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The ABC and the Australian Media Sector: Summary of RBB Economics Report

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The ABC and the Australian Media Sector: Summary of RBB Economics Report The ABC and the Australian media sector: summary of RBB Economics report 1 WHAT DOES THE REPORT EXAMINE? • RBB Economics (RBB) is a firm specialising in competition economics. • RBB was asked by the ABC to examine two overarching questions: 1. Do the ABC’s activities lead to a ‘crowding out’ of audiences available to other media operators? 2. What potential is there for the ABC’s activities to lead to benefits to the wider media industry? • In assessing these questions, RBB applied a mix of data-driven and qualitative analyses. 2 HOW IS IT RELEVANT TO COMPETITIVE NEUTRALITY? A key input to the ABC’s submission • Current competitive neutrality (CN) policy only applies to ‘government business activities’. • In the context of the ABC, this means it applies to specific business activities of the ABC Commercial division. These activities account for approximately 5% of the ABC’s total revenue. • Nevertheless, the current Inquiry into the Competitive Neutrality of the National Broadcasters is contemplating how the broad principles of CN might apply to public broadcasters. • As such, the report by RBB is designed to aid understanding of the impact of the ABC’s broader activities in the media sector. The analysis is an input into the ABC’s submission to the inquiry. 3 WHATA ARE THE REPORT’S KEY FINDINGS? • At a high level, the RBB report made two key findings: 1. No evidence that the 2. Substantial evidence that ABC’s activities crowd out the ABC’s activities are the audiences of likely to have resulted in commercial media significant benefits to the operators wider media industry 4 KEYA FINDINGS IN DETAIL 1. No evidence that the ABC’s activities crowd out the audiences of commercial media operators • The ABC’s activities differ significantly from commercial broadcasters, often focusing on different genres. • The ABC’s activities do not crowd out commercial media companies in terms of audiences or revenues. This result holds when looking at long-term initiatives (such as the launch of a 24-hr news channel, or the launch and upgrades of iview), as well as short-term events (such as the broadcast of the ABC’s most popular programs). • Extensive data suggests that the recent pressure on traditional media business models is much more likely to be due to a significant shift in advertising revenues to online platforms, rather than ABC activities. • A review of international studies provides no evidence to suggest that more funding for public broadcasters has any negative effect on commercial media operators. If anything, more public funding for broadcasting is associated with higher commercial revenues. 5 KEYA FINDINGS IN DETAIL 2. Substantial evidence that the ABC’s activities are likely to have resulted in significant benefits to the wider media industry • The ABC’s activities result in a direct benefit to industry through licensing, partnerships, and community and cadet investments. • The ABC has made substantial investments in new initiatives, such as digital multi- channels and iview, that did not initially enjoy substantial consumer demand. These initiatives were later built on by commercial broadcasters. • The ABC has undertaken early investments in a number of types of content and talent (including journalists, producers, and musicians) that have been followed by further success on other platforms. 6 ASSESSING THE QUESTION OF CROWDING OUT 7 ASSESSING THE QUESTION OF CROWDING OUT RBB utilised multiple approaches and techniques • ‘Crowding out’ was defined as: a sustained diversion of substantial audiences that limits the opportunities for other operators to attract audiences and revenues, and compete effectively. • If there is no evidence of crowding out, it would be difficult to suggest the ABC has a net competitive advantage over its commercial counterparts. • RBB undertook four separate elements of analysis to form an overall view that the ABC’s activities do not crowd out the audiences or revenues of commercial media operators. RBB examined two main questions. Effect of long and short-term ABC Does the ABC’s activitiesExtent of ABClead content to a ‘crowding out’ of audiences available to other initiatives on commercial differentiation media operators? broadcasters’ audiences Do the ABC’s activities crowd out commercial operators? Effect of ABC’s online activities on International evidence: cross- commercial media operators’ country analyses online advertising revenues 8 RELEVANT INDUSTRY CONTEXT? Proliferation of new platforms, services, and increased fragmentation of audiences • As a starting point, RBB considered the relevant industry context, including: o decline in time spent viewing major free-to-air channels, combined with growth in time spent viewing digital multi-channels, and substantial growth of video-on- demand services; o decline in time spent listening to radio, combined with a number of innovations that RBB haveexamined significantly two increased main questions. the quantity and variety of radio and audio content available to Australians - including the introduction of digital radio, online radio Doesstreaming, the ABC’s online activities music streaming, lead to aand ‘crowding podcasting; out’ and of audiences available to other media operators? o significant changes to patterns of news consumption, including increased consumption on digital platforms. • These trends have resulted in audiences being increasingly fragmented across a growing number of channels, services and platforms, including in TV, radio and online. 9 EXTENT OF ABC CONTENT DIFFERENTIATION? ABC activities are significantly differentiated from commercial broadcasters • As a starting point, RBB examined the differences between the ABC and commercial operators by looking at the amount of programming they devote to particular genres. As one example, the ABC’s television broadcasting often focuses on different genres and types of programming, as shown by comparing the hours of news and reality broadcast. RBB examined two main questions. Does the ABC’s activities lead to a ‘crowding out’ of audiences available to other media operators? Figure 1: Proportion of prime-time broadcast minutes attributable to Figure 2: Proportion of prime-time broadcast minutes attributable to Reality News and Current Affairs programs by major FTA channel, 2009 to 2017 Television programs by major FTA channel, 2009 to 2017 (Source: RBB analysis of OzTAM data) (Source: RBB analysis of OzTAM data) 10 EFFECT OF LONG-TERM ABC INITIATIVES? No evidence that initiatives crowded out commercial operators • RBB examined examples of substantial longer-term ABC activities to understand their impact — such as the launch of the 24-hour news channel in 2010, or the launch and later upgrades to the ABC’s iview RBBservice. examined two main questions. Does the ABC’s activities lead to a ‘crowding out’ of audiences available to other • Themedia launch operators? of ABC News 24 did not correlate with any significant change in the audiences of free-to-air networks, or even Sky News. In some cases, the average audience on other networks actually increased. Figure 3: Television audience by major FTA network and Sky News, 2009 to 2017 (Source: RBB analysis of Monthly OzTAM data) 11 EFFECT OF SHORT-TERM ABC INITIATIVES? No evidence that these initiatives crowded out commercial operators • To understand the impact on others in the market, RBB looked at examples such as Gruen, ABC TV’s most popular series, over a five year period including 2014 when the program was rested. • The absence of regular broadcasts of the Gruen series in 2014 was not associated with any significant change in audiences for the commercial broadcasters, even within the same time RBBslot. It examined was only associated two main with aquestions. relatively small change in audiences for the commercial broadcasters,Does the whenABC’s looking activities within lead the to narrow a ‘crowding subset out’of programs of audiences within theavailable same genre. to other media operators? 12 EFFECT OF SHORT-TERM ABC INITIATIVES? No evidence that these initiatives crowded out commercial operators RBB examined two main questions. Does the ABC’s activities lead to a ‘crowding out’ of audiences available to other media operators? Figure 4: Effect of Gruen broadcasts on the prime-time audiences of Figure 5: Audiences on commercial FTA channels broadcast during programs of a similar genre broadcast on commercial FTA channels the same time slot as Gruen, 2012-16 (Source: RBB analysis of Daily OzTAM data) (Source: RBB analysis of Daily OzTAM data) 13 EFFECT OF ABC’S ONLINE ACTIVITIES? RBB examined extensive data sources • RBB examined the trends in revenue streams available to commercial broadcasters and news providers in the Australian media sector, namely the: o growth in internet uptake and internet advertising revenue; o growth in demand for video-on-demand content (particularly Netflix); o decline in print advertising revenue, and flat advertising revenue for traditional free-to- RBB examinedair and subscription two main broadcasting; questions. and oDoessubstantial the ABC’s proliferation activities in leadonline to sources a ‘crowding of news out’ content, of audiences with over available20 different to news other mediasites accessedoperators? by Australians in June 2017. • RBB also examined the fragmentation of audiences across providers within the online news market, and noted that: o ABC online news has had a relatively small and fairly constant share of the online news audience since January 2016 (see figure on next slide);
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