Background

The Minister for Communications announced a consolidated package of media reforms on 6 May 2017, in the lead up to the 2017-18 Budget (see here). One element of this package was a Government review of Australian and children’s content, to consider whether existing Government measures to support the production and delivery of that content remain fit for purpose.

The key existing Australian Government measures supporting Australian and children’s content are:

  • free-to-air television quotas for Australian content, with sub quotas for drama, children’s content and documentaries
  • minimum expenditure requirements for new drama on pay TV
  • tax incentives for Australian productions of feature films and television programs and for post-production, digital and visual effects work undertaken in Australia.

In addition, the Government (predominantly through Screen Australia) provides direct funding for projects and, of course, funding for the two national broadcasters, the ABC and SBS. A range of other mechanisms are in place to provide support.

Terms of reference

Terms of reference for the review, which is being conducted jointly by the Department of Communications and the Arts (DoCA), the Australian Communications and Media Authority (ACMA) and Screen Australia, were released on 23 May 2017 (see here). Those terms of reference state the review will consider:

  • the economic and social value of Australian screen content to the Australian community
  • the current and likely future market for Australian screen content production and distribution
  • whether the Government’s current policy settings
    • are relevant to current industry practice
    • appropriately target content that requires intervention
    • ensure an approach that works across a diversity of platforms
    • promote a sustainable production and distribution sector
    • are able to support Australian content on any platform into the future.

The regulations on local content for regional television and regional radio are out of scope of the review.

Consultation paper

Consultation on the review commenced in earnest in June 2017. A short form consultation paper was released in August 2017. That consultation paper starts from the premise that Australian screen content (including children’s content) has both significant economic and social value. It also recognises the fundamental changes that have occurred in the way in which Australians consume content (and the significantly greater volume of content that is available), citing this as a key factor underlying the decision to assess whether the support provided by the Government is appropriate. Importantly, it sets out three policy objectives:

  • Any measures implemented should encourage the creation, delivery and export of diverse and high quality Australian content.
  • Content should be available to Australian children to assist them in understanding Australian values and culture.
  • Policy settings should facilitate Australia’s content industries becoming more sustainable.

The paper states that the Government should only intervene in the event of market failure and that any intervention should comply with a number of principles. In addition to the obvious principles that regulation should be simple and clear in its policy intent, those regulatory principles are:

  • Regulation should be “platform agnostic”
  • The benefits of regulation should outweigh the costs
  • Regulation should be flexible and so able to respond to future changes in technology and consumer tastes

The paper does not make any suggestions as to what future regulation should be or, indeed, if any regulation is needed. The paper instead poses a number of questions, which can be paraphrased as follows:

  • Are the policy objectives and design principles set out in the paper (and outlined above) appropriate?
  • What market failures exist or are likely to exist?
  • What types of Australian screen content should be supported by the Government?
  • What are the appropriate types of regulation and support that should be provided by the Government?
  • What encourages audiences to access Australian content and is there a role for the Government in encouraging greater consumption?
  • If changes are made, what transitional arrangements should be put in place?

The paper makes only limited reference to State and Territory based support of content production. State and Territory based support can be quite substantial and the existence of this support could mean that there is a more limited need for Commonwealth level support or may suggest that support in particular areas, such as tax benefits, is most appropriate.

The consultation paper does not discuss in detail the question of how it would be possible, if this was an option that the Government wished to consider, to impose content quotas or similar on the providers of online services, including subscription video on demand services such as Netflix and Amazon Prime or on content platforms such as YouTube. Commercial providers of television services, both free-to-air and subscription, require a licence from the Government to provide their services (not to mention spectrum licences). Therefore it is fairly straightforward to impose content quotas on those providers. However, the providers of online services do not require a similar licence and in some cases have very limited operations in Australia. It may be difficult to enforce quotas on such content providers. The absence of a full discussion of this issue perhaps indicates that the Government is thinking of moving from imposing quotas and minimum expenditure requirements to greater reliance on incentives to promote Australian content production.

Interactions with other reviews and assessments

There is a question as to how the outcomes of the review may be influenced by other public consultation and discussion processes which have occurred over recent times, some of which are discussed below.

Convergence Review

The consultation paper contains echoes from the previous Labor Government’s Convergence Review undertaken over 2011 to 2012. The final report of the Convergence Review, similar to the new consultation paper, highlighted the importance of Australian stories and acknowledged the impact that alternative delivery platforms were having on Australian content consumption. Key content production related recommendations from the Convergence Review, which have not been implemented, include the following:

  • A new converged content production fund, partly funded by the Government, should be established to support the production of Australian content.
  • The quotas and minimum expenditure requirements applying to free-to-air and subscription television should be replaced with an obligation imposed on certain “content service enterprises” to invest a percentage of revenues from professional TV-like content in the production of Australian drama, documentary or children’s content or, where that is not practicable, contribute to the new converged content production fund. Content service enterprises would be those that have control over the professional content they deliver, have a large Australian audience and have high Australian revenue.
  • The Producer Offset, which entitles a production company to a 40% rebate for qualifying Australian production expenditure on eligible films and 20% for other formats (including television), should be amended to increase the television offset to 40%
  • Games and other interactive entertainment should be supported by an offset scheme and the proposed content production fund

ACMA’s content conversation

Although the consultation paper had not been released at the time, the issues canvassed in that paper were discussed at the two day ACMA conference held on 16 and 17 May 2017, titled “Australian content conversation”. ACMA released an overview report outlining the discussions that were held during that conference, including some interesting comments on Government interventions, which were seen as necessary to support the production of Australian content. These included:

  • Although views on quotas were generally mixed, it was suggested that caution should be exercised before quotas are removed, given that Australia’s free trade obligations mean it is unlikely these will be able to be reinstated
  • Unsurprisingly, there were arguments raised that quotas should be introduced for online services (though it appears little discussion occurred as to how such quotas might be enforced)
  • There was general support for ongoing Government funding
  • An Australian content fund was discussed. It was suggested that this could be established by a Government grant and could involve private sector partnerships
  • The Convergence Review recommendation of increasing the tax offset for television production to the same level as film had support (including as a means to support children’s content)
  • Levies for content providers, requiring them to contribute to the costs of production of Australian content were discussed. The EU model that imposes a levy of streaming services was raised in that context

Negotiations on media reform package

The negotiations of the Minister for Communications on the Government’s broader media reform package may intersect to a limited extent with this review. For example, Senator Xenophon has sought agreement from the Government to require the ACCC to conduct an inquiry into the impact of the new digital environment on media as a condition of his party’s support of the Government’s media reform bill. If that inquiry was conducted, it may make findings in relation to content production that could lead to Government intervention.

Concluding comments

The consultation paper does not shed much light on the changes to the current measures to support the production and delivery of Australian and children’s content that the Government may be considering. It does however make clear that ongoing support will be provided, though it may be provided for a broader range of content and to a broader range of providers.

The consultation period closes on 21 September 2017, with options for reform due to be provided to the Government by the end of the year.