Australian Broadcasting Corporation. submission to. National Cultural Policy Consultation

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1 Australian Broadcasting Corporation submission to National Cultural Policy Consultation February 2010

2 Introduction The Australian Broadcasting Corporation (ABC) welcomes the opportunity to provide a submission to the National Cultural Policy Consultation. The ABC is a statutory corporation under the Australian Broadcasting Corporation Act 1983 ( the ABC Act ). The ABC Act, which includes the ABC Charter, sets out the basic functions and duties of the Corporation. With a responsibility to reach all Australians, ensure participation in the national debate and provide access to range of information, entertainment and other programming, the ABC seeks a presence on all major electronic media platforms. The Corporation has a central role in sustaining and contributing to Australia s culture, providing education, entertainment and civic and cultural engagement. The ABC Charter states that the functions of the Corporation include broadcasting programs that contribute to a sense of national identity and inform and entertain, and reflect the cultural diversity of, the Australian community [and] broadcasting programs of an educational nature. Further, the Charter prescribes that the Corporation encourage and promote the musical, dramatic and other performing arts in Australia. 1 Engaging Australians with diverse, high-quality and innovative local content is at the centre of the ABC s Charter obligations. Enabling Australians to create, debate, enjoy and explore their own cultural products lies at the heart of cultural policy. In particular, the cultural policy settings that apply to the creation of audiovisual content and which are designed to promote and support the creation of local film and television products are of interest to the ABC. In the context of the technological revolution that is occurring in both the creation and distribution of television content, it is important that the policy framework supporting local production takes an holistic approach, is comprehensive and accounts for the changing nature of the business models that finance local audiovisual content products. Specifically in relation to Australian audiovisual content creation, this means examining and identifying the right mix of regulatory and funding support mechanisms to enable our screen production and broadcasting industries to be successful. More broadly, it is important that such a policy framework also consider the various linkages between the different cultural sectors and in particular cultural institutions and their various cultural product inventories and archives. As a distributor and creator of Australian content, the ABC can play an important role as both a coordinator and facilitator of local content partnerships. The National Cultural Policy Consultation and the concept of a national cultural policy integrating the full range of artistic endeavour presents an opportunity to consider technological and business changes that may undermine the nature and focus of existing cultural policy interventions. For the broadcasting and audiovisual production industries, a re-evaluation of the targets of cultural policy support in the context of a rapidly- evolving technological landscape and the development of policy approaches that leverage existing cultural assets is both timely and essential. 1 Australian Broadcasting Corporation Act 1983, s.6. 2

3 Background Australian Content on Australian Screens Television delivers economic, social and cultural dividends and television content is an important part of the Australian cultural landscape. The importance of television content to the cultural policy goals of various governments is reflected by the objects of the Broadcasting Services Act 1992 (BSA) and in the Charter of the ABC. Over time Australian governments have created and sustained an audiovisual public policy framework that regulates the broadcasting industry in order to pursue a number of goals. One critically important goal of this policy framework has been to achieve certain cultural outcomes through the production of specific types and amounts of Australian content on television. The measures designed to support this local content creation include tax rebates, direct funding support via contestable mechanisms, funding of the national broadcasters, regulating for the transmission of or expenditure on certain types and amounts of local content and, most recently, providing the free-to-air commercial television broadcasters with a licence fee rebate. These cultural policy interventions have been developed to address a market failure in the production of local content. They have also been developed within a particular technological context and taking into account audience behaviour, business models and the wider international environment. The Australian television industry today is experiencing a period of significant technological change. A number of factors will, or have the potential to, significantly change the very notion of television, as well as to challenge and change the business models underlying television and to undermine the basis upon which Australia s cultural policy interventions have been designed. The transition to digital television means that free-to-air broadcasters can now transmit more channels and subsequently more content using the same amount of spectrum as they used to transmit a single channel in the analogue world. Digital multi-channels such as ABC2, ABC3, OneHD, SBS2, Go! and 7TWO are recording significant successes and growing audience share. While it is difficult to assess just where these audiences are coming from yet, it is clear there is an interest from audiences in more content choice. Over the next eight years, the Government will invest up to $43 billion to build a national fibre-tothe-home network bringing 100 megabits per second (Mbps) capacity to approximately 90 per cent of the population. The National Broadband Network (NBN) will be open access and will sell wholesale services exclusively. The NBN will change the nature of competition in the fixed telecommunications market and provide the basic infrastructure to fundamentally change the nature of competition in the content market. In addition, the realisation of a digital dividend from the sale of spectrum previously used for analog television will pave the way for the introduction of next generation mobile networks using Long Term Evolution (LTE) technology with a theoretical top download speed of 100 Mbps. 3

4 These technological developments and the services that grow on these new platforms will fundamentally change the television landscape. There will be more channels than ever available to Australian audiences on more platforms than ever. There will be time-shifted channels and intelligent set-top boxes that allow time-shifted viewing. There are likely to be more subscription services and more pay-to-view services, all of which will be accessible via the internet. In short, there will be more content. However, there is unlikely to be much more Australian content. In relative terms, Australian content and Australian stories will be a smaller part of the whole. Furthermore, the sectors that traditionally transmitted the most local content and which are the target of cultural policy interventions may not be as dominant as they were in the past if the technological barriers to new market entrants on one platform (such as spectrum scarcity) are not present on other platforms. In this environment, there is a real risk the cultural policy interventions that were developed in an analogue world around the notion of a single platform aggregating large audiences may not be effective or efficient in a digital world. Discussion Local Content Policy levers Digital television multi-channelling allows free-to-air broadcasters to transmit several channels of content in the spectrum space they previously used to broadcast one analogue channel. The ABC currently transmits ABC1, ABC2, ABC and ABD HD. The commercial broadcasters and the SBS also transmit multi-channels. Commissioning and producing local content for television is expensive. While Australian production is an efficient (albeit small in global terms) sector, the local content environment is characterised by structural market failure. The limited size of the Australia market means it continues to be susceptible to the dominance of low-cost, overseas programs. For example, drama programming that would cost A$1 million an hour or more to produce can be acquired from overseas for broadcast in Australia for less than $50 100,000 per hour. In the digital multi-channel context, it is likely that, barring regulatory intervention or financial assistance, the majority of broadcasters will populate new channels with cheaper foreign content. The ABC notes that the Department of Broadband, Communications and the Digital Economy (DBCDE) is currently conducting a review of content standard requirements applying to digital multichannels. In a fragmented television marketplace with higher costs and increased competition from a range of sources, it is likely that commercial television broadcasters will be forced to re-assess their business models and as a product of this, their program schedules. The commercial free to-air-television sector is the main investor in local production in Australia with Free TV Australia claiming its members spend almost $800 million a year on local content production. This figure is unlikely to 4

5 change, despite the Government s recent announcement of a licence fee rebate to the commercial free-to-air broadcasters, worth an estimated $250 million. If local content quota levels remain static while investment in foreign content increases, the local production industry is likely to suffer. The nature of services to be provided on other platforms and via other technologies such as highspeed broadband also need to be considered. While Australian-based subscription services will most likely be required to purchase subscription television licences and hence be subject to the local drama content spend requirements, foreign services transmitting to Australian audiences via broadband will not. Such services will most likely fall outside the current regulatory mechanisms designed to guarantee certain levels of local content. In light of the many changes facing the Australian broadcasting sector and the likely flow on effects to demand for locally-produced screen content from the independent production sector, the ABC believes there is a need for an holistic review of the mechanisms designed to foster and support local content production. Specifically, such a review needs to be conducted with a focus on local television screen products and the ways in which both demand and supply of such content can be promoted. Today local television production is supported by a range of regulatory and funding mechanisms. These include: Transmission quotas on the commercial free-to-air broadcasters Drama content expenditure requirements on subscription television providers Tax rebates for local screen production (e.g. the Producer Offset) Direct funding of the national broadcasters Contestable funding support provided through Screen Australia and State Screen Agencies The Government has also recently announced its intention to further support Australian content production through licence fee rebates for commercial television broadcasters. The regulated quotas imposed on the commercial free-to-air broadcasters are currently the subject of review by the DBCDE. The drama content expenditure requirements placed on the subscription television industry are not currently under review. However, it is likely any attempt to increase or modify such quotas on the broadcasters main channels in the future would likely impact on the sector and would be complicated by the existing requirements which form part of Australia s Free Trade Agreement with the United States. It is suggested that another focus of a review should also be issues that could be modified to provide improved support for local television content creation. National Broadcaster Funding As part of the ABC s triennial funding, the Government announced in May 2009 the biggest increase in ABC funding since its incorporation a $167 million dollar package. 5

6 For ABC Television this funding increase included two significant outcomes: $67 million over three years for a new dedicated children s channel ABC3; and $70 million in new funding for local drama production. The allocation of new dedicated funding for ABC3 has allowed the ABC to launch the new channel with 40% local content, building to 50% in later years. As commercial broadcasting commercial models come under increasing pressure and foreign television competition via IPTV grows, the ABC will continue to play an important role in producing and screening Australian content of both broad and specialised appeal. Ongoing funding to ensure the ABC continues to fulfil this role will be vital. Content Production Funding While the role of national broadcasters in producing and screening significant levels of local content is important, the role of the broader television production industry also needs to be recognised. Diversity of ideas, innovation and a broad base of skilled workers all flow from a healthy local production sector, of which the ABC is just one part. The amount of funding available for television production is one area in which governments can intervene to support Australian content. One source of such funding could be the proceeds from any auction of digital dividend spectrum. The benefits of this support for local production would be maximised by distribution across the production sector as a whole through a mix of direct allocations to the national broadcasters and targeted television production funding for Screen Australia. In essence, the Government would be transferring a portion of the revenue generated through the Digital Dividend to the television production sector. While it is unclear who will be successful licensees of the spectrum freed up or what uses they will make of the spectrum, local content should be supported. Accordingly, such a revenue transfer would support the existing policy framework and objectives designed to promote the production of local content. The Producer Offset The Producer Offset was introduced by the Government in 2007 and is administered by Screen Australia. It is worth 40 per cent of qualifying Australian production expenditure on feature films and 20 per cent on other programs such as content produced for television. Other offsets administered by the Department of Environment, Heritage, Water and the Arts include the Location Offset and the Post-production, Digital and Visual Effects (PDV) Offset. The Producer Offset is a significant component of the financing of the majority of the programs that ABC Television commissions. Feedback from independent producers and the BC's experiences indicate however that the scheme could be modified to better support television production. Level of offset With the level of offset set at 20%, producers use the offset and seek investment from Screen Australia. Therefore, where producers previously dealt with one system to finance their program 6

7 the FFC they must now deal with two Screen Australia and the Producer Offset. If the Offset was set at a higher rate, producers would also have greater flexibility in the financing of their projects. Bringing the offset for television production into line with the 40% offset for feature films would be of significant assistance to producers. Timing of Acquittals As the Offset rebate is administered by the Australian Tax Office via each company s end-of-year tax return, producers are scheduling productions to deliver in June each year to avoid substantial interest bills being carried forward for another year. Productions are bunching into the last eight months of the year, causing a spike in employment for that period. There are less crew available at this point, their rates are more competitive and budgets therefore increase. If the Offset was administered in at least two points during the financial year this would reduce bunching and pressure on budgets and make it more viable for independent producers to maintain a steady and sustainable production model, arguably the primary intention of the scheme. Administration The process of financing is now much more onerous on the producer especially as they get closer to the production when their real focus needs to be on getting the production shoot ready. The level of compliance and paperwork required to obtain the Offset is substantial. The ABC and the Arts The ABC s commitment to the arts flows from its Charter obligation to encourage and promote the musical, dramatic and other performing arts in Australia, which the Corporation has consistently interpreted as a wider responsibility to present the arts more generally. The ABC s commitment to the arts is reflected in a range of programs and activities. In April 2008, the ABC and the Australia Council announced a strategic partnership to develop initiatives spanning the breadth of arts genres and practice, in a range of formats, including live performance. The ABC presented this arts content across ABC1, ABC2, ABC Online, Second Life, internet channels, and through mobiles, vodcasts and user-generated content. More recently, in October 2009, the ABC partnered with The Australia Council for the Arts to present the national Presenting the Arts Forum on 26 and 27 October The forum drew in creative and strategic thinkers from across Australia to discuss the arts in the digital era and look at the opportunities digitalisation can provide. Last year, the Corporation also launched its ABC Arts Gateway, which draws together arts content from across the ABC, including television, radio, news, online and archive material. In all of these developments, the value of the relationships and strategic linkages between arts organisations, cultural institutions and the ABC has been central. As a multiplatform content provider with a charter obligation to both the Arts and innovation, the ABC is well placed to 7

8 contribute to and sustain high-quality Australian cultural content. Furthermore, this content is and should be available to all Australian s regardless of income, social circumstances or geography. An integrated policy approach to developing and delivering artistic content to Australian audiences across platforms is needed. Such a framework could encompass formalised linkages, funding to digitise achieved cultural content and programs to ensure that content can be distributed both online and on-air. Conclusion In the increasingly fragmented television environment, an integrated approach to supporting local content production and distribution will ensure Australian audiences continue to have access to Australian stories. This entails supporting both broadcasters and the production industry. Regulatory intervention and funding support are targeted at both the supply and demand aspects of content production. In the digital world, a review of the effectiveness of those targeted interventions is needed. The ABC continues to play an important role in the distributing cultural products and developing innovation across a range of platforms. An integrated approach to cultural product development, access to cultural institutions digitised archives and the formulation of strategic linkages are all aspects of a cultural policy framework in which the ABC can be an important role. 8

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