MUSIC AND THE MEDIA: GOVERNMENT REGULATION IN AUSTRALIA AND ABROAD Lynn Gailey, Music Council of Australia March

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1 MUSIC AND THE MEDIA: GOVERNMENT REGULATION IN AUSTRALIA AND ABROAD Lynn Gailey, Music Council of Australia March Tables of Contents Executive Summary 2 Broadcasting content quotas an international overview 4 Commentary on the role of music quotas on radio 10 Australia Radio 12 Does the Code of Practice Work? 13 Can the Code of Practice be Changed? Should it be Changed? 14 Australia Application of Content Quotas for Television and Eligibility for Subsidy for Film and Television Productions 16 The State of the Australian Music Industry 18 Just a Few A Possibilities for Change that Might Assist Australian Musicians 21 Regulating for the Future 24 Appendices A. Content regulation and the First Amendment to the United States Constitution 25 B. Australia music content regulation timeline radio 26 C. Australian content regulation television broadcasting timeline 27 D. Office of the United States Trade Representative: National Trade Estimate Report E. Canada Radio 38 F. Television Program Standard for Australian Content in Advertising (TPS 23) 41 G. Broadcasting Services (Australian Content) Standard 2005 as amended made under section 122 (1) Broadcasting Services Act H. What is an Australian film, television drama or documentary for the purposes of the Producer Offset 45 I. Official Co-production Program administered by Screen Australia 46 J. Building Support: Review of Private Sector Support for the Arts in Australia, October K. Flexible Vision: Regulatory options table 50 L. Regulating the Future in Selected Overseas Jurisdictions: Broadband 52 Attachments 1. AMPCOM Annual Report 2. RIAJ Yearbook

2 Executive Summary The Department of Broadband, Communications and the Digital Economy is currently conducting a Review of Convergence. The Convergence Review Committee has released an Interim Report and is expected to release its final report at the end of March. Central to the terms of reference for the Review is the government s objective to foster the production of Australian content and to ensure Australian audiences are able to access adequate levels of Australian content. Thus far the Music Council has recommended that Australia either implement or retain the right to implement quotas in broadcasting to the extent allowable within the provisions of the Australia-United States Free Trade Agreement, and to monitor developments in broadcasting-like services to determine, in a rapidly evolving environment, whether it will be possible or desirable to regulate broadcasting-like services delivered online. The Interim Report has flagged support for a shift over time from the use of quotas to the introduction of an expenditure requirement. If this occurs, it is likely to profoundly affect levels of Australian content in broadcasting and represent the biggest shift in government broadcasting policy since This history of Australian content in commercial broadcasting has, until now, been a history of regulation. The Convergence Review is also being undertaken against a background of dramatic changes in the music industry. In film and television, a mix of subsidies, tax offsets and quotas prevail. These mechanisms are intended to make production possible and to support productions that are Australian (other than location incentives designed to attract offshore production). However, in the underpinning regulation that determines definitions of Australian, Australian music is a consideration but it is not determinative. Music does not enjoy the same levels of government support as is enjoyed by film and television. Whilst governments provide support for orchestras, some support for other music genres and some funds are available to assist touring, the quantum pales into insignificance when compared with support for the audiovisual sector. The most important government intervention in supporting recorded music is the current music quotas in commercial radio broadcasting a mechanism that is now being questioned with its extension to digital radio deferred for three years. This paper endeavours to provide information about how government interventions operate in an attempt to highlight how they might be improved to the advantage of Australian music from the seemingly minor (amending the definition of an Australian television commercial to give greater emphasis to music) to the rollout of further content quotas in digital television and radio; from the extension of the Producer Offset that applies for films and certain television program types to musical live theatre and recorded music to the possibility of amending the eligibility criteria for research and development tax deductibility; to the possibilities of government-supported micro- 2.

3 financing or matching funds raised through crowd sourcing; among others. It also looks at how quotas and other government support mechanisms are utilised in selected overseas jurisdictions. 3.

4 Broadcasting content quotas an international overview Since the advent of broadcasting, around the world jurisdictions have responded to what has been considered by almost all governments to be the pervasiveness of the broadcast media. There have been a variety of responses. Totalitarian regimes and countries with exclusively state owned media have typically responded by controlling the media and thus determining what can be broadcast. There is an important distinction between the objectives and methods of these governments with regard to broadcast media and those of liberal democracies and their public broadcasters at arm s length from government. Countries with massive domestic markets like the United States and India have considered there is no need to protect the output of their cultural sectors and have not introduced content regulation. Indeed, in the case of the United States, introducing content quotas appears to offend the First Amendment of the US Constitution. A concise explanation sourced from Wikipedia is at Appendix A. Other countries have responded with measures that include content quotas, direct subsidy, taxation concessions and the establishment of publicly funded broadcasters. Many have used a mix of measures. A time line of music content regulation on radio in Australia is at Appendix B. A time line of content regulation for television broadcasting (together with the introduction of subsidy and other support measures) in Australia is at Appendix C. The Office of the United States Trade Representative (USTR) monitors all sectors where domestic regulation might, in the view of the United States, impede free trade or put another way, might impede America s capacity to export. Below is a summary of content quotas around the world drawn from the USTR National Trade Estimate Report Full extracts from the Report in respect of audiovisual services and broadcasting for those countries to which the USTR has drawn attention is at Appendix D. Argentina Australia Brazil Canada Europe Imposes costs on foreign films. An overall transmission quota of 55% for commercial free-to-air broadcasting with subquotas for adult drama, children s programs and documentaries. A 10% expenditure requirement for predominantly drama subscription television channels. A music quota graduated according to genre of up to 25% for commercial free-to-air radio. Taxes foreign film and television programs. For open (free-to-air) television broadcasters, 80% of programs must be local. Local content quotas for television and radio. Up to 35% for music on radio. For an explanation of MAPL the content quotas for music see Appendix E. Television without Borders Directive 50% quota for European programming. The EU Directive on Audiovisual Media Services was implemented in France Bound by the EU Directives but goes further with a quota of 60% for European programming and 40% for French. 40% of songs 4.

5 Indonesia Israel Korea Malaysia Singapore South Africa Ukraine Venezuela Vietnam broadcast on private and public broadcasters must be French. 1 Cinemas must reserve 5 weeks per quarter for French films. In 2009 declared no more than 60% of films screened could be foreign. Restrictions on advertising. Until 2006, it enforced a screen quota requiring cinemas to reserve 146 days per year for Korean films. Cut to 73 days per year in response to pressure from the US during protracted free trade agreement negotiations. Foreign popular music capped at 40% of all music broadcast. 80% of television programs must be produced by local companies owned by ethnic Malays. 60% of radio programming must be local. Restricts use of satellite dishes. Content regulations for television. Local content quotas for radio and television but not enforced. Content quota of at least 50% on television. 50% of radio programming must be local. In the case of music, 50 percent of the Venezuelan produced material must be traditional Venezuelan songs. Annual distribution and exhibition quota for Venezuelan films. Considering establishing a single government owned buyer for all overseas programs. Additionally, and the following cannot be read as being comprehensive, other countries, have utilised content quotas. Germany considered introducing a music quota on radio in 2001 but it was rejected. The industry was seeking a 50% quota for new releases, with 50% of that songs being sung in German. 2 In 2003, Nigeria reportedly had an 80% music quota apparently met by government but not private radio stations. 3 Also, in 2003, the Philippines had a reportedly unenforced requirement that radio stations with a music format play at least four original Filipino compositions an hour. At that time bills were before the Senate variously to increase the existing requirement, and extend it to television and music in 1 Loi du 1er février 1994 requires private radio stations to broadcast, beginning January 1, 1996, Frenchlanguage songs for 40% of their variety music program during peak listening hours, with at least half of the material being from new artists or new productions. Cited in Ivan Bernier, 2004, Local Content Requirements for Film, Radio, and Television as a Means of Protecting Cultural Diversity: Theory and Reality, Section 1, p. 9, 2 Richard Letts, October 2003, The Effects of Globalization on Music in Five Contrasting Countries. Australia, Germany, Nigeria,The Philippines and Uruguay, Music Council of Australia, October 2003, p.9, 3 Ibid. 5.

6 public places. 4 Whilst Uruguay has had music content quotas for radio, they had not been enforced. 5 Along with many others countries in the region, the media in Brunei is government owned and controlled. Unusually and perhaps because of its small population, Brunei earlier this century set itself a local content target of 60% for Radio Television Brunei. 6 It is not clear whether this has been achieved but it is no longer listed as an aspiration on its website. 7 Certainly the schedule indicates a high level of local content mixed with Malay content. 1997, South Africa adopted The South African Music Local Content Regulation which requires at least 20% of music broadcast from 5 a.m. 11 p.m. to be from South Africa and to be fairly evenly distributed during that time period. 8 Local content quotas were amended and increased in % for commercial television broadcasters, 55% for public service broadcasters with subquotas along the lines of those in Australia, and 8% for terrestrial subscription services. The quota for commercial radio rose from 20 to 25%. 9 Chilean law gives the Consejo Nacional de Television de Chile the right to require up to 40 per cent of programming on free to air television to be Chilean production. This requirement has to be mandated through a Consejo resolution but since it was introduced into law in 1989, it has never been adopted given that local content has always exceeded 40 per cent. According to the exchange of letters in the US-Chile Free Trade Agreement, local content has been more than 50 per cent on average. Local content is monitored annually by taking a two month sample. 10 According to Bernier, Argentina, Costa Rica and Korea also have content quotas for television. It appears that the Argentinean quota operates in a similar fashion to the Chilean quota Richard Letts, October 2003, The Effects of Globalization on Music in Five Contrasting Countries. Australia, Germany, Nigeria, The Philippines and Uruguay, Music Council of Australia, October 2003, p.9, 5 Ibid. 6 Media Entertainment & Arts Alliance, February 2005, Submission to the Department of Foreign Affairs and Trade, Proposed Free Trade Agreement between ASEAN and Australia and New Zealand, 7 See Radio Televisyen Brunei Organization at 8 Ivan Bernier, 2004, Local Content Requirements for Film, Radio, and Television as a Means of Protecting Cultural Diversity: Theory and Reality, Section 1, p. 9, 9 Terence W. Farrell, 2010, Caribbean Identity and the Development of the Creative Audio-Visual Industry: A Proposal, pp. 7-8, 10 Side Letter on Television, United States - Chile Free Trade Agreement, 2006, USTR, 11 Ivan Bernier, 2004, Local Content Requirements for Film, Radio, and Television as a Means of Protecting Cultural Diversity: Theory and Reality, Section 1, p. 11, 6.

7 Notwithstanding the size and homogeneity of its domestic market, Japan has also embraced content regulation. Local stations must broadcast at least ten percent selfproduced programming. Ten percent of all programming screened by commercial channels must be education programs and a further 20 percent must be dedicated to cultural programs. Like the United States, Japan is a homogenous market with seemingly small appetite for foreign television programs. Approximately 95 per cent of all programming on terrestrial television is Japanese. 12 A standout example is New Zealand. A developed country with a small population and consequently a small domestic market where a government, committed to trade liberalization, the free market and domestic deregulation, made commitments in the General Agreement on Trade in Services (GATS) that prevented the incoming Clark Government from introducing quotas. Several attempts to work a way through the impasse failed, with the United States repeatedly pointing out quotas would infringe New Zealand s GATS commitments. 13 In summary, it can thus be recorded that a stated policy of a newly elected government could not be put into action because an earlier government had thwarted this very measure through relevant GATS concessions, with the potential contravention against GATS being pointed out both from within and without... This is a problem, moreover, that exists not only in relation to the GATS but also with regard to all international agreements that restrict national political autonomy. 14 Only a relatively few countries have made commitments in GATS in the audiovisual sector. The only one to do so in respect of radio prior to GATS entering into force was the US. Some have made commitments of a very limited nature. Australia made a commitment covering: services by advertising agencies in creating and placing advertising in periodicals, newspapers, radio and television for clients; outdoor advertising; media representation i.e. sale of time and space for various media; distribution and delivery of advertising material or samples. Does not include production or broadcast/screening of advertisements for radio, television or cinema. 15 Of those countries that have made audiovisual sector commitments, many are as limited as Australia s. 12 Media, Entertainment & Arts Alliance, 2007, Submission to Department of Foreign Affairs and Trade regarding Japan Australia Free Trade Agreement, submissions/view-category/page UNESCO, n.d. An example case: New Zealand and local radio quotas, Helen Clark, 2002, Address delivered at a jointly convened UNESCO and UNEP high-level Roundtable held on 3 September 2002 in Johannesburg during the World Summit on Sustainable Development, published in Cultural Diversity and Biodiversity for Sustainable Development, p. 31, 14 UNESCO, n.d. An example case: New Zealand and local radio quotas, p. 2, ments.pdf 7.

8 As noted above, alongside quotas, governments have used a range of mechanisms to support local content. Alongside public broadcasting and regulation of commercial broadcasting, many governments support the production of local content through direct subsidy grants and investment and indirect subsidy, often administered through the taxation system. Others establish hypothecated funds to create dedicated finance pools to support production, for example, by utilising income from spectrum auctions, levies on broadcasters, media mergers and acquisitions and so on. Yet others offer at a state or national level incentives to attract offshore production to their territory to drive local employment. In most developed countries notably other than the United States governments support public broadcasting again with a range of finance models. Some allow a mixed model of direct government appropriation along with advertising revenue like the Special Broadcasting Service (SBS) in Australia. Some European countries and the United Kingdom use licence fees. Greece uses a tax on electricity. 16 Others like the Australian Broadcasting Corporation (ABC) in Australia are funded by direct government appropriation. In some countries, local content quotas apply to public broadcasters as well as to commercial broadcasters. In Australia, there are no content quotas for public broadcasters but expectations are set out in their enabling legislation. In the case of National Indigenous Television (NITV), objectives are contained in its Constitution The ABC Charter requires the broadcaster to provide within Australia innovative and comprehensive broadcasting services of a high standard and: (i) [broadcast] programs that contribute to a sense of national identity and inform and entertain, and reflect the cultural diversity of, the Australian community; and (ii) [broadcast] programs of an educational nature 17 The SBS Charter states: The principal function of the SBS is to provide multilingual and multicultural radio and television services that inform, educate and entertain all Australians, and, in doing so, reflect Australia s multicultural society. 18 NITV was: established to carry on the business of developing and producing television content 16 European Audiovisual Observatory, 2002, Diversity in financing sources in The financial situation of public radio-television companies in Europe is deteriorating, Strasbourg, 9 April 2002, 17 Australian Broadcasting Corporation Act 1983, s 6 Charter of the Corporation, (1) 18 Special Broadcasting Service Act 1991, s 6 Charter of the SBS, (1) 8.

9 that informs, entertains and educates Indigenous and non-indigenous people and to commission particularly from Indigenous producers and Indigenous media organizations The Constitution of National Indigenous TV Limited, Clause

10 Commentary on the role of music quotas on radio Most discussion of content quotas covers all broadcasting quotas and tends to concentrate on television. Three relatively recent papers look at the Australian experience of music quotas on radio and the Australian experience compared with selected countries. Paul Mason, October 2003, Assessing the impact of Australian music requirements for radio, Music Council of Australia 20. It concludes: Certainly it can be established that radio airplay has a clear effect on the production and consumption of music and as such, requirements for the broadcast of local music can be used as an efficient means of stimulating and maintaining local musical practice. However, it would appear that simply meeting an agreed target may not always be enough. As such, use of local content requirements as a means of supporting local musical practice, would only appear to be effective if they are regularly monitored for compliance and effect, and if the ability to amend the requirements relative to changes in broadcasting and musical practice is maintained. It may be that future discussions around the role of local content requirements should not focus simply on the quantity of local music broadcast, but rather seek to identify areas of local music practice that may require more support and determine how this can be meaningfully achieved through greater airplay. Richard Letts, October 2003, The Effects of Globalization on Music in Five Contrasting Countries. Australia, Germany, Nigeria, The Philippines and Uruguay, Music Council of Australia 21 Despite considerable differences between the jurisdictions, in all five: the recording and broadcast industries are extremely important to music there are both government and privately owned radio stations all except Germany have local content quotas for radio, whether enforced or not. all are signatories to international copyright conventions all are committed to the expansion of international free trade but argue that Culture is not a good or service to be traded like any other. Nonetheless, only Germany and Australia (at the time, 2003) were committed to cultural exemptions in trade agreements

11 Note: In 2003, the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions had not yet been formulated. It was subsequently voted in by the UNESCO General Assembly and now, other than The Philippines, all are now signatories to the Convention. 22 Shane Homan, 2011 Local priorities, industry realities: the music quota as cultural exceptionalism in Media, Culture & Society 23 Abstract: This article examines cultural quota debates in the context of local music content provision in Australia and New Zealand. The commercial radio industries in both countries are examined for the different ways in which the local music industries attempt to negotiate changing perceptions of the national in the shift from analogue to digital media environments. A call for new configurations of local media as cultural exception is made, given the profound shifts in global cultural trade and digital media spheres where reliance upon older notions of cultural nationalism are less stable. 22 See list of parties at

12 Australia Radio As noted above, a music content regulation timeline for commercial radio broadcasters in Australia is at Appendix B. It should be noted that Australia led the way with music quotas on radio, the first being implemented in It took Canada another three decades to follow suit. France followed the Canadian model years later. In 1992, the new Broadcasting Services Act made local content quotas for radio part of a self-regulatory (now called co-regulatory ) code for commercial and community broadcasters. In so doing, it did not change the nature of the measure it is considered a government intervention as its existence is contained within the provisions of the Act. Broadcasters are required to report compliance with the Code of Practice to the Australian Music Performance Committee (AMPCOM). 24 The Annual Report (which includes the text of the Code at pp. 3 6) is attached (Attachment 1). 25 In brief, the Code provides for a number of music categories which attract different quotas. Category Format of Service Mainstream Rock Album Orientated Rock A Contemporary Hits Top 40 Alternative Hot/Mainstream Adult Contemporary B Country Classic Rock Soft Adult Contemporary C Hits & Memories Gold encompassing Classic Hits News Talk / Sports Talk Oldies D Easy Listening Easy Gold Country Gold Nostalgia E Jazz NAC (Smooth Jazz) Applicable Proportion Not less than 25% Not less than 20% Not less than 15% Not less than 10% Not less than 10% Category New Australian Performances as a Proportion of Total Australian Performances 26 A Not less than 25% B Not less than 20% 24 AMPCOM is comprised of representatives of Commercial Radio Australia and the music industry New is defined as released within the previous twelve months. 12.

13 C Not less than 15% Does the Code of Practice Work? Compliance results are reported to AMPCOM by Commercial Radio Australia (CRA) and published annually. The results for are included in AMPCOM s Annual Report at pages See Attachment 1. The data is not subject to independent scrutiny. It is a self-reporting exercise taken at face value. This paper takes the results at face value. As can be seen, other than for a handful of broadcasters whose data was not available, all achieved the necessary quotas. While some barely exceeded quotas, others exceeded them considerably. While some commentators and stakeholders argue that quotas are not necessary because of the sector s commitment to Australian music and the fact that quotas are met, it is possible that in the absence of quotas, those reporting Australian music compliance at or marginally above the required quota may not deliver the same outcome. Some stations meet the quota for new Australian music. Some exceed the quota requirement by 10% or more. Some exceed the quota by considerable margins for example, B104.9 FM Albury and Hot Cairns must meet a quota of 20% for new music yet averaged 58.33% and 40.37% respectively. Sydney s 2DAY FM, Melbourne s FOX FM and Brisbane s B105 FM with a quota of 25% averaged 75.03%, 66.78% and 70.80% respectively. In the face of the results for new Australian music it is difficult to assert as Commercial Radio Australia has that there are difficulties in finding sufficient new music of appropriate quality for broadcast. 13.

14 Can the Code be of Practice be Changed? Should it be Changed? Matters for consideration Under the provisions of the Australia-United States Free Trade Agreement (AUSFTA), music quotas can be retained for free-to-air radio broadcasting, whether analogue or digital. However, the threshold is capped at 25%. In the event the quotas are lowered, they cannot again be increased. In the event the quotas are removed, they cannot be reintroduced. 27 It is highly likely that imposing an expenditure requirement on broadcasters in the place of quotas would offend the AUSFTA. Direct government subsidy to support the sector is, however, permissible. In 2010, the Australian Communications and Media Authority (ACMA) acceded to submissions from Commercial Radio Australia (CRA) to not extend quotas to new digital only radio services. The matter is to be revisited in early In a submission to the Convergence Review, CRA argued that: It is unsustainable and inequitable for free-to-air commercial radio broadcasters to be subject to Australian music quotas when internet-only services and streamed content provided by telecommunications companies and others are not subject to the same degree of intervention. To this end, CRA supports the removal of the Australian music content quota requirement in respect of commercial broadcasters and believes that greater effort needs to be expended at the production level to ensure that a wide range of quality Australian music content continues to remain both available and attractive to music consumers. However, if the Australian music content quota is to be retained, we consider that it may be useful expanding this requirement to other platforms that have a minimum specified take up rate (e.g. Australia based online music services) as a means of ensuring a greater level of regulatory balance between platforms. This requirement should not otherwise apply to personalised communications, such as on demand music download services. While the commercial broadcast radio industry strongly supports Australian music, the ability to meet any Australian music content quota requirements is heavily dependent on the production and availability of quality Australian music. In this regard, CRA strongly believes that greater effort needs to be expended at the production level to ensure that a wide range of quality Australian music content continues to remain both available and attractive to music consumers. 28 Apart from CRA, other submissions to the Review arguing against content quotas include Telstra, the Communications Alliance, Southern Cross Austereo ( While SCA supports the Australian music industry, it considers current local content regulations should be dropped because radio-like services are not regulated and opposes extending current local content regulations to radio-like services. ), and ASTRA (does not support extending quotas to narrowcast radio services) among others Australia-United States Free Trade Agreement, Annex II, Schedule of Australia, p. 6, 28 Commercial Radio Australia, 28 October 2011, Submission to the Convergence Review, pp.26-27, data/assets/pdf_file/0005/143357/commercial_radio_australia.pdf. 29 Submissions to the Convergence Review in response to its open call for submissions can be found at ce_review_open_call and in response to the Interim Report at 14.

15 Other submitters to the Convergence Review argued for the retention of music quotas for radio including the Music Council, Media Wave (which argued against Telstra s opposition to quotas in favour of Australian content regulation being applied to the program inventories of all major Australian-based content aggregators ), the Australia Council, APRA/AMCOS, the Media Entertainment & Arts Alliance, and the ARC Centre for Excellence for Creative Industries and Innovation, Queensland University of Technology (pointing out despite many submissions arguing against the extension of Australian content rules to convergent platforms, recent research by the ACMA shows high levels of support for Australian content rules for the Internet. [84% saying it was somewhat/quite/very important cf 92% for television and the highest support for Internet rules was found in the group] and supporting MediaWave s call for a quota of around 25% being incrementally imposed on the inventories of all Australian-based content aggregators ). Some submissions called for quotas to be replaced with government subsidy to support production, quotas to be replaced with expenditure requirements and the like. The Convergence Review Interim Report observed: Australian music quota requirements currently apply to analog music radio stations. A number of submissions have called for these quotas to be extended to digital radio stations and to internet radio services, consistent with the principle of regulatory parity. Whilst this principle is valid, some digital radio services are developed for specific events, for example to cover tours by popular musicians, and some internet services are user directed. A recommendation on this issue will be made in the final report. 30 In the face of the results for new Australian music (see above) it is difficult to assert, as Commercial Radio Australia has, that there are difficulties in finding sufficient new music of appropriate quality for broadcast. Industry figures informally dispute assertions that production standards are inadequate. Homan questions whether it is possible to accept CRA s avowed support for Australian music in the face of continued calls for abolition of the quota and when its Chief Executive Officer believes provision of Australian music is forced supply. 31 Quotas are a measure consistent with the provisions of the UNESCO on the Protection and Promotion of the Diversity of Cultural Expressions to which Australia is a party and which requires parties to foster their cultural sectors e_review_interim_report. Very brief summaries of submissions made in response to the open call have been compiled by the Music Council and can be made available if desired. 30 Department of Broadband, Communications and the Digital Economy, 2012, Convergence Review Interim Report, Australian Government, p. 13, data/assets/pdf_file/0007/143836/convergence-review-interim-reportweb.pdf 31 Shane Homan, 2011 Local priorities, industry realities: the music quota as cultural exceptionalism in Media, Culture & Society, p. 6, 32 UNESCO, 20 October 2005, Convention on the Protection and Promotion of the Diversity of Cultural Expressions 2005, URL_ID=31038&URL_DO=DO_TOPIC&URL_SECTION=201.html. 15.

16 Australia Application of Content Quotas for Television and Eligibility for Subsidy for Film and Television Productions Australia has a strong quota system for commercial free-to-air television broadcasting. It comprises an overall transmission quota of 55 per cent between the hours of 6 a.m. and midnight with subquotas for adult drama, documentary and children s programs. There is a further quota for television commercials of 80 per cent. Compliance with the overall transmission quota is adequate with broadcasters often exceeding the quota. Exceeding the subquotas is less common, particularly with respect to children s programs and documentaries. Compliance is overseen by the Australian Communications and Media Authority and compliance results are published annually. 33 The AUSFTA allows the application of the current quota arrangements to a secondary channel and in the event a network has a primary channel and more than nine secondary channels, to an additional secondary channel (often referred to as multichannels). It allows for the advertising quota to be applied to two secondary channels regardless of the number of secondary channels attached to the primary channel. In respect of subscription television, there is an expenditure requirement of ten per cent that applies only to predominantly drama channels. The AUSFTA allows for this requirement to be increased to 20 per cent and to be applied at the rate of ten per cent to arts, children s, documentary and educational channels. All the above are subject to ratchet provisions referred to earlier use it or lose it. In the event existing quotas are lowered, they cannot be later increased. In the event they are abolished, they cannot later be reintroduced. What is important for the music sector in respect of television quotas and subsidy for the film and television sector is what is defined as an Australian program. Television Commercials The definition of a complying commercial can be found at Appendix F. s. 6 sets out those elements that are considered. The music composition and performance is optional providing sufficient other elements are Australian. [Note: there are no personnel requirements with respect to radio commercials see Appendix F(a).] Australian Television Programs The definition of a complying Australian television program can be found at Appendix G. As can be seen, music is not a defining element. Australian film and television programs eligible for the Producer Offset While the music can be considered it is not determinative. A summary of the eligibility requirements can be found at Appendix H

17 Official Coproduction Program Certification as an official coproduction allows eligibility as an Australian program for the television quota and access to subsidy. Again, music is considered but it is optional. A summary of the program and the points system can be found at Appendix I. Location and Post, Visual and Digital Effects (PVD) Offsets These offsets are designed to attract offshore production to Australia. The offsets, like the Producer Offset, are made available after lodgement of tax returns. As the Location Offset aims to attract offshore productions to film in Australia, it is rare that the music industry will see any benefit. The PVD Offset looks at attracting offshore productions to Australia to undertake postproduction. The usual beneficiaries are those in visual effects. However, it is also common for Asian productions to mix in Australia and sometimes to record their music tracks. For an explanation of eligibility criteria, the definition of Qualifying Australian Production Expenditure and so on, see the Screen Australia website. 34 Development Funding Screen Australia and the various state film funding agencies provide funds to develop film scripts and scripts for certain television program types. Eligibility criteria vary. Typically, in the absence of a project proceeding to production, development funds are not recoupable. Production Funding Screen Australia and the various state film funding agencies provide investment in feature films and certain television program types. Eligibility criteria vary. Most look for a market place attachment and funding from other sources. Market place attachments for television production are typically television network presales and for feature films can be presales, distribution guarantees, distribution advances and the like

18 The State of the Australian Music Industry Data on the state of the music industry in Australia and elsewhere is remarkably rubbery. Lack of consistency in how the industry is measured here and elsewhere makes analysis difficult. Continual changes in how the industry is measured compound the problem. In Australia, irregular mapping does not assist. Doom, gloom and piracy have been the catchcry of many sectors in the music industry for a decade or more. Some of the available data suggest that the industry is in crisis. Some do not. Some suggest both and some suggest evolution. Nonetheless the picture is not an altogether rosy one, especially in respect to incomes. An interesting snapshot of the music industry globally is contained in the RIAJ Yearbook for See Attachment 2 pages Drawing on data from the International Federation of the Phonographic Industry, it tracks the global share of sales of recorded music in millions of U.S. dollars (page 23) from 2004 to 2009 inclusive. The bad news is that total sales plummeted from $33,613.6 in 2004 to 18,606.2 in However, while America s share of this pie fell from 36.2% in 2004 to 24.5% in 2009, and Japan s share rose from 15.4% to 22.8%. Australia s rose from 2.1% to 2.5%. Another snapshot is offered by the Australian Bureau of Statistics (ABS) ABS, 2009, Arts and Culture in Australia: A Statistical Overview, 2009, 18.

19 Trade in Selected Cultural Services to $m $m $m $m $m $m $m Credits Theatrical film Cinema royalties TV program royalties Video tape royalties Other royalties (a) Total (b) Music royalties Total credits Debits Theatrical film Cinema royalties TV program royalties Video tape royalties Other royalties (a) Total (b) Music royalties Total debits -1, ,122-1,082-1,133-1,211 (a) Includes Multimedia royalties. (b) Includes audio visual, sporting and entertainment. David Throsby has been surveying the arts sector for more than 20 years. His most recent report, Do You Really Expect to Get Paid?, compares mean and median incomes of artists between and It paints a sombre picture. 19.

20 Comparison of mean incomes between 2000/01 and 2007/08 (a) (in 2007 $) 37 Comparison of median incomes between 2000/01 and 2007/08 (a) (in 2007 $) 38 If things are tough for Australian musicians generally, they are tougher for Indigenous musicians. Song Cycles is a joint research project of the Australia Council and the Australasian Performing Right Association (APRA).It finds 37 David Throsby & Anita Zednik, 2010, Do You Really Expect to Get Paid? Australia Council, p. 51, data/assets/pdf_file/0007/79108/do_you_really_expect_to_get_paid. pdf. 38 Ibid., p

21 For many Indigenous music artists, basic rights issues that non-indigenous people assume daily, present untold challenges. The fundamental issue of social disadvantage which the vast majority of Indigenous Australians face is, regrettably, ever present in the lives of Indigenous music artists. 39 Despite the talent and audience interest, attitudes, physical distance, training and education are significant barriers that prevent Indigenous artists from reaching wider audiences. The past decade has been particularly volatile for those in the music sector. New business models are emerging. Some have failed. Some are working. Piracy has been an issue across the globe. Long term trends are not yet clear and research and data collection typically lag behind industry developments. So looking to the digital future, in 2011 the Music Council commissioned Dr Hugh Brown to research, develop, and deliver an annotated set of links and, where appropriate, an annotated bibliography, identifying best practice in digital marketing, promotion, and distribution of music in digital environments. The resultant report, Digital Marketing, Promotion and Distribution, 40 provides links to related business services that are arguably best practice. 46 articles are presented in six sections: Social Media Strategy, Marketing, Promotion, Distribution, Other (covering topics such as fundraising, radio airplay and licensing) and Research. 39 Sally Howland and Ebony Williams 2010, Song Cycles: An audit of support infrastructure for Indigenous music in Australia, Australia Council for the Arts and the Australasian Performing Right Association, page 3, data/assets/pdf_file/0008/76373/song_cycles_full_report.pdf ution. 21.

22 Just a Few Possibilities for Change that Might Assist Australian Musicians Music quotas on radio While the media landscape is dynamic and evolving, radio remains strong. Its value to the listening public can be demonstrated by the fact that total advertising expenditure on radio increased by seven per cent in 2010 to exceed $1 billion for the first time. 41 Airplay drives music sales. Assuming continuation of music quotas, research is needed to establish whether the quotas for genres that currently do not attract a 25% quota could or should be increased. Consideration of quotas being applied to new digitial only radio services has been deferred until Research could be undertaken to establish whether there are new services for which quotas are not appropriate. Film, television and television commercials quotas While there are no quotas for feature films such as apply in countries like South Korea and France they are captured within the drama subquota for television when they are broadcast. As noted above, the definitions of Australian vary depending on whether the prime consideration is the requirements of funding agencies, or the Australian content quota for television. However, nowhere is Australian music a precondition as is the case, for example, with producer/director/writer/cast. Consideration could be given to arguing for more robust definitions that better serve the Australian music sector. Anecdotal evidence suggests that television programs are increasingly using library music and that music budgets have been falling over the past decade, both suggesting Australian music is not being well served. There is no data available to demonstrate this and efforts made by the Music Council over the past four years have proved to be in vain. The commercial sector treats the information as commercial in confidence. Whilst Screen Australia has a repository of information dating back to 1992, all remains in paper form and is accessible only with the utilization of considerable human and financial resources. The issue has been made more difficult with the introduction of the Producer Offset. As it is administered by the Australian Taxation Office (ATO), all financial information is subject to the privacy provisions of the Income Tax Assessment Act (ITAA). Under the provisions of the AUSFTA, it is possible to impose content quotas applying to primary commercial free to air television stations to one secondary channel per network (multichannel) and to impose the current 80% quota for television commercials to two secondary channels per network. The Government considered doing so but decided to defer consideration until the findings of the Convergence Review could be taken into account. 41 ACMA, 2011, Communications Report , ACMA, page 51, 22.

23 New funding models Since the mid-1990s, spasmodic attempts have been made to introduce a scheme for musical live theatre similar to the 10BA financing model that formerly applied in respect of feature films and certain television programs. Administered through the ITAA, 10BA was introduced as a very generous scheme, wound back through the course of the 1980s and finally effectively supplanted by the establishment of the Film Finance Corporation, the predecessor of Screen Australia. Governments of both persuasions were not interested in extending it to eligible Australian musical live theatre productions. The issue could be revisited but it is unlikely that the Government would agree to anything more than the levels of deductibility available under s 7 of the ITAA. Since the establishment of the Producer Offset for eligible Australian film and television programs, there have been calls for a similar offset to be introduced for music. Currently, the Producer Offset is being considered in the Convergence Review where there have been calls for the Offset for eligible television programs to be increased to 40% in line with the Offset for feature films. Problems experienced with the Producer Offset relate to the need to cashflow the Offset as it is a tax measure and is not available until after the company s final tax return has been lodged. Consequently, most film and television programs utilize Special Purpose Vehicles establishing a new company for each production. The costs of cashflowing the Offset have proved both expensive (the costs of the funds secured for cashflowing the Offset) and difficult to obtain, especially since the latter half of 2008 when a number of the banks offering such facilities in Ireland and Scotland collapsed or were taken over by their respective governments. Some Australian film agencies offer small revolving film funds for the purpose and some superannuation funds have considered doing the same. At the other end of the range are proposals set out in Building Support: Review of Private Sector Support for the Arts in Australia. The review, chaired by Harold Mitchell, made a number of suggestions that might well have utility for the music sector, in particular for individual artists, namely that: o The Australian Government develops a crowd funding initiative with a matched funding from government component [sic]. 42 o The Australian Government provides funding to support a micro loans scheme for the arts sector. 43 The full text in respect of these recommendations can be found at Appendix J. The Report also made comment on the possibility of better utilization of vacant buildings for the benefit of the arts, noting the Renew Newcastle initiative, but did not make any recommendations in this regard. 44 Creative Industries, a Strategy for 21st Century Australia notes: 42 Building Support: Review of Private Sector Support for the Arts in Australia, 2011, p. 35, Arts.pdf. 43 Building Support: Review of Private Sector Support for the Arts in Australia, 2011, p. 36, Arts.pdf. 44 Ibid. 23.