INSIGHT

Media Reform Green Paper

By Valeska Bloch, William Coote
Media, Advertising & Marketing Telecommunications

In brief 9 min read

On 27 November, the Department of Communications issued a Media Reform Green Paper (Green Paper) seeking views on a number of proposals. The Green Paper builds on a number of issues highlighted by the ACCC's 2019 Digital Platform Inquiry – in particular, the recommendation to move towards a platform-neutral regulatory environment.

The Green Paper follows a long line of government papers on proposed media reform stretching back to the 2012 Convergence Review (and beyond). Although there has been some reform in the intervening years, the Government has shied away from wholesale reform to the Broadcasting Services Act (BSA).

The Green Paper represents another step along the way towards harmonisation of the Australian media regulatory environment – however it is no more than another step.

Key takeaways

What the Green Paper proposes

The Green Paper proposes the following principal reforms, aimed at supporting the free-to-air television sector to move to a sustainable operating model, reduce regulatory imbalance and secure new funding for Australian content and journalism:

  • A transformation of the broadcasting arrangements for free-to-air television businesses designed to:
    • reduce the amount of spectrum required for broadcasting (to be effected by way of shared multiplexing); and
    • reduce regulatory costs (including by removing the licensing tax to the which FTAs are currently subject, and a removal of Australian content obligations in respect of multichannels (but not primary channels)).

This transformation would be effected by way of the introduction of a new licence for FTAs.

  • The reallocation of current FTA allocated spectrum to telecommunications uses by way of a licence auction. Money raised through the auction of the reallocated spectrum would be allocated to two new public trusts:
    • the Public Interest News Gathering Trust (PING Trust); and
    • the Create Australian Screen Trust (CAST).

Part of the money would also be used to subsidise the cost of FTAs transitioning to the proposed new licensing model.

  • New regulatory expectations for Subscription Video‐on‐Demand services (SVODs) and Advertising Video On Demand services (AVODs) to invest in Australian content.
  • Codification of the Australian Broadcasting Corporation (ABC) and the Special Broadcasting Service (SBS) in commissioning and providing new Australian content.

Submissions on the proposals the subject of the Green Paper are due by 7 March 2021.

What does the Green Paper avoid?

The Green Paper, yet again, shies away from any proposal to substantively reform – or rewrite – the BSA.

The proposed reduction in regulatory costs for FTAs and the introduction of Australian content expectations do represent further steps towards a more harmonised regulatory framework as between traditional media and digital platforms – albeit it that the proposed new content obligations are expressed as 'expectations' rather than express, statutory obligations as is the case with existing obligations.

However, the Green Paper does not address ongoing and fundamental concerns relating to the ownership and anti-siphoning rules that continue to apply to traditional Australian media companies, but not to new entrants (eg streaming services). Until these restrictions are fully addressed, the Australian media regulatory landscape will continue to be an uneven playing field.

The Green Paper openly invites the submission of alternative ideas that could contribute to the overall objective of a sustainable Australian media sector – removal of industry specific ownership restrictions imposed by the BSA will invariably be one.

Overview of Green Paper's proposals

Transformation of FTA broadcasting arrangements

The Green paper proposes a transformation of the broadcasting arrangements for FTA broadcasters. The key aspects of the proposal are as follows:

  • FTA broadcasters would be provided with a 'one off', irrevocable election to transition to a new commercial television broadcasting licence (New Licence). Such election would involve a commitment to transition to a spectrum licensing model that involves the use of shared multiplexes.
  • Key feature of the proposed New Licence include:
    • that commercial broadcasting tax would no longer be payable; and
    • Australian content requirements would not apply to multichannels (although Australian content requirements would continue to apply to FTAs' primary channels).

The Green Paper proposes that the transition to the new broadcasting arrangement would be at the broadcasters' discretion – however the arrangements (other than the reduction in commercial broadcasting tax) would not be effected unless at least two metro licensees elect to transition in each of their metropolitan markets. It may also be a requirement that at least two licensees elect to transition in the aggregated regional markets. The reason for this requirement is that the spectrum efficiencies would not be achieved if a critical mass did not elect to transition. If a critical mass has elected to transition, the ABC and the SBS would also be required to transition.

The purpose of the New Licence is clearly to provide FTA licensees with the ability to reset their operational cost base moving forward by removing regulatory costs which uniquely attach to FTAs. Whether licensees elect to transition or not will be purely a question of economic modelling – weighing up the costs of transition (which are expected to be material) with the economic efficiencies that may be gained. The new licensing model will rise or fall based on this economic modelling – which will need to be undertaken by each licensee and the results of which may well vary from licensee to licensee.

It is somewhat odd that the Green Paper's proposal provides for a significant degree of uncertainty in relation to whether or not industry will be transitioning to the new model – the uncertainty stemming from the requirements in relation to critical mass. If the intention of the proposal is to free up spectrum and assist FTAs in reducing their cost base, any issues that would prevent FTAs from adopting the New Licence ought to be able to be assessed and addressed prior to the implementation of the new model. This approach would provide certainty to the industry as to the path forward.

Assuming that the transition cost hurdles can be overcome (the Green Paper proposes that part of the 'spectrum dividend' which would be achieved would be put towards assisting transition costs for regional media companies as well as the ABC and SBS), the proposed New Licence model only addresses part of the issues that currently affect Australian media companies. It does not address the legacy regulatory landscape and the ongoing restrictions imposed by the Broadcasting Services Act.

Establishment of two new public trusts

The Green Paper proposes that two new public trusts be established to support future television content delivery under the new legislative framework. Both trusts would be capitalised from the proceeds of a spectrum auction which would reallocate the spectrum currently used by FTAs for other purposes (ie mobile telecommunications).

The Green Paper makes clear that the two trusts would not be established unless the 'spectrum dividend' is able to be achieved – that is, if there is sufficient critical mass to trigger the transition to the New Licence model described above.

CAST

The Create Australian Screen Trust (CAST) would be established to fund the creation and distribution of two types of Australian content:

  • Projects of cultural significance - Cultural significance would be assessed using the same criteria as presently used by Screen Australia (including the project's subject matter, place of creation and nationalities of creators and participants). CAST would provide funding to these projects in the form of grants or equity investments.
  • Commercial investments - CAST would make equity investments into projects with prospects of commercial return and use any returns to sustain its funding pool.

Recommendations regarding the funding of specific projects would be made by the trustees of CAST to the Board of Screen Australia, which would administer CAST.

The Green Paper does not make clear where the distinction lies between funds to be expended out of CAST and Screen Australia's funding which it expends on a BAU basis. We would hope the existence of CAST would not affect government's ongoing funding of Screen Australia – that is, CAST should be in addition to, rather than in lieu of, Screen Australia's existing funding amounts.

PING Trust

The Public Interest News Gathering Trust (PING Trust) would be established to reduce the cost burden on regional broadcasters arising from their obligations under the BSA. The PING Trust would enable regional media companies to seek grants for funding to go towards the cost of regional news across television, radio, print and online media.

These grants would be provided through either direct financing or equity investments. Applications for access to funding would be made via a competitive grant process and assessed on their merits. Notably, the PING Trust would prioritise applications that provide employment opportunities to journalists, including cadets, and focus on news and investigations rather than entertainment journalism. Assistance provided by the PING Trust would be free of any editorial content conditions.

Expectation for Australian content for SVOD and AVOD

The Green Paper proposes that the regulatory framework around Australian content requirements should be harmonised by setting the following legislative expectations on some of the SVODs and AVODs:

  • to invest a certain percentage of their Australian revenue in Australian content through commissions, co‐productions and acquisitions;
  • to make Australian content discoverable to Australian audiences; and
  • to report to the ACMA each year on performance against these expectations.

The Government also proposes to give the Minister the power to implement formal regulatory requirements on an SVOD or AVOD service that has not met the proposed regulatory expectations for two consecutive years. This proposed framework of legislative expectations differs from the stricter Australian content requirements presently imposed on FTA and subscription television licensees under the BSA – that is, substantive obligations in relation to Australian content, not just an expectation.

The proposed regulations will apply to SVODs and AVODs that meet certain eligibility criteria thresholds which relate to:

  • The purpose of service - The new legislative framework would capture services the primary purpose of which is to provide professionally produced scripted content delivered over the internet to Australians.
  • Australian presence - An SVOD or AVOD service would be captured if it offers its service in Australia for the purpose of serving Australian audiences.
  • A minimum number of paid Australian subscribers - The Green Paper notes that a threshold of one million subscribers would capture popular SVODs, such as Netflix and Disney+.
  • A minimum amount of gross revenue earned from the services' operations in Australia - The Green Paper mentions that a threshold of $100 million per annum in Australian revenue would capture the more popular SVODs while avoiding the imposition of an unreasonable burden on startups.
Codification of Australian content obligations for the ABC and SBS

The Green Paper proposes to amend the Australian Broadcasting Corporation Act and the Special Broadcasting Service Act to codify and make explicit Australian content obligations. The proposal seeks to harmonise the type of Australian content that would be required to be produced with similar requirements in other industry sectors, while accommodating the differences between content providers. Australian content is proposed to be defined either broadly (consistently with current obligations on commercial television broadcasting licensees), or in terms of specific genres of Australian content, such as Australian drama, children’s content and documentary programming. The obligation would be structured in one of the following forms:

  • a quota or broadcast requirements (consistent with present commercial television broadcasting licensees); or
  • an investment level, supported with discoverability requirements (consistent with proposed expectations on SVODs).

The Green Paper acknowledges that each of the ABC and the SBS already play a significant role in commissioning and broadcasting Australian content.