Paul Fletcher (Bradfield, Liberal Party, Minister for Urban Infrastructure) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The Communications Legislation Amendment (SBS Advertising Flexibility) Bill 2017, provides the Special Broadcasting Service (SBS) with increased flexibility in the scheduling of advertising and clarifies SBS's ability to earn revenue through having product placement during programming.

SBS advertising

SBS is Australia's multicultural and Indigenous broadcaster. It is funded through a mixed funding model. While the majority of its operating budget is provided by the Australian Government, a sizeable proportion is earnt through SBS's commercial activities, which include advertising and sponsorship.

During 2014, the then Department of Communications undertook an efficiency study of the ABC and SBS in cooperation with the national broadcasters. The study identified a range of areas where the ABC and SBS could realise savings, mainly in their back-of-house operations, without reducing the resources available for programming.

The study found that SBS could realise additional commercial revenue through implementing advertising flexibility, without increasing the maximum amount of advertising it was permitted to broadcast over a 24 hour period.

Under the Special Broadcasting Service Act 1991, SBS is restricted to five minutes of advertising per hour, equalling a maximum of 120 minutes of advertising broadcast per day. The majority of advertising revenue is earned by SBS during peak viewing times—between 6 pm and midnight—or during the broadcast of special events such as the FIFA World Cup.

This bill seeks to amend the Special Broadcasting Service Act 1991, to allow for a more flexible approach to advertising, where SBS may broadcast up to 10 minutes of advertising per hour, with a daily limit of 120 minutes.

This flexibility will give SBS the ability to take advantage of greater demand for advertising during peak viewing times. SBS will be able to earn more advertising revenue by scheduling up to 10 minutes of advertising during the peak times, while scheduling less advertising during other hours to ensure the 120 minute daily cap is not exceeded.

While this amendment may on its face appear to be generous, the existing 120 minute daily cap is well below the limit applying to commercial broadcasters, which is a maximum of 350 minutes per day.

In addition, SBS does not currently fill 100 per cent of the time it has available for advertising across all of its channels and markets. This is particularly so in regional markets where SBS struggles to fill the current allotment of five minutes per hour per channel during peak viewing times and higher rating programs.

In such situations, it is very unlikely that providing flexibility will generate much additional revenue. The benefits of the proposed amendment will be found in the metropolitan markets.

Product placement

The efficiency study also identified that SBS could earn additional revenue through the use of product placement within particular types of programming, particularly food or sports.

Product placement is not a new concept. It has been widely used by commercial broadcasters for many years to earn revenue and subsidise the cost of content production.

Currently SBS broadcasts some programming with product placement, however, the majority of this content is acquired rather than commissioned, and SBS therefore does not receive any direct benefit for this product placement.

While SBS has introduced a modest level of product placement in its commissioned content, the amount of revenue being collected is not substantial due to the lack of clarity regarding the use of product placement in the SBS Act.

The bill amends the SBS Act to provide clarity, to allow a wider use of product placement in commissioned content. To ensure this process is properly managed, the bill requires the SBS Board to develop and publish guidelines on the use of product placement.

It also requires SBS to report on the use and earnings of product placement in its annual report, consistent with the existing requirement for SBS's other advertising and sponsorship announcements.

Financial impact of advertising changes

The introduction of advertising flexibility and product placement is anticipated to result in a modest increase of SBS's commercial revenue of approximately $27.4 million over four years.

In the short term, the additional revenue would be directed towards meeting the government's efficiency targets. In the longer term, it is intended that future revenue raised from this amendment can be used to deliver more distinctive and innovative content and services in line with its Charter responsibilities.

With advertising revenue of the commercial broadcasting industry (excluding WIN) totalling $3.7 billion in 2015-16, it is highly unlikely that any additional revenue earned by SBS from this amendment will have a material impact on the commercial broadcasters.

Since 2006-07, when in programming advertising was introduced on SBS, its advertising revenue has gradually increased. Generally during FIFA World Cup years, SBS's advertising increases significantly. While this may seem like a substantial amount of funding for SBS, this revenue constitutes two per cent of the commercial television industry's revenue during the same period.

The steady growth of SBS's advertising revenue over this period has not led to a reduction in overall commercial advertising revenues for free-to-air television. This is because the growth of the entire television advertising spend over the period has outstripped the growth in SBS's advertising revenue.

Therefore, a minor change to SBS's advertising arrangements is unlikely to have any significant effect on other broadcasters.

Conclusion

The additional revenue earned from these advertising measures will put SBS in a better position to provide more high quality and relevant programming that reflects and promotes Australian's multicultural and Indigenous society.

SBS currently receives approximately 75 per cent of its operational budget through government funding. Measures in this bill will give SBS more independence to earn additional revenue, and in turn become somewhat less dependent on government funding.

The government understands the significant relationship SBS has with Australians, particularly those from rural and regional areas, and it is committed to a strong and resilient public broadcasting sector that efficiently uses taxpayers' money.

Debate adjourned.