On Saturday, the Minister for Communications outlined a comprehensive package of reforms to Australian broadcasting and content regulation that are intended to be included in tonight’s Federal Budget. The proposals, aspects of which have been pushed by the industry for the past decade, have been warmly received throughout the media sector. After the failure of narrower reforms to gain traction, the Turnbull Government appears to be banking on the breadth of this package (with something in it for everyone) to help push it over the line.

If they become law, the proposed changes to ownership rules are widely expected to trigger consolidation among Australia’s media companies. Judging by the surging share prices of free-to-air broadcasters yesterday, the market is betting this reform package stands a real chance of getting through Parliament relatively unscathed.

Here are the top 5 things you need to know about the Media Reform Package:

1

Broadcasting licence fees to be abolished

The Government proposes to scrap broadcasting licence fees (currently costing the industry around $130 million per year) and reform spectrum licence fees, so that spectrum fees are based on the value of the spectrum transmitters used by a particular broadcaster.

These reforms are in recognition of the uphill battle faced by broadcasters to generate profits in the face of a declining share of audiences. Earlier this year, Network Ten CEO Paul Anderson publicly asked the Government for reform, admitting uncertainty over the future of the network after announcing a half-year $232 million loss. The overall expected cost saving for broadcasters is intended to enable them to better compete with online content distributors, who do not pay any similar licence fees, and to increase investment, especially to encourage the production of Australian content.

2

Anti-siphoning scheme and list to be amended

The current anti-siphoning scheme gives free-to-air broadcasters a priority position over subscription TV providers in obtaining broadcasting rights for certain popular sporting events on the anti-siphoning list (set by the Minister). At the moment, subscription TV broadcasters must wait until 12 weeks before the start of an event to see if a free-to-air broadcaster acquires the rights first.

The Government’s proposal would end the exclusivity period for national and commercial TV broadcasters at 26 weeks before the start of the event, in order to enable subscription broadcasters to better plan and promote their coverage. Several events would also be removed from the anti-siphoning list entirely, generally based on whether the event involves an Australian team or not, or whether the event is played outside of Australia. For example, FIFA World Cup matches not involving Australia (other than the final), certain Wallabies rugby union test matches, all Wimbledon and US Open matches and the US Masters golf tournament would be removed from the list. However, events such as the AFL, Australian Open Tennis, Olympics and Commonwealth Games would all remain on the list unchanged.

The anti-siphoning scheme has been criticised in the past because it does not apply any restrictions to non-television media operators. For example, late last year Optus surprised many by purchasing exclusive Australian media rights for the English Premier League soccer competition; while EPL matches are not on the anti-siphoning list, Optus would have been unaffected by the scheme’s restrictions even it sought exclusive rights in respect of a listed event. The Government’s reforms package does not address this criticism.

3

Media ownership rules to be repealed

The reforms package also calls out a change that is already before the Senate. If passed, the Broadcasting Legislation Amendment (Media Reform) Bill 2016 will abolish the ‘75% audience reach rule’ which prohibits commercial TV broadcasters from controlling licences whose combined licence area populations are greater than 75% of Australia’s population. This rule is generally viewed as redundant given the availability of online content (which transcends geographic boundaries). The Bill will also abolish the ‘2 out of 3’ rule, which prohibits one person from controlling more than two of three regulated media platforms (being a commercial radio broadcasting licence, a commercial TV broadcasting licence and an associated newspaper) in any given commercial radio license area.

These reforms are aimed at allowing Australian television, radio and newspaper companies to operate across media platforms, but have caused some concern that they could result in a reduction of competition and media diversity. The removal of these rules is likely to see a degree of consolidation in Australia’s media landscape.

4

New restrictions on gambling advertising in live sporting events

All gambling advertising between 5am and 8:30pm would be prohibited from five minutes before a live sporting event commences until five minutes after the end of play. The existing rules would continue to apply after 8:30pm.

The restrictions would apply across a broad range of platforms, including commercial TV and radio, online services like ‘catch up TV’ and live online streaming aimed at Australian audiences. The reforms aim to address community concerns that regular exposure to gambling advertisements during live sports may have a particularly harmful impact on children. However, while current prohibitions on promoting live odds will be retained, the measures have already been criticised because advertising covering the racing industry would remain exempt from the restrictions, and because ‘family’ panel/analysis shows relating to popular sports are often on air after 8.30pm.

5

Review of Australian and children’s content + funding for women’s and niche sports

The existing framework to encourage the production of Australian and children’s content is made up of a range of different policy and regulatory measures, including screen production funding, quota mechanisms and minimum expenditure requirements for television broadcasters. The Department of Communications and the Arts, the ACMA and Screen Australia intend to undertake a joint review of these measures to ensure that domestic audiences enjoy Australian and children’s content across the wide range of platforms that are currently accessible. The reform package would also provide $30 million of additional funding to subscription TV to increase coverage of sports that receive little or no broadcast exposure, including women’s sports, niche sports, and sports that command high levels of community involvement and participation.

What Next?

Both FTA and subscription broadcasters stand to benefit from the reforms and have welcomed the package, as have other players in the industry. However, it won’t necessarily be a straightforward process for the Government to pass all elements of the package, with both Labor and the Greens indicating they would not support certain aspects - particularly the abolition of the media ownership rules (the Labor Opposition has previously backed the abolition of the ‘75% audience reach rule’ but it remains firmly opposed to changing the ‘2 out of 3’ rule). The Government is expected to rely on support from Nick Xenophon Team Senators, with the gambling advertising reforms seemingly aimed at their anti-gambling platform. A positive reception from industry is also expected to assist the Government.

While it remains to be seen what amendments Senate cross-benchers may seek in exchange for their support, investors are bullish on the prospects for passage of this legislation.