Broadcasting licence fees

Budget Review 2016–17 Index

Broadcasting licence fees reduction

Dr Rhonda Jolly

Under the Television Licence Fees Act 1964 commercial television broadcasters are required to pay a proportion of their gross earnings as fees for using the scarce public asset of radio spectrum.[1] From 2010, there have been a number of reductions in these fees, the last being in 2013 when the maximum rate of fees was reduced from nine to 4.5 per cent. The argument for reducing fees in 2013 was that it would help counter ‘the significant financial pressures faced by commercial television stations as a result of emerging and convergent technology’ and an ‘increasingly challenging operating environment’.[2]

The free-to-air networks have not been satisfied with licence fee reductions; they consider that ‘onerous and restrictive licence fees’ should be removed completely as they consider this will deliver a fairer competition environment and give them capability to invest in Australian jobs and production. [3] In support of its position, Nine Entertainment has argued that currently multinational content companies, such as Netflix, pay no licence fees and do not invest in Australian content, talent or production staff. On the other hand, Nine argues, free-to-air television directly employs over 7,000 people and contributes $4.7 billion in direct value to the Australian production industry.[4]

In arguing for the removal of licence fees, Seven West Media has noted that Australia’s licence fees are substantially more than those paid in other countries. [5] In Britain, for example, licence fees are 0.18 per cent of broadcasters’ revenues.[6] In addition to this, Seven West Media has claimed that Australia’s content obligations are greater than those imposed by many international regimes.[7]

Commercial Radio Australia (CRA), the industry body for commercial free-to-air radio broadcasters, which also pay licence fees to enable their use of spectrum, has maintained that radio broadcasting licence fees are higher than their overseas counterparts. [8] In response to the recent review of spectrum by the Department of Communications, CRA has argued that it was important that the pricing of spectrum for commercial free-to-air radio is considered in the context of ‘heavy regulation, local and Australian music content requirements, advertising restrictions and mandatory tags required of radio broadcasters, as well as the key role of radio in emergency situations’.[9]

This Budget has provided fora reduction in the amount of licence fees free-to-air television and radio broadcasters will be required to pay, but fees will not be abolished. Instead, they will be reduced by approximately 25 per cent from the 2015–16 licence period. This measure is expected to have an impact of $163.6 million over the forward estimates.[10] The Government stated in the budget papers that it will continue to consider licence fees ‘as part of broader reforms to broadcasting and spectrum policy’.[11]

Reaction

Free-to-air television broadcasters appear not entirely happy with the licence fee concession, given their efforts to have fees abolished and the possibility that other media reform—to the 75 per cent reach rule and the two out of three ownership rule—may be at least temporarily forestalled until after the 2016 election.[12] However, as one industry source remarked in 2015, licence fees are the priority issue for free-to-air broadcasters and the issue is entirely separate from any consideration of media ownership rules’.[13] This is most likely because the broadcasters believe, as Seven West Media’s Tim Worner has claimed, that abolishing licence fees may do more to assist them to remain financially viable than removing cross ownership and reach rules.[14]

Chairman of the television lobby group Free TV, Harold Mitchell, however, has called the cut in this budget measure ‘disappointing’.[15] While the lobby group appreciates the ‘modest first step’, according to Mr Mitchell the change does not acknowledge that in the new media environment, action needs to be taken urgently ‘to make sure broadcasters can continue to invest in great Australian programming and in transforming [commercial free-to-air broadcasting] businesses’.[16]

Commercial Radio Australia’s Chief Executive Officer, Joan Warner, considers the licence fee cut ‘a welcome relief’, but adds that the radio industry body is similarly disappointed that ‘the relief is not greater’, given that commercial radio needs ‘to be able to better compete against global players who are largely unregulated and do not carry the many costs, obligations and restrictions that local radio broadcasters do’.[17]

The reduction in licence fees has disappointed the subscription television industry. In the opinion of the Australian Subscription Television and Radio Association (ASTRA) lobby group, the licence cut in the Budget amounts to a ‘taxpayer-funded gift’.[18] ASTRA Chief Executive Officer, Andrew Maiden, denies the free-to-air television broadcasters’ argument that they face significant financial pressures, contending that the licence fees they pay ‘reflect the value of unusually significant protections and privileges enjoyed by the major broadcasters, rendering invalid any comparison with fees paid by their international peers’.[19] According to Mr Maiden, in exchange for paying licence fees, free-to-air broadcasters ‘enjoy a legislated ban on competition, guaranteed access to broadcasting spectrum and the world’s most protected market for sports broadcast rights’.[20]

 


[1].          Television Licence Fees Act 1964.

[2].          Explanatory Memorandum, Television Licence Fees Amendment Bill 2013, p. 2.

[3].          For example, the Nine Entertainment, Submission to Senate Environment and Communications Legislation Committee, Inquiry into the Broadcasting Legislation Amendment (Media Reform Bill) 2016, March 2016, p. 4. Submission cites information from Deloitte Access Economics, Economic contribution of the film and television industry in Australia, [report for] Australian Screen Association, February 2015.

[4].          Ibid., p. 5.

[5].          Seven West Media, Submission to Senate Environment and Communications Legislation Committee, Inquiry into the Broadcasting Legislation Amendment (Media Reform Bill) 2016, March 2016, p. 13.

[6].          Ibid., Appendix 5.

[7].          Ibid.

[8].          Radio Licence Fees Act 1964, accessed 4 May 2016 and Commercial Radio Australia(CRA), Commercial radio industry welcomes Government response to Spectrum Review, media release, 25 August 2015.

[9].          Ibid. See also Spectrum Review, at: Spectrum Branch, Spectrum review, Department of Communications March 2015

[10].       Australian Government, Budget measures: budget paper no. 2: 2016–17, 2016, p. 8.. 

[11].       Australian Government, Budget measures: budget paper no. 2: 2016–17, 2016, p. 8.

[12].       The 75 per cent rule (audience reach rule) states that a person, either in his or her own right or as a director of one or more companies, must not be in a position to exercise control of commercial television broadcasting licences which have a combined licence area population that exceeds 75 per cent of the population of Australia. The two out of three rule (cross-media ownership rule) states that a person can only control two of the regulated media platforms (commercial television, commercial radio and associated newspapers) in a commercial radio licence area.

[13].       D White, ‘Malcolm Turnbull expected to play hard ball on TV licence fee cuts’, Sydney Morning Herald (online), 22 July 2015.

[14].       D Crowe and J Mitchell, ‘Forces massing to fight Fifield's media reforms’, The Australian, 2 March 2016, p. 6.

[15].       FreeTV,Budget licence fee change, media release, 3 May 2016.

[16].       Ibid.

[17].       Commercial Radio Australia, Commercial radio welcomes licence fees cut in Federal Budget, media release, 3 May 2016.

[18].       Australian Subscription Television and Radio Association (ASTRA), Taxpayers foot $150 million handout to ‘free’ television, media release, 3 May 2016.

[19].       Ibid.

[20].       Ibid.

 

All online articles accessed May 2016. 

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