Submission by Network Ten House of Representatives Standing Committee on Communications and the Arts Inquiry Into the Australian Film and Television Industry
Total Page：16
File Type：pdf, Size：1020Kb
Submission by Network Ten House of Representatives Standing Committee on Communications and the Arts Inquiry into the Australian Film and Television Industry 10 April 2017 Executive summary • Network Ten welcomes this Inquiry because it is time to face the reality that the highly successful local television production ecosystem we have built over many years in Australia is facing unprecedented challenges and we can no longer sit back and hope for the best in the new competitive landscape. • Ten is committed to Australian content. We broadcast thousands of hours of Australian programming every year and we employ thousands of Australians directly and indirectly across the production sector. • We invest heavily in marketing and promotion of local programs, we build content brands, we train production professionals, and we launch local and international careers both on and off screen. Eighty percent of Ten’s publicity and marketing budget is spent on promoting Australian content. • Without strong, profitable local broadcasters, the Australian production sector faces a very uncertain future. We want to retain our commitment to Australian drama, our national news coverage, and our commitment around Australia but Network Ten’s commitment to local content and local news is in serious jeopardy. • Our competitive landscape has changed completely – Ten is now competing directly for advertising dollars, viewers, and content against some of the world’s largest and most valuable companies such as Google, Facebook, Netflix, Apple and Amazon. • These companies do not make local news, dramas, or children’s television. They do not employ local journalists or publicists and in some cases they do not have a single employee in Australia, but they are taking an increasing share of advertising revenue in this market. • At the same time programming costs are rising as more platforms and channels compete to buy scarce content. Changing advertiser and viewer behaviour has meant that Australian content, particularly drama, is increasingly difficult to monetise. • As Ten has been saying for many years, the first step to sustain the ecosystem and grow local production is clear: abolish the exorbitant commercial television licence fee. • Australian broadcasters pay the world’s highest television licence fee at 3.375% of gross revenue. This represents hundreds of millions of dollars being diverted directly from local production to the Government’s coffers. • In addition to the heavy licence fee, onerous and inflexible Australian content obligations erode returns and severely curtail Ten’s ability to respond to the new competitive landscape and permanent structural change. • With rising content costs and flat to declining revenue due to increased competition, commercial FTA broadcasters are no longer realising the economic return that underpins the current regulatory system and the quotas in their current form have become unsustainable. They must be urgently reviewed. • In particular, the Children’s (C) and Pre-school (P) quotas are no longer serving Australian children and should be abolished. Ten has a longstanding history of broadcasting a range of high quality children’ programs, but Australian children are no longer watching them and the highly restrictive rules around advertising in C and P programming ensure that this content is almost impossible to monetise. 2 Introduction The media industry is a critical part of Australia’s economy and of its culture, and Network Ten is incredibly proud of the role it has played and continues to play within it. Indeed, Network Ten has become part of the national fabric. It has an enormous following, particularly among younger Australians who are traditionally hard to engage on a consistent basis due to our mix of distinctive, popular programming. Network Ten is an institution in this country proudly bringing Australians news, sport and entertainment for over 50 years. While our head office is located in Sydney with 462 employees, we have a strong presence and commitment outside of Sydney with 312 employees based in the other state capitals Melbourne, Brisbane, Adelaide and Perth. TEN broadcasts popular and iconic programs like MasterChef Australia , The Project , Offspring , Neighbours , The Bachelor Australia , Australian Survivor , The Living Room , Studio 10 , the Supercars Bathurst 1000 , and the Australia Day Concert . We reinvented 20/20 cricket through the Big Bash League and Women’s Big Bash League which both achieved strong ratings this summer: 14.6 million Australians watched some of the 2016/17 BBL. Ten welcomes the opportunity to make a submission to this Inquiry because it is time to face the reality that the highly successful local television production ecosystem we have built over many years in Australia is facing unprecedented challenges and we can no longer sit back and hope for the best in the new competitive landscape. Without urgent reform to the regulatory framework, the local production sector faces a very challenging future. As a member of Free TV Australia, Ten strongly supports the submission made by that body on behalf of the commercial free-to-air (FTA) television industry. This submission should be seen as supplementary to the positions outlined in the Free TV submission. The new media landscape - dominance of the global technology media giants Commercial FTA broadcasters are the bedrock of local television production. We fund 60% of all Australian production. 1 We make thousands of hours of Australian content every year and we employ tens of thousands of Australians directly and indirectly across the production sector. We invest millions in marketing and promotion of local programs, we build content brands, we train production professionals, and we launch local and international careers both on and off screen. However, the new competitive landscape has placed an unprecedented strain on that investment and local production will be hit hard in the coming years. Australian media companies are under duress and many of them – due to tectonic changes in the global media marketplace – face a daunting future. Simply put, without significant reform to the regulatory framework the future is very bleak for local content. We are now operating in a competitive landscape for television content that has changed completely. Australia is experiencing a rapid shift in viewer and advertiser behaviour toward digital and asynchronous channels. The foreign technology companies Ten is now competing against dwarf 1 Free TV Australia media release, Australia Needs Free TV: Free TV Australia Celebrates 60 Years Of Television , 11 October 2016. 3 Australian media companies. Google is more than 2200 times the size of Ten based on market capitalisation. Facebook and Amazon are respectively more than 1500 the size of Ten. These companies do not make local news or Australian dramas or children’s television. They do not employ local journalists or publicists. In some cases they do not have a single employee in Australia. However, they are taking a rapidly growing share of advertising dollars out of the Australian market. These companies have balance sheets that dwarf the combined market capitalisation of the Australian media industry and their advertising revenue growth continues at a staggering rate: • In the full financial year ending 30 June 2016 online advertising increased $1.6 billion to reach $6.8 billion, which was a 29.7% increase over the previous year , the fastest growth rate in the past five years. 2 • According to Morgan Stanley: “Global tech players are taking all the ad market growth, and then some. In C2016E we estimate global media/ad tech players… will collectively extract A$4bn- A$5bn worth of ad revenue – representing 35-40% share of the total pool of ad revenues in Australia (A$13.9bn) . It’s a big number and critically, it’s growing fast...” 3 • PwC forecasts that by 2020, internet advertising will clearly dominate the advertising sector, reaching $10 billion or approximately 50 percent of the market .4 By contrast, for the period June to December 2016 advertising revenue for metropolitan commercial FTA television networks declined by 4.53% compared to the corresponding period in 2015. That equates to a decline of over $70m. Unfortunately local content will not benefit from this aggressive growth in digital advertising with an estimated 70-80% of total Australian digital advertising revenue going overwhelmingly to two foreign technology companies, Google and Facebook 5, neither of which are contributing in any meaningful way to local production in Australia. While Netflix may have a global commissioning budget of around US$6 billion, not one of their original new productions is Australian at this stage, although they have made a small investment in an existing ABC drama series. Hopefully that will change, but even if it does, the new players are unlikely to ever come close to matching the volume currently generated by Australia’s commercial broadcasters. At the same time programming costs for all content providers continue to be bid-up as new entrants compete for the same (scarce) content. The cost of Australian content has escalated dramatically in recent years while FTA advertising 2 IAB Australia, Online advertising spend reaches record $6.8 billion in 2016 financial year , 23 August 2016, www.iabaustralia.com.au 3 Morgan Stanley Research, Australia Media, Internet and Technology, 27 January 2016, page 1 4 PwC Australian Media and Entertainment Outlook 2016-2020, https://outlook2016.ezimerchant.com/category41_1.htm 5 Morgan Stanley Research, Australia Media, Internet and Technology, 27 January 2016, page 10. 4 revenues remain flat. This is causing immense pressure on FTA broadcasters’ ability to make expensive Australian content and dedicate funds to innovation. This was recognised in evidence to the Senate Environment and Communications Legislation Committee’s inquiry into the Broadcasting Legislation Amendment (Media Reform) Bill 2016 , on 29 April 2016, from Ms Megan Brownlow of PwC: “That type of content is very expensive, whether it is creating a big reality TV show or whether it is sports rights.