Big handouts for media fat cats

March 6, 2010

Shortly before Christmas, the owners of the big three free-to-air commercial television networks, Seven, Nine and Ten, accompanied by Free TV Australia lobbyist and former Queensland ALP premier Wayne Goss met with Kevin Rudd at Kirribilli House. They cried poor and demanded corporate welfare for their "struggling" businesses.

On February 7, $250 million in public funds were surrendered to the corporate television networks, under a licence subsidy by the federal government. The deal was announced by communications minister Stephen Conroy.

In the mainstream press, this has triggered a slanging match between the owners of free-to-air television stations and their pay television rivals. But the real issue is that a big payout has been given to an industry that is raking in billions. Free TV Australia figures show that gross advertising revenue for commercial free-to-air TV was more than $1.87 billion for the June-December 2009 period, said the February 8 Australian.

The government announced commercial television broadcasting licence fees would be cut by 33% in 2010 and 50% in 2011. Licence fees paid by each network are equal to about 9% of their annual gross revenues.

A February 11 Crikey article said that rather than $250 million, the cost to taxpayers will be closer to half a billion dollars. Crikey speculated that with a "likely growth in advertising revenue as the economy accelerates, big sporting events such as the Commonwealth Games and the advertising frenzy of a federal election, the rebate could conservatively yield about $240 million in 2010 and $300 million or more in 2011.

"Which means the free-to-air networks will cost us more than $20 a head for every Australian over the next 17 months."

The deal has been justified with the claim it will increase Australian content, keep Australia's fees internationally competitive and help television networks with the transition to digital television.

All these arguments are easily refuted.

First, the deal comes without strings. There is no obligation to deliver any more Australian content than is already regulated. National director of the Actors Equity section of the Media Entertainment Arts Alliance, Simon Whipp, said on February 10 that the industry was "surprised and disappointed" that the rebates had not come with local content guaranteed. "What is being granted at the moment makes no guarantee there will be more Australian content", he said.

Second, the change to digital television will involve expenses for the commercial free-to-air networks, but the extra channels being handed to the current networks at no charge, and without adding new competitors into the marketplace, ensures their continued profitability.

The government has again ruled out awarding a fourth commercial television licence. It has also massively delayed the licensing and funding agreement for community television.

Capital city community television networks were only allocated spectrum for digital broadcasting on November 9 with a promise of a miserly $2.6 million to cover the costs of the transition.

The February 10 Australian quoted equity investors, banks and private equity firms who said that the TV networks had told them that the handouts would go straight to their bottom lines. Ten Network's market value grew by $130 million in the two days following Conroy's decision.

On the issue of internationally competitive fees, Crikey explained: "What others charge their broadcasters is simply immaterial to Australia. Our broadcasters do not compete with US, Canadian or UK broadcasters. If spectrum licence fees were higher in the US, UK or Canada, then Australian broadcasters would be charged more for programming by the likes of CBS, ABC, NBC, Fox and ITV to recover the higher fees."

Australia has one of the most monopolised media industries in the Western world. Conroy's handout will keep these media companies dominant, despite the advent of new technologies.

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