The Age | June 10, 2008
FTA puts Australian television content out of focus
COMMUNICATIONS Minister Stephen Conroy has flagged an end to Foxtel’s regulatory "holiday".
But if he hopes to increase the hours of local content broadcast on pay television, he may find his efforts hindered by Australia’s free trade agreement with the United States.
Conroy is right in thinking that pay television’s current obligations are akin to a "holiday". In particular, the sector enjoys very lenient local content regulation compared with free-to-air broadcasters. Free-to-air channels must make sure 55% of content broadcast between 6am and midnight is Australian. This quota includes mandatory levels of first-run drama and children’s content.
By comparison, Foxtel is obliged only to ensure that 10% of its drama channels’ total expenditure is spent on new Australian drama. It does not have to broadcast a certain number of hours of Australian content.
Foxtel’s obligation is simpler to administer, and much cheaper to deliver. And because of the recently signed free trade agreement with the US, it is likely to stay that way.
During the negotiations, the US pushed hard for Australia’s local content laws to be removed. When Australia retained them, it was heralded as a victory for Australian culture.
The reality is somewhat different. By freezing requirements at current levels, the agreement removes the Australian Government’s ability to determine how best to regulate local content.
US television content is cheap. If an Australian channel wants to license US content, it pays from as little as a few hundred dollars an hour up to about $70,000 an hour for top-rating, first-run drama programs.
New Australian drama can cost up to $200,000 an hour (and much more for mini-series or telemovies). If 10% of a pay television drama channel’s programming budget is spent on new Australian drama, it may only fill 3% or 4% of its broadcast hours.
Foxtel’s local content regulations do not result in adequate levels of local content. Quite simply, the cultural objectives of the scheme are not being met.
The level of local content requirement imposed on a sector (such as free-to-air television and pay television) is supposed to be pegged to that sector’s influence on community views, as well as its ability to withstand compliance costs.
Foxtel’s obligations were drafted when pay television was newly established and unprofitable. Future reviews of the scheme were scheduled for when the industry was no longer in its infancy. One such review will take place this year.
Ordinarily, one may expect that this review would consider the possibility of changing Foxtel’s obligation, forcing it to broadcast a certain number of hours of new, local content each year. After all, 31% of Australian households now subscribe to pay television, and the sector accounts for 21% of all television viewing in Australia. Foxtel is far from being a fledgling business.
Instead, owing to the trade agreement, the Government is now bound to retain the current local content scheme. This means Foxtel will continue to be subject to a requirement drafted during the infancy of pay television, and which does not deliver local content to pay television audiences.
So, if Conroy is to rethink Foxtel’s local content requirements, what are his options?
The trade agreement permits marginal changes to the scheme in two ways; through extending the 10% requirement to arts, educational, children’s and documentary formats, and by increasing the drama format’s requirement to 20%. The impact of extending the requirement to additional formats would be minor, because most children’s channels are already subject to the 10% drama requirement, and the arts, documentary and educational formats are niche.
Increasing the drama requirement to 20% requires US consent, which is unlikely to be given. The Motion Picture Association of America has indicated it will oppose any increase.
Regardless, neither option tackles the basic problem with the existing scheme: that expenditure requirements do not result in the broadcast of local content. The cultural objectives of local content cannot be achieved.
Thanks to the trade agreement, even if Conroy has the best intentions, he may find his hands tied.
Alex Farrar is a practising lawyer undertaking a graduate diploma in communications law at Melbourne University. This article is based on an essay he wrote for a master’s subject.