Despite the deluge of criticism against the government decision, the licence fee rebate for the Australia’s free-to-air TV networks is actually well deserved.
Why? Well, the tax was an offset for competition limitations in the past. Pay TV — which is an effective Foxtel monopoly — is still untaxed, despite the public financing most of the $3 billion spent by Telstra to build the Foxtel cable.
Then you have SBS advertising, and prospectively online and other distribution bypasses, which are making this spectrum exclusivity “monopoly profit” for the FTAs non-existent. In addition, the government still taxes the networks with high cost imposts — either directly on revenue generation (the licence fee) or mandated programming.
It would be cheaper for the networks to buy their spectrum completely much as mobile carriers buy their spectrum and eliminate all the restrictions on their programming and the greater than $140 million or so per annum they will still pay in licence fees.
And given the competitive history of the Australian commercial television industry, I doubt that all the licence fee rebates will fall to the networks’ bottom line. It is unlikely that the networks were able to negotiate this tax reduction without some offsetting — that is, verbal commitments to continue their level of support for local programming.
The proportion that does not go to the bottom line will be largely spent on local programming as, historically, the networks have not had a close correlation between cost movements and profits. In 2009, 12 out of the top 20 drama programs were Australian, and in programs overall for 2009 (regular programming only) only two out of 20 were foreign.
The networks win by spending on Australian programming, and have largely shifted the lower rating foreign programming to their second digital channels (such as Nine’s Go and 7Two).
Furthermore, the FTA industry competes against a large budget in the ABC, which has no commercial breaks (commercials are a ratings destroyer for FTA networks), and SBS, which takes another 5% or so ratings share with a hybrid revenues model based upon government subsidies with some commercials.
This was a good decision by the Government, even if it was made for wrong — certainly political — reasons in an election year.
Have a bet each way why dont you?! Clearly you want to do a PR job for the Free TV Stations and have a jab at the Govt are the same time but I am afraid you can’t do that without being a hypocrite on this issue.
It is your last sentence that I have the most difficulty with.
I don’t care what axe you have to grind but you can’t say that it was a great decision as it pertains to the impeccable morality of the TV Stations but made for awful reasons as it pertains to the pernicious anti-democratic, advantage seeking Government.
If it was a good decision then it was good governance. Period. If it was a decision made to curry favor with big media in an election year then it was a bad decision and bad governance. Period.
I am more inclined to believe the latter.
I am also inclined to believe that as advantage seeking as this Government might be, they are not stupid or inclined to throw away money without some promise of a return on their investment. So please lets dispense with the notion that the TV stations are completely blameless in all of this.
If the Hon PM really belives he can bribe the 3 free to air commercial Networks to lean towards the Govt with favourable references and whatever else his dodgy deal promises him, its a bloody expensive way of doing it and treats the electorate as fools, who know it and will advise him so at the ballot box. Obviously he still lives in some fantasy land where he can continue his spin, his boring diatribe and porkies. After his personal downturn in the polls, wonder why friend Kevin doesn’t see what we can see.
Geez Roger, hope you’re not analysing media stocks for any funds with my money in them. What a dud effort.
For a start, you omit the biggest regulatory windfall to the FTAs of all – the moratorium on competition from a fourth FTA licence. That’s worth tens of millions – probably more – a year, year in, year out.
As for the “competition” you reckon is hurting the FTAs – well, subscription TV has been hobbled for decades by the anti-siphoning list which means its penetration has remained so low due to lack of premium content it only became profitably in, what, 2005? 2006?
And SBS hasn’t been able to offer state-specific ads until recently, so it only attracted national advertisers. And at about 4-5% audience share, it is hardly a serious competitor to the FTAs.
Not to mention taxpayer handouts like free spectrum and in regional cases direct payments from the taxpayer for digitisation, and tax rebates for the costs of producing local content.
And in case you hadn’t noticed the ABC has been there for fifty years. “The FTA industry competes against a large budget in the ABC, which has no commercial breaks” so what has changed recently to exacerbate that?
This sort of rubbish wouldn’t even get you a gig with Julie and co at FreeTV.
Roger what on earth are you on about? “the FTA industry competes against a large budget in the ABC” umm, Channel Seven has more money than the ABC…and Channel Seven just runs 2 tv channels across the metro area (7 and 7TWO) while the ABC runs 3 (soon to be 4) channels, plus 7 national and more than 40 local radio stations, plus its extensive online presence and ABC Shops. How on earth can the ABC have a ‘large budget’? The comparison clearly shows that Channel Seven has tonnes of money and could do a lot more than it does. Commercials are ratings destroyers? Really? then how come they are doing so well in the ratings?How come the ABC isn’t the highest rated network? yours is a ridiculous argument.
Right on, Bernard!
Every factor mentioned by Roger Coleman has been stable for decades, so why do the networks suddenly need a rebate now? And why should the government give a 50% rebate on the basis of a presumed verbal agreement (what is that worth?) to continue to comply with their current obligations, i.e. to go on doing exactly what they are already doing??
This is one of the worst decisions a government has made in many years.