The Cost of Being The ABC Delivering the best and most efficient public broadcasting The Cost of Being the ABC | June 2018 1 2 The Cost of Being the ABC | June 2018 Contents Introduction 05 Executive Summary 06 1. The ABC today 08 1.1 What the ABC receives 08 Public investment 08 International comparison 09 Commercial activities 09 1.2 How we allocate our funding 10 Focus on content 10 1.3 Our national workforce 13 1.4 What the ABC delivers 15 Platforms 15 Content 17 Reach 20 Audience responses 22 2. Funding and efficiency 25 2.1 Budget decline 26 Future indexation pause 27 2.2 The ABC’s Efficiency 28 A history of reviews 28 2.3 ABC savings 29 Efficiency Case Study: Investing in Audiences Strategy 30 3. Future challenges 32 Technology investment 32 Improving audience engagement 32 Increasing cost of content 33 The road ahead - Investing in audiences 35 The Cost of Being the ABC | June 2018 3 71% of 7.6 million Australians Australians watch, read or use ABC digital listen to the ABC services each each week. month. 92% of ABC More than 80% funding is spent of Australians in areas directly consider the ABC linked to content a trusted source creation and of information. delivery. We have one The ABC of the world’s broadcasts from largest dedicated 56 locations rural reporting around Australia. teams. The ABC has Australia’s We are the largest southern broadcast hemisphere’s footprint and can largest creative reach 99.58% of employer. Australians. 4 The Cost of Being the ABC | June 2018 Introduction The ABC’s annual As Australia’s independent public broadcaster, our purpose includes telling the nation’s story and helping Australians to understand their budget of one billion place in the world. We connect communities and create moments that matter. We educate, inform and entertain. dollars is a significant Given the investment required to do this well and the many demands on investment made the public purse, it is appropriate that the ABC’s funding and expenditure on behalf of all is transparent and well understood. This paper builds on information provided at our first Annual Public Australians to fulfil Meeting in February 2018.. It provides further detail about the ABC’s financial context as we enter a period of rigorous external and internal our public purpose. review. It explains why efficiency matters to the ABC and how the ABC allocates its funding. Put simply, the ABC’s budget is declining as the demands on us are growing. The ABC’s per capita funding has halved in real terms over the last 30 years. We have adjusted by cutting management positions, back office expenses and the cost of transmitting and distributing our broadcast signal across an entire continent. These and other efficiencies have saved $324 million over the last five years alone. We have achieved this without compromising on outcomes for audiences. No Australian media organisation is more trusted or valued. No organisation better represents our national culture through distinctive stories told well. And none contributes more to Australia’s creative industries, benefiting the media sector as well as the wider economy. But the cost of fulfilling our Charter responsibilities is escalating as never before. Changing technology requires us to invest in new digital services and platforms while maintaining our long-running scheduled broadcast platforms for the foreseeable future. The emergence of global media giants with corresponding budgets for content and talent, requires us to spend even more to represent our national culture. And the increasing contest of facts requires us to redouble our commitment to provide Australians with a trusted source of news and analysis. Entering this intense period, this paper is designed to help all Australians understand the financial imperatives shaping the ABC’s strategy for the future. The Cost of Being the ABC | June 2018 5 Executive Summary Transparency and accountability are key principles of public broadcasting. They underpin everything the ABC does. Despite claims to contrary, the rationale for the ABC has never rested on a model of market failure. Our primary purpose, as defined in the Charter, is to provide comprehensive and innovative public broadcast and digital media services. We must create content of widespread appeal as well as specialised interest. We need to present our content across multiple platforms so it is accessible to all Australians. And by default, we have to allocate sufficient funding to do so. In this paper we set out how we achieve this. We have outlined the steps taken to ensure that we are one of the world’s most efficient public broadcasters without compromising quality or public trust. We also describe the challenges the ABC faces in achieving further productivity gains and in meeting the increasing cost of fulfilling our legislative responsibilities. The ABC’s per capita funding has halved in real terms in 30 years Each year the ABC receives approximately one billion dollars in public funding. This amount has declined in real terms by 28% over 30 years, and per capita funding has halved when Australia’s growing population is factored in. The ABC budget has been cut by $254 million between 2014 and 2019, and indexation will now be paused for the fiscal period 2019-2022 at an estimated cost to our base funding of $84 million. Overall, Australia invests 34% less per person in public broadcasting than the average of comparable democracies. For example, the ABC receives one eighth the funding of our British counterpart, the BBC, to serve one third the population. The ABC is doing more with less Across platforms and genres, 92% of ABC funding is spent on making content, supporting content makers, and distributing that content. This is in line with benchmarks set by other international public service broadcasting organisations, but our goal is to reduce overheads even further. 6 The Cost of Being the ABC | June 2018 The number of platforms operated by the ABC has increased sixfold since the 1980s. We produce more content than ever before, exceeding many of the mandated minimum standards that apply to our commercial peers and reaching more than 70% of Australians each week. The high standard of ABC programming means Australians to rate the ABC as the leader for value, trustworthiness and quality. The ABC faces unique costs in meeting its legislative responsibilities The ABC Act and other legislative requirements limit our discretion to decide when and where our money is spent. These obligations include specialist arts, science, education and Indigenous programming, as well as providing services for regional audiences, maintaining editorial controls and meeting reporting standards. This is investment that our commercial counterparts are not required to make. Technology change demands ongoing investment The transformation of the media sector requires ABC funding to stretch further than ever. There is a need for substantial new investment in technology to match the expectations of audiences as they migrate from broadcast to digital services. However, our Charter requires us also to maintain our linear services—scheduled broadcast television and radio—until all Australians are ready and able to transition to digital platforms. More broadly, we must now stretch our funding to be able to acquire the new digital rights for content and meet the escalating costs of making great programs. Efficiency is of critical importance The ABC has a history of prioritising efficiency, and the strong push for greater productivity continues with added urgency as our budget declines and our costs increase. The need for efficiency is built into our funding as, in general, the allocated indexation does not equal the rate of increase in the consumer price index. There have been 12 reviews completed in 15 years, both internal and external, that have examined our efficiency and processes. These have delivered significant cumulative efficiencies, with $324 million in savings identified in the last five years alone. As part of this process we have evaluated spending on everything from television cameras to stationery, reduced management layers, cut travel costs, limited spending on consultants and restructured our support and content teams. Efficiency at the ABC has become an ongoing process. However, having delivered substantial annual savings over a long period, our capacity to continue increasing productivity at the same rate is limited. Our Investing in Audiences strategy positions the ABC to adapt to changes sweeping through the media sector, but the following pages make clear that our costs will continue to increase in the short term. Further funding cuts, as foreshadowed in the Federal Government’s 2018/19 Budget, will be challenging. The Cost of Being the ABC | June 2018 7 1. The ABC today 1.1 What the ABC receives Public investment Each year the ABC receives around a billion dollars from the Federal Government. This funding is invested on behalf of all Australians to fulfil our primary public purpose of providing comprehensive and innovative broadcast and digital services that reflect and foster Australian culture and identity. We understand there are many demands on the public purse and appreciate the responsibility vested in the ABC to deliver services as efficiently as possible. Table 1: ABC appropriations 2013/14 to 2018/19 (includes capital allocations and excludes equity injections and loans for one-off capital activities) ($M) 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 General 860.7 868.4 870.5 861.3 865.5 865.1 Transmission 193.2 194.8 193.9 174.8 178.2 180.8 Net Appropriation 1,053.9 1,063.2 1,064.4 1,036.1 1,043.7 1,045.9 Figure 1: Cost per person per day 1985/86 to 2017/18 25 20 15 Cents 10 19.2 Cents 5 8.0 9.7 4.0 0 1987 Budget 2017 Budget 1987 Budget 2017 Budget 1987 Dollars 2017 Dollars *Excludes orchestras, transmission and distribution 8 The Cost of Being the ABC | June 2018 1.