Senate debates

Wednesday, 9 November 2016


Broadcasting Legislation Amendment (Television and Radio Licence Fees) Bill 2016; Second Reading

12:08 pm

Photo of Stirling GriffStirling Griff (SA, Nick Xenophon Team) Share this | Hansard source

I rise to speak on the Broadcasting Legislation Amendment (Television and Radio Licence Fees) Bill 2016. At the outset, I foreshadow that during the committee stage I will be moving amendments aimed at providing permanent relief from licence fees for commercial television broadcasters and radio broadcasters. I do so on the basis that these fees are no longer justified and are jeopardising the viability of our free-to-air broadcasting services. This should come as no surprise to the government, especially given that the minister himself is on record as stating:

[Licence fees] were, if you like, the original super profits tax. There was no other broadcast media so TV and radio were in a very strong and dominant position there. Obviously things have changed a lot since then. There are a larger range of options for people.

I think it is fair to say that the minister's acknowledgement of this issue comes off the back of serious and protracted lobbying by commercial free-to-air broadcasters, who currently pay licence fees of 3.375 per cent of gross revenue, which equates to around $115 million per annum. The government has failed to address the fact that network advertising revenue has gone backwards due primarily to advertising on social and alternative media. The key players are of course Google, the world's fourth biggest company, and Facebook. Both have a huge competitive advantage over free-to-air television and broadcasters. That competitive advantage exists not only through their market reach but also because they spend absolutely nothing on local production and contribute very little by way of Australian taxes.

In May of this year the West Australian reported that Facebook paid a dismal $814,000 in tax for the 2014-15 financial year. This is despite earning a whopping $33.5 million. During that same period, according to Morgan Stanley, the multinational company, valued at $468 billion, earned between $500 million and $600 million from advertising in the Australian market alone. This is a company that in the US reported a $2.04 billion profit for the three months to the end of March this year. For the year ahead, Facebook's revenue figures are expected to rise significantly as it no longer books its local revenue in Ireland. This is because Facebook restructured its local business to meet the government's multinational anti-avoidance legislation that took effect this year. Google is no different. According to the Australian Taxation Office's corporate tax transparency report for the 2013-14 income year, Google Australia paid over $920,000 of tax on an income of $360 million. In the US the Google conglomerate is valued at a mind-boggling $527 billion. These are companies that are vying to reach the $1 trillion value mark. Collectively, they already do that.

According to PwC Australia's forecast, by 2019 the internet advertising market will be bigger than free-to-air television, newspapers and radio combined. And unlike commercial free-to-air broadcasting this is an area with no taxes, no licence fees, no regulation, no local news—or limited local news—and certainly no regional employment opportunities. In addition to arguing that their licence fees are the highest in the world and do not reflect competitive audience pressures from unregulated digital reforms, television networks have also highlighted the fact that Google and Facebook employ very few Australian employees. As far as we can tell, Facebook is said to employ about 75 people in Australia, primarily in sales. And it is not just these large multinationals that commercial free-to-air broadcasters are competing with. There is also Foxtel, Foxtel on Demand, YouTube, YouTube Kids, Quickflix, Presto, Netflix, Quality Cinema on Demand, Telstra TV, GO, Optus Yes, Amazon, BigPond Movies, iTunes and so forth—and not one of these digital platforms pays licence fees of any kind.

As highlighted by Free TV Australia, evolving technologies have disrupted traditional media business models and opened the door to increased competition, which has fundamentally altered the economics and profitability of the broadcasting industry. Is it any wonder that the networks have been lobbying for some serious change in this space? Despite the massive profits of the Australian arms of digital platforms there is little regard by the government for the fact that 80 per cent of viewing in Australian homes is actually through free-to-air television and not pay television or even online viewing. There is even less regard for the fact that the fees collected through licence fees could otherwise be going back into local production and local jobs.

This also extends to international film production, which receives more generous producer offsets and tax write-offs, often at the expense of the Australian film industry. Producer offsets are, as we know, a rebate for producers on the cost of making Australian film and television programs. Currently, the offset is worth 40 per cent of qualifying production costs for feature films but only 20 per cent for television programs and documentaries. Networks have argued, quite rightly, that the inequality between film and television makes very little sense, especially given that more Australians watch local television dramas than watch feature films, and that commercial free-to-air is—often by far—the largest contributor to domestic content production.

Offset support is also currently capped at 65 per cent of commercial broadcast hours for a television production. This cap penalises successful Australian dramas, which have to be fully funded once the cap has been reached. Channel 10's popular series Offspring is a good example of how crazy the system is. While audiences were shattered by the thought that the last season would not come to fruition, they had little concept that the network would have to absorb significantly higher costs to continue filming. Fortunately for Offspring fans, Channel 10 made the decision to fully fund the last season of the series, but we know of several other popular TV series that had to be cancelled as a direct result of reaching the offset.

We know also that international film producers are offered a location offset to entice $15 million-plus film productions to Australia. That location offset is in addition to any promises of direct funding by the Australian government. Last year at around this time, it was widely publicised that the government had reached agreement with 20th Century Fox and Marvel Studios to bring at least two productions to Australia, at a cost of around $47.25 million in direct government funding. According to an article in The Guardian newspaper in 2014, there were 56 applications for the location offset and PDV—that is, postdigital and visual effects—offset which led to production expenditure in Australia of $356.73 million. The rebates payable for those offsets totalled $69.4 million. Those figures certainly demonstrate why the government is so keen to offer offsets to international film producers. They also allow companies to invest in equipment and training which can then be used on Australian productions, leading to a better-quality Australian product.

That is all very positive, and something we should all support. But I think the point that local networks make is that these offsets should not come at the expense of local production and, if there is scope to offer incentives to overseas film producers, then certainly more should be done to support local free-to-air broadcasters—who, as we know, contribute hundreds of millions of dollars into our local economy every year. The reality is that both feature film and TV production draw from the same pool of creative and technical talent. And, as highlighted by one network, without the volume of production funded by free-to-air broadcasters and the training and employment provided by TV work, the skills would not exist to enable big feature films in Australia. It is probably also worth mentioning that you would be hard-pressed to point to any Australian actor who has made it big in Hollywood who did not get their big break on local Australian TV, especially through Channel 10's Neighbours and Channel 7's Home and Away, both equally popular Australian TV series.

According to Free TV Australia, commercial free-to-air television broadcasters spend over $1.5 billion on domestic programming. They account for $6 out of every $10 spent on Australian production and employ 15,000 people, directly and indirectly, across the country. In the three years since the initial licence fee cuts came into effect, free-to-air broadcasters have spent an incremental $345 million on local content and an aggregate of $4.39 billion for that period. That innovation includes bringing additional free services and other streaming and catch-up services to the Australian public. They have reinvested 150 per cent of the savings into local content and technology to improve the viewing experience.

While Australian licence fees remain at a crippling level, internationally there has been a concerted effort by governments to reduce free-to-air licence fees in order to protect local production. For instance, in the UK the government reduced licence fees by 97 per cent, from $543 million down to just $60 million, between 1995 and 2011. Broadcasters there are said to be thriving. In New Zealand, broadcasters pay 0.26 per cent as a percentage of their revenue and licence fees. In Canada, they pay 0.25 per cent. In Hong Kong, they pay 0.09 per cent. And in Italy, they pay 0.06 per cent. All of the stakeholders that I have consulted with—and they include representatives from all of the commercial free-to-air television broadcasters—have expressed concern over the uncertainty that exists around licensing fees, and the difficulty that this brings to creating budgets and looking at forward business plans. For some, this issue is now very critical. Based on an analysis of the economics of the Australian film and television industry conducted by Deloitte Access Economics, undertaken for Screen Australia, there is the potential to increase local television and production jobs by over 1,000. Australian GDP could grow by as much as $140 million to $150 million.

If Australia is to continue to have a vibrant and competitive media industry, and if the government is serious about supporting our local television industry, supporting our local actors, and supporting job growth and creation, then it needs to follow the international lead of countries such as the UK and provide real and permanent relief from licence fees. It needs to give serious consideration to the amendments that my colleagues and I will be proposing to level up the playing field for traditional, free-to-air television broadcasters. I am sure that, if the government is stuck for ideas as to how and where it could claw back some of these levies, my colleague Nick Xenophon would be more than pleased to make out the case for a turnover tax for those multinational companies that are earning tens of millions of dollars at the expense of our local industry and our local economy. With that, I look forward to the committee stage of the bill.


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