standards. This would most certainly create an uneven playing
field for traditional broadcasters (Bradshaw, 2012).
Content
Content Standards
Under the new
content standards, the review proposed that once a particular content has been
classified, it would apply uniformly regardless of the platform it is delivered
on. However, the review made an exception that:
“Content providers that are not of sufficient
size and scope to qualify as content service enterprises should also be able to
opt in to content standards or develop their own codes”
It is unclear
why the review made such an exception. Does this mean that say a horror movie
classified as “PG13” – Parental guidance advised for viewers under the age of
13, could be classified as something completely different just because it is
being streamed on YouTube? Another
scenario may hold true as well where a young viewer who watches an episode of
Simpsons for instance, may not register the variations in content standards
when he watches it on free-to-air channels, on a PG (Parental Guidance advised)
rated episode on Pay TV or downloaded through Apple TV (Kidman, 2012).
The Push for more
Australian Content
One of the major
highlights of the convergence review is to increase locally produced television
content by regulating the amount of Australian made programs aired on their
networks (Department of Broadband,
Communications and the Digital Economy, 2012) . The review proposes
that television broadcasters would keep their current 55 per cent quota for
Australian content while increasing the quota for drama, documentary and
children’s content by 50 per cent. At the moment, these quotas will not include
content shown on digital multi-channels. One of the main reasons why the
government has to step in to regulate Australian made content is because,
producing locally made content is more expensive than buying content from
overseas. Therefore, without regulation, there would no incentive for
broadcasters to air locally made programmes. Indeed, in the final report of the
review, Price Waterhouse and Coopers (PwC)
concluded in its analysis that without existing Australian content
requirements, documentaries would plunge by 50 per cent, drama by a staggering
90 per cent and children's content would simply not exist.
This is
especially true for children’s programmes, since most of its children’s
programming is currently only from the Australian Broadcasting Corporation
(ABC) and hence lacks variety. A
research into the health of children’s television in Australia found these
quotas to be the utmost important.
“The
research confirmed the centrality of the CTS (Children’s Television Standards)
to the production of children’s television in Australia. In an environment in
which Australian adult drama production has been declining, and financing
children’s television has been becoming more difficult, the CTS quotas mean the
production of children’s television plays a significant role in the overall
health of Australia’s production industry.”
(Blumenau, 2011)
Therefore,
the review was justified in raising the quotas for children’s programmes,
although, one may argue that Australian children's content simply does not pay,
particularly when there is no junk food advertising (McCreadie,
2012) .
In the current
state of almost non-existent content regulation, the free-to-air networks'
digital multi-channels, have carried next to no Australian content, with the
exception of Neighbours (McCreadie, 2012).
Not surprisingly, with the exception of Channel 31, which airs only locally
made programmes, both free-to-air and subscription television were opposed to
the raise in quotas. Julie Flynn, chief executive of Free TV, the industry’s
umbrella body, said: local content quotas
“Should
not be increased and they should be more flexible than they are”, in light of
the convergence of television and digital platforms. (Holgate,
2012)
James Warburton,
chief executive of the Ten Network (Ten), also criticised local content rules
for not allowing local programs broadcast on the FTA digital channels to count
for the quotas. He wrote in an opinion piece for The Australian Financial
Review,
“Unfortunately
the Australian Content Standard, which sets out the local content rules, was
framed well before digital multi-channels arrived.” (Warburton,
2012)
He
was particularly referring to Ten’s longest running and successful drama
series, “Neighbours,” which airs on its free-to-air channel which would have
met the quota requirements if it was counted towards it. Despite these
criticisms, a news article by the Sydney Morning Herald, reported that Pay TV
has upped their local content spending significantly. However, it was pointed out that most of
their investment was put towards expensive sports rights instead of spreading
them between the different genres. Minister for Broadband, Communications and
the Digital Economy, Stephen Conroy, quickly responded by saying at least 10
per cent of total programming expenditure needs to be put towards drama (Strachan,
2012) .
While it is common knowledge that producing local content is
costly, the paper found that the three commercial free-to-air televisions have
no reasons to complain, bringing in top dollars with a combined
annual revenue of between $3.5 billion and $4 billion, while earning more than
$2 billion in the second half of last year from advertising alone. They also received a licence fee rebate of
$250 million in the past few years and $53.5 million from the government to
move off the spectrum they had already agreed to vacate. With figures like these, it is only
justifiable that the review has pushed for more Australian content over the
television (McCreadie, 2012) .
The convergence review also
proposed further expenditures by the television industry to support the push
for more Australian content. The review proposed a uniform content scheme which
will require CSEs to invest a certain percentage of their revenue from Australian
drama, documentary and children’s programs. Alternatively, they may also choose
to contribute a percentage of its revenue to a ‘converged content production
fund’ for reinvestment in traditional and innovative Australian content. In
order to better support content production, the review also prosed a raise of
the Producer Offset from 20 per cent to 40 per cent. Finally, it also recommended
the creation of a converged content production fund, which will get direct
funding from the government and may include spectrum license fees from
broadcasting services and contributions from content service enterprises under
the uniform content scheme. These proposed expenditures caused the current
shadow minister for communications and broadband, Malcolm Turnbull, to lash out
at the review and claimed that the requirements would impose an additional
financial burden on enterprises which in many cases are struggling to remain
profitable and viable (Turnbull, 2012). But is the television industry really
struggling while research has shown that it is still the medium of choice for
consumers and advertisers alike? Or, could it be that when the review finally
discloses what the said percentages of contributions are that it would prove to
be costly for the industry? This is yet to be unravelled in a few months.
Interestingly, this paper could not
find the implications that these local content requirements would have in terms
of quality of programs produced. One can only assume that pressurising digital
television broadcasters as such could possibly force them to produce and air
low quality programs in an attempt to meet the standards. For instance, do
Australians really want locally produced television programs similar to the
“Jerry Springer” show? The review seems to have failed to define what “quality”
programming means and this only provides broadcasters a loophole through which
they can cut costs while meeting the standards of the review. There is also
another question that the review has failed to answer - Will the content
standards stifle the development of emerging content service initiatives, even
where those initiatives are housed within larger organisations that qualify as
CSEs (Corrs Chambers Westgarth, 2012)?
This is yet another important question that the review will need to
consider before implementing the changes.
New
Standards Body
The final review
proposed the establishment of two separate bodies – the first, a statutory
regulator which will replace the current Australian Communications and Media
Authority (ACMA) and secondly, an industry-led body which will oversee
journalistic news and commentary across all platforms in the media and
communications sector.
Communications Regulator
The review recommends that the new regulator would –
“Be independent
and operate at arm's length from the Government. Significantly, ministerial
control of the regulator would be only through disallowable legislative
instruments, not general directions.”
This regulator would take the form of a statutory
corporation which will be managed by a board which will have the full powers to
act within the limits of the law. It will be interesting, to see the persons
who will be appointed to the “independent” board. Despite its “arm’s length”
operation from the government, it would still be, according to the review –
“Held
accountable for its decisions under existing parliamentary, judicial and
administrative arrangements; for example, disallowance by Parliament, merits
review by the Administrative Appeals Tribunal and judicial review…”
With the exception of news and commentary, the
regulator would be responsible for all compliance matters relating to media
content standards. This automatically begs the question – What would be
classified as news and commentary? Does
anyone who uploads a YouTube video discussing current affairs become subject to
regulation, if suppose YouTube were to meet the CSE requirements?
The new regulator would also define the thresholds for CSEs, administer ownership rules, and ensure Australian and local content obligations are applied. With regards to the above, Free TV Australia addressed some concerns in their submission to DBCDE. Firstly, they wanted the review to give a clearer indication as to the relationship between the new regulator and the DBCDE in terms of policy making and also the Australian Competition and Consumer Commission (ACCC) in terms of competition rules. Secondly, Free TV refers to the statement in the review which says the new regulator would not be subject to:
The new regulator would also define the thresholds for CSEs, administer ownership rules, and ensure Australian and local content obligations are applied. With regards to the above, Free TV Australia addressed some concerns in their submission to DBCDE. Firstly, they wanted the review to give a clearer indication as to the relationship between the new regulator and the DBCDE in terms of policy making and also the Australian Competition and Consumer Commission (ACCC) in terms of competition rules. Secondly, Free TV refers to the statement in the review which says the new regulator would not be subject to:
“Unreasonable
procedural requirements”
In its report, it wanted the review to explain how
it will guarantee that there will indeed be procedural fairness, since the
review failed to provide details (Free TV Australia Limited, 2012).
The regulator
would also be required to set technical standards which will assist users in managing access to content, such as parental locks
or age-verification systems. However it is yet to provide more details. While
many details of this new regulator are yet to be revealed, it is difficult to
determine the impact of this new regulator on TV in Australia.
News Standards Body
The new standards body would
oversee all news and commentary on television and thus:
“Would administer a self-regulatory media code
aimed at promoting standards, adjudicating complaints, and providing timely
remedies”
However, once again the review failed to specify its reach of
the regulation. For instance, would it regulate news and commentary content
from overseas news agencies such as British Broadcasting Corporation (BBC) and
Fox news, which currently air on free view and if so, how? Does that mean it
would monitor news content and engage in censorship?
Because news and commentary play a vital role in any
democracy, it is critical that journalistic standards in fairness, accuracy and
transparency be applied regardless of the delivery platform. However, it is
unclear as to how the news standards board would go about implementing its
powers.
Broadcasting Spectrum
One of the benefits
that the switchover to digital TV provides is the release of TV spectrum so
they may be allocated for next generation mobile broadband services. This will
also allow TV stations to broadcast on more than one channel using the same
bandwidth. After the switchover, there will be 126 megahertz (MHz) of spectrum,
in the 694-820 MHz range, available for use. This is what the Department of
Broadband, Communications and the Digital Economy (DBCDE) refers to as the
“digital dividend.” Of the 126 MHz, the 700 MHz is the most coveted of all. The
International Telecommunications Union (ITU), which specifies the approved
services to be used by certain radio frequency bands worldwide, allocated the
700 MHz band primarily for broadcasting, even though the band could also be
used for fixed wireless and mobile services (International telecommunications
Union, 2012). Traditionally, the entire 700 MHz band was used for analogue TV
broadcasting. But with the switchover, its availability means
telecommunications corporations could fight for a slice of the bandwidth as
well.
So, why is the 700 MHz
bandwidth so popular in the first place? This is because it possesses excellent
propagation characteristics, such as being able to penetrate buildings and
walls easily, and it covers relatively large geographic areas without
unacceptable deterioration of the signal. This means that lesser base stations
would be needed to serve a large area, thus providing for an efficient use of
wireless networks (Marius, 2012). Therefore, it seems likely that most of this
bandwidth will be snatched up by telecommunication companies. Indeed, in a
report prepared in 2009, by Spectrum Value Partners for the Australian Mobile
Telecommunications Association (AMTA, an association of mobile operators,
handset manufacturers, retail outlets, network equipment suppliers and other
suppliers to the industry), it indicated that Australia’s economy would be
boosted by up to ten billion Australian dollars if at least 120MHz of useable
spectrum from the digital dividend were allocated to mobile broadband uses
(Access Economics Pty Limited, 2010).
In the final review,
existing holders of commercial broadcasting licences would have their apparatus
licences replaced by spectrum licences planned for the supply of broadcasting
services. The broadcasting licence fees
would be replaced by annual spectrum access fees based on the value of the
spectrum as planned for broadcasting use. However, this fails to answer an
important question – How will the television industry, which will spend a
substantial amount on spectrum be protected against inroads made by content
service providers who avoid the use of such spectrum (Corrs Chambers Westgarth,
2012)?
Conclusion
In a survey done
by Deloitte, of more than 2000 Australian consumers, with 63 per cent, TV was
by far the most popular choice for entertainment, followed by the internet at
47 per cent and listening to music at 30 per cent (Davie, 2012). Hence, this paper decided to focus on
the impact of the Convergence Review on television because contrary to popular
belief, television is still the dominant media for Australians. Therefore, any
changes made to the way it functions will impact Australian viewers directly.
This paper chose to critically examine the proposed changes that would most
impact the television industry, mainly the impact of the new regulators, the
coinage of the term CSE, the content regulations and its associated financial
contributions and finally the financial impact of spectrum licensing. The paper
did not touch on media ownership as the ownership landscape in the television
industry will not be as impacted as much as radio or internet will be. While
there are many aspects of the review that were unclear, especially in terms of
the actual figures associated with expenditures and also detailed ways in which
the regulations will be implemented, the paper still managed to speculate on
the various possible implications it would have on the television industry. One
on hand, proponents of the review claim that the television industry will in
fact be doing well despite facing competition from other media platforms and
therefore, their expenditures are justified. On the other hand, there are major
television networks which have expressed unhappiness with having to contribute
to funds and licencing and to produce more Australian content, claiming that
they are struggling to survive. Until the review comes into implementation it
will not be possible to discuss the review’s impact in financial terms. The
review is set to be implemented in three stages; however, no specific deadlines
have been set by the DBCDE as yet.
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