4, Australia - 1 July 2004
Advertising boss John Singleton wants a fourth free-to-air
TV channel with only Australian content, and he'll
back it with his money. Pie-in-the-sky or a serious
attempt to add to Australia's cultural landscape?
ORegan: Hello, and welcome to The Media Report.
week were interested in the prospect of a fourth
free-to-air network committed to broadcasting 100%
the flood of cheap US sitcoms, or the never-ending
police dramas unfolding on The Bill, what
would a locals-only TV network be like, showcasing
home-grown products and a raft of stories that extend
popular understanding of Australia, and Australian
week at the Australian Broadcasting Authority conference
in Canberra, the big news was all about the Macquarie
Medias interest in such a network. Now were
talking serious media players here, specifically,
advertising boss John Singleton, former television
executive and Telstra board member, Sam Chisholm,
and the man who directed the movie, Crocodile
Dundee, Peter Faiman, exploring the options
of a fourth network, committed, indeed mandated, to
screen only local content.
these days of free trade agreement conditions and
tight regulatory control, its tantalising to
speculate what such a network might be like.
Coming up tonight on Channel 4, the Channel for and
By Aussies, weve got a great line-up of home-grown
after the News, be sure to catch The Yard Goes
On Forever, where this week well show
you how to build your own barbie.
following our new series of local home videos, dont
miss our Movie of the Week, The Man From Snowy
for you night owls, Australia Uncovered brings you
the stories those foreign programs seem to always
forget, plenty more reasons to stay in and enjoy a
great night, here on Channel 4, The Network that Never
ORegan: Now all jokes aside, what is the prospect
of another free-to-air network, specifically one that
features only local content? The reality for those
proposing such a network is that nothing is going
to happen until 2006, when the current regulatory
framework for free-to-air TV will be reviewed.
when he spoke to Kerry OBrien on The 7:30 Report
last week, John Singleton indicated that he was both
prepared to start a network from scratch and argue
strongly for a mandated, local content condition.
Singleton: If there is a new licence granted, if,
in 2006 when the three-station agreement ceases, if
there is a new station granted, I have the niches
for Australian art and culture to be given its own
stage, its own platform. So I look at all the kids,
including my own, going through now studying art,
drama, advertising, ballet, music, and theres
no showcase for their talents, theres no showcase
for their writing talents, theres no showcase
for their performing talents.
it occurred to me that if was going to be a fourth
free-to-air network that it would be politically palatable
to the existing players and also serve a fantastic
service to the community if we do an All Australian
channel. Then the next thing was to find out whether
or not it was practical and at what cost, and whether
or not we thought that it could attract enough revenue
to pay for itself.
ORegan: John Singleton.
as I mentioned, at the moment theres a moratorium
on the issue of any new commercial television broadcasting
licences, and that moratorium finishes at the end
of 2006. However, that time frame hasnt diminished
the enthusiasm of the Singleton group for a new network.
argue if they get the 100% local content condition
and it was mandated by government, that might mean
the cost of a licence would drop significantly, from
say an estimated $1-billion to something around $500-million.
Singleton: But if there were a fourth TV network auctioned,
by the government, or by the Latham government or
a Howard government, and it was to be Australian-owned,
and only Australian content, that would drive the
price down. So again, Im not being totally altruistic
here; I need to make it affordable for us. At the
lower end of that scale, around $500-million, yes,
a national or Australian network can work.
O'Brien: But $500-million is still a lot of money.
Youd pay big bucks for a licence, youd
produce 100% reasonable quality Australian content,
and youd still
Singleton: All this, why not one great
O'Brien: But is it all
Singleton: Why not great content, it doesnt
just have to be reasonable.
O'Brien: And youd still make good profits. The
existing TV proprietors would say thats fantasyland.
Singleton: Well if theyre right well go
broke, and as I understand it, thats still permissible.
After four years of hard labour I dont intend
to blow it unless weve done our homework, and
theres guys have been involved in TV a long
time, like Sam Chisholm and Peter Faiman, have been
working with me on this, and we all think its
ORegan: Not only feasible, but as he said, profitable.
Especially if the sort of viewers who are attracted
fall into whats known as the AB-demographic,
with high disposable incomes. John Singleton didnt
expect to rival the ratings of any of the existing
commercial networks, or even the ABC, but he did view
the sort of viewer numbers that SBS attracts as possible.
Singleton: Weve done our sums on rating about
SBS, rating 4s and 5s, and at that level, going to
the As and Bs and those who are interested in Australian
art and culture, and writing and showcasing Australian
talent, that can attract a very big premium advertising
ORegan: Advertising executive and fourth TV
network proponent, John Singleton speaking to Kerry
O'Brien on The 7:30 Report.
same day, investment banker and Macquarie Media shareholder,
Mark Carnegie, had been telling the ABA conference
in Canberra about why another free-to-air channel
was not only an attractive investment, it was also
crucial for cultural reasons.
Carnegie: We want and need our national attributes
to be on display to us, in order for us to briefly
pause and think about what is great about Australia
every day. We need more quality local product in order
to show the rest of the world what we are about, and
more importantly, to give our young people a sense
of the national personality.
of us need reminding of our national attributes, such
as a rigid determination not to give in, a healthy
streak of larrikinism and good humour in the face
of authority and adversity; a sense of compassion
aligned with the reluctance to boast about giving
someone a helping hand, and above all, the extreme
value placed on loyalty and mateship. These are images
not only worth preserving, but essential to us if
we are to have the sort of country of which so many
of us are proud.
ORegan: Those comments came at the very end
of Mark Carnegies formal address to the ABA
conference, and neatly encapsulated the arguments
he strongly advanced for a fourth TV network with
100% local content.
in the conference the former Publishing and Broadcasting
Limited executive, Peter Yates, had outlined a completely
different analysis, based on what he called the
imperfect market of free-to-air TV where a small
population and the high cost of local content meant
that simply adding another network would distort the
Yates: The free-to-air industry relies upon a mass
market, and once that mass is undermined either because
you have alternative forms of entertainment seeking
eyeballs such as Pay-TV, such as Internet, so the
total mass thats available to free-to-air is
reduced, or otherwise that mass is carved out among
incremental licence holders or sub-licence holders.
a point in time, whats known as a tipping point,
when does that tipping point occur? I dont know,
but if it does occur, you can never go backwards.
So all Im seeking to do is frame the debate
around any new licence issue, and that is, that the
free-to-air market is a failed market, its a
classic failed market, theres nothing wrong
with it, you can have profitable failed markets, but
thats how it should be analysed.
ORegan: Peter Yates, former PBL executive.
needless to say, the Yates analysis didnt convince
Mark Carnegie, who instead saw the market distortion
as a product of oligopoly where in his terms, three
families, two Australian and one Canadian, profited
massively from free-to-air television licences while
investing a relatively meagre amount in local content.
Carnegie: What we need today is not something to repair
market failure, but something to repair regulatory
failure. This spectrum and this cash flow, is Australias
it is not three families, and what the government
needs to be doing is mandating the amount of that
cash flow thats going to go to Australian content.
The idea that you can ask publicly traded companies
in this environment with the legal obligations on
directors, to spend incremental money for filling
a public trust, when the government no longer executes
any of its oversight or governance in any sort of
serious way about those companies discharging their
obligations, is going to fail.
think this is a regulatory failure as opposed to a
market failure. If it were a market failure, my partners
and I shouldnt be prepared to write a very big
cheque in an open auction to go and bid for a new
fourth network. And the truth of the matter is like
the FM radio auctions just recently, we fully expect
that we could be the loser there, because it wont
just be us, itll be Macquarie Bank and 15 or
20 other people who see the opportunity to come into
the Australian TV market, and make a ton of money
out of it. And the argument about were a small
country, 20-million people, and we cant survive
with a fourth commercial free-to-air network, completely
fails to understand the extent of the advertising
pie that there is in Australia to split.
extents of the returns on capital employed by the
existing networks and the ability for new technology
to take costs out of a whole series of other areas
in technology that mean that this is an unbelievable
commercial opportunity. So what Id say on the
market argument, the profitability argument and the
advertising argument, is that John Singleton, Sam
Chisholm, and Peter Faiman, who unlike me, have a
reputation in the area of media, are all prepared
to be part of a consortium that will write a very
big cheque to buy a fourth network, on one proviso,
which is that are spectrums the same as the other
guys spectrum, both analogue and digital.
we dont have to listen to the future of the
500-channel media world, digital conversions and all
of that stuff, because we know once that starts talking,
well end up on some spectrum that people cant
see, and 20 years hence when the number of digital
sets has moved from 5% to 10%, well still be
sitting there and fighting over the 10% of the players.
Forget it. And you know, even for the 10% of players,
whats going to be happening is half of those
people wont be able to make the digital controls
work, if theyre anything like me.
thats on the economics, on the ability for the
market to sustain a fourth network, us and I bet you
every investment bank in town, will be looking for
a way to pay a very big price to buy this opportunity.
ORegan: Investment banker Mark Carnegie, speaking
at the Australian Broadcasting Authority conference
disagreement continued. Peter Yates rejected the notion
that the answer to the industrys problems involve
Yates: The Australian media industry is extraordinarily
highly regulated, as we speak. And why? Because regulators
have recognised that we have this inherent market
failure. For Mark to argue that media proprietors
have not paid, thats not true. Media proprietors
are paid 10% of all their revenue, ever since they
first received a licence. Now I think if we go back,
and I cant comment for all the industry, but
I suspect that in the case of Channel 9 or Channel
7, theyve probably paid in total licence fees
over the last 20 years, well in excess of $2-billion
or $3-billion. So for Mark to raise that argument,
thats just nonsense, its not true.
ORegan: Peter Yates.
weve heard, Mark Carnegie is under no doubt
that a fourth network will be profitable, in fact
he sees it, as he said, as an extremely attractive
investment. However the centrepiece of his address
to the conference, which Im now going to play
at some length, dwelt much more at what might be called
the cultural imperative.
Carnegies eyes, Australians are really worried
about their culture right now. Theyre worried
about what the media is doing, or isnt doing.
Theyre worried about the combined effects of
globalisation, of the corporate mantra of shareholder
value, and that the proliferation of new media technology
means our distinctive national culture is at risk.
But more than that, Carnegie suggests our very democracy
is at risk.
Carnegie: To my mind, what we have to do is explicitly
regulate as a society for more investment in mainstream
media, in our Australian culture, and in Australian
product. The idea that you can put anybody who sits
in my shoes or Peters shoes or anybody elses
shoes, either as a director or a manager of a public
company, in a situation where youre asking them
to serve two masters, the master of the media culture
and the master of profitability, you just cant
do it. Running a business in the media or in any other
business in the world today is a really hard thing
to do and you have to be single-mindedly focused on
the profit motive.
cant go anywhere else. So dont think that
without the government finding a way to regulate for
Australian content, educational content, high quality
drama, or any of the other things that people want
to achieve, its going to work. It just isnt.
Its not going to work if our licence, the fourth
licence we buy, is bought free of any regulatory conditions,
and its not going to work for the existing guys,
who are sitting there trying to find some way to be
up 15% in earnings every year, in an environment that
is getting harder and harder. So regulatory solutions
are really the only ones here, and to my mind you
can talk about all the different sorts of solutions
to it, but you come down to essentially four in my
first one, regulatory maybe not, but certainly in
the hands of government, about dealing with our culture
is you can massively increase the funding of the ABC
and SBS from where they are at the moment, and say,
We recognise that the people who are in business
are under enormous commercial pressure today, that
the quality of Australian drama and content is going
to go inexorably down as people chase more facelift
shows and more pop star shows, thats just the
way it is. If youre chasing rating, youre
about the lowest common denominator, theres
nothing you can do about it.
what were going to do is reserve some block
of spectrum, invest heavily in it and have a much
better funded ABC and SBS than we have at the moment.
I think the political chances of that are low, but
it is a completely legitimate way to solve the problems
of Australian media and culture at the moment.
second way that you can do it is you can go back in
history to 2000 and look at the Productivity Commissions
report on broadcasting. And you could adopt those
recommendations in whole, but not in part. You would
basically take back all of the digital spectrum from
the existing broadcasters and re-auction it. They
would obviously, because of their incumbent position,
be able to pay for the vast majority of the higher
prices than other people could.
could guarantee to have them and everybody else vacate
the analogue spectrum by 2009 and you could have a
genuine open competitive environment in broadcasting,
and with that, what you would get is an enormous amount
of diversity, because you would just have so much
channel, so much capacity, such a level playing field
that you would actually be able to go and have niche
applications in broadcasting, as opposed to the broad
broadcast opportunities that are there at the moment,
and the tyranny of having three or four players. So
you would have a market that would look more like
a US radio market than you would an Australian TV
finally, lets assume for a moment that the realities
of the media proprietors being able to basically put
the fix in so deep that nothing happens, and we continue
with what weve got at the moment, where they
can actually claim that their billion dollars of cash
flow id at risk from a $28-million investment in childrens
television programs and an $82-million investment
in high quality drama. So a billion dollars, $100-million
for those two. Theyll get it up, theyll
get it up.
idea that they got given the spectrum for free and
that theyve got spend zillions of dollars on
digital deployment, all of that, people will believe.
The fact that people are telling me that in a country
of 200-million people digital roll-out is going to
cost me $US50-million. People are still going to buy
on that. So assume we get no increases in funding
for the ABC, we get the Productivity Commission to
wither on the vine like it looks like it has, we get
no regulatory intervention to actually sit there and
say to the existing broadcasters, You have to, as
a result of what youve been given and what would
have been paid for by other people and gone into the
hands of government, you have to invest in these things,
you are mandated to, this is not optional.
all of that goes out, then the only thing that I would
implore people today to think very hard about is that
when, not if, the fourth network actually gets auctioned,
it gets auctioned with a set of very, very tight regulatory
requirements about the amount of money that needs
to be invested on Australian content by that channel.
need to understand that when we looked at the potential
for a fourth channel what we hoped to go to the government
with was a submission for 100% Australian content,
free-to-air television network, with no foreign programs
of any type on it, because we think it is that important
to the society, because we think that that is the
only way if you are forced to do it, that you are
going to as part of this, actually deliver on what
was the historic public trust that broadcasters have.
Were sure even with 100% Australian content
we can make a handsome profit on the spectrum, paying
commercial rates for it.
believe it really, really strongly. But you, everybody
in this audience needs to understand that if the spectrum
goes out without very tight licence conditions about
what the licensee is actually going to use, no matter
how well-intentioned we are, were going to be
ending up doing exactly what the incumbents are doing
and looking for the lowest common denominator, the
cheapest foreign and local program, chasing the biggest
markets for the lowest costs, and behaving absolutely
like everybody whos sitting running a public
company, or on a board of a public company does at
the moment, which is trying to get the most for the
ORegan: Media investor, Mark Carnegie, arguing
for a local content driven new TV network.
is this realistic? And what are the implications of
such a move as far as the Free Trade Agreement between
the United States and Australia is concerned?
Harris is the Executive Director of ASDA, the Australian
Screen Directors Association, and he has some
Harris: As a general rule in a limited broadcasting
market, if you want to guarantee certain levels of
high quality local content, theres generally
a recognition that you have to have a small number
of players who can then, by virtue of a protected
market, afford to spend money on local programs and
to compete with the dumped programs from other markets.
So its a kind of a quid pro quo thats
been generally accepted within broadcasting terms,
and theres a kind of weird inverse logic there
which basically means that you can actually increase
the diversity of content by having less diversity
of players in the market.
ORegan: Just explain that for listeners? How
does that contradiction work?
Harris: Well basically it means that theyll
actually be prepared to spend on local programming
which is actually much more expensive, because theyve
actually got a protected market. Whereas there is
this idea that if you actually fracture it completely,
and have a completely open market, all you do is get,
in the words of Bruce Springsteens song, 57
channels and nothing on. And in the context of maybe
100 or 1,000 channel environment, we could have 1,000
channels with nothing on. So the idea being that if
you fracture the market to the extent where no-one
can afford to do high quality programming, all youre
going to be doing is importing in cheap stuff.
ORegan: Right. Now in a moment Id like
to talk about the implications of the Free Trade Agreement
with the United States in relation to this question,
but just on quality: at the moment, as youve
said, theres a limited number of outlets, theres
a major investment in the more expensive end of television
production, namely drama, and I suppose to some extent,
childrens television. If there was a movement
to an all-Australian channel, would we end up seeing
all sorts of amateurish and low production value products
going to air?
Harris: Well that was initially my reaction when I
heard that they were thinking about a fully Australian
channel. I guess that the real question was Will this
fracture the market further and will this continue
the pressure on high end quality Australian content?
I think its worth noting that what weve
seen over the past ten years, this is kind of the
background to it, and the ABA backs this up in its
reports, is that those protected networks have actually
shown essentially less commitment to Australian high
quality programs from the sub-quotas.
weve seen is less hours, less diversity and
actually less money being spent on those programs,
and what this means for the people that I represent
for instance for directors, its meant that theres
actually less work out there now in those areas. Its
actually harder work, in that their schedules have
been cut by a half, and its less creatively
satisfying. So any mention of fourth network I just
think Does this actually continue that pressure? Will
it actually mean that the directors who are struggling
out there will actually have to struggle more because
youve fractured the market?
when I heard the proposal, I got very nervous thoughts
about it, but having listened to what Singleton had
to say on television the other night, I thought it
was suddenly interesting, and Ive had some discussions
to say maybe this isnt so fanciful; they are
very serious about it, and there is some logic there,
but absolutely I think our concern is, Does this 100%
content mean just filming everything that people are
doing in their backyards, or eisteddfods or whatever
it might be, home videos, or does it actually mean
creating a greater market or greater amount of Australian
ORegan: Richard Harris regarding the Free Trade
Agreement, obviously in the last week the democratic
challenger for the US Presidency, John Kerry, has
indicated that he would support it, which of course
puts great pressure on Australian legislators as far
as their acceptance or rejection of it is concerned.
But if it goes through, that Free Trade Agreement
with the US, wouldnt an all-Australian content
television network be not possible?
Harris: It would be very difficult for in fact
it would be impossible if the Free Trade Agreement
goes in as its currently framed, to insist that
a broadcaster must show 100% Australian content regulations.
Essentially you could not have those stipulations
on a licence, so the discounting that someone like
John Singleton might be looking for in order to argue
that thats what theyll do, they simply
couldnt make that happen. So that does throw
into some question about the extent to which that
licence could be framed in those terms.
ORegan: Richard Harris from the Australian Screen
at the Australian Film Commission, another key provider
of local content to the TV industry, Chief Executive,
Kim Dalton is worried at the prospect of the regulatory
system being splintered by different rules for different
Dalton: We should not set up a system where different
licensees are operating according to different rules.
I think that as we go further down the track, and
as time plays out, then that will begin to serve to
undermine the way in which Australian content, certain
minimum levels of Australian content, is delivered
to Australian audiences across all of the channels.
ORegan: This idea put forward by the likes of
John Singleton and Sam Chisholm and Mark Carnegie,
is it something that comes across your desk as a serious
proposal that the AFC will look into with some earnestness
or is it something that you think, Well, lets
just see how it flies.
Dalton: We view any developments and changes within
the broadcasting arena with a great deal of seriousness.
Were following very closely the debate around
the introduction of a fourth channel, we believe that
its absolutely critical that that fourth channel
comes into the same regulatory environment that exists
at the moment for the existing free-to-air free channel
operators, and furthermore we believe that those regulations
applying to minimum levels of Australian content,
should operate as of Day 1 for that new operator.
I think we would take very seriously a proposal from
a new licensee, and wed be very interested,
as no doubt the Australian audiences would be very
interested and the Australian production industry
would be very interested to hear from a licensee who
says theyre going to deliver very high levels
of Australian content.
ORegan: Kim Dalton from the Australian Film
to the most recent indication of corporate interest
in a fourth TV network, from one of the worlds
most significant media companies, Sony.
Managing Director of Sony Pictures Television Australia
is Jack Ford, and he sees no inherent contradiction
in a transnational company such as Sony being engaged
in the development of a local content for Australian
Ford: We have put money in directly ourselves as Sony
into an array of purely Australian programs, which
we then take to the rest of the world. A very good
recent example is the movie about the Thredbo disaster,
Heros Mountain, which was a television
movie which aired on Network Ten just a short while
ago. That was something in which Sony put substantial
amounts of money, and we have done that on a number
of occasions in purely Australian content television
material. So Im very used to operating in that
environment, where we are both investors of, and then
ultimately sellers of, Australian television program
ORegan: Right, well as you would be aware, theres
currently a moratorium on any new commercial television
licence. That moratorium is scheduled to end in 18
months, at the end of 2006. In the interim, what do
you imagine Sonys input into this debate in
either, if you like, argument or practical terms might
Ford: I think we are at the very infant stages of
this debate, even though 18 months is perhaps not
a very long time in the media. Its only now
that the debate is starting to gather some force and
there was a lot of talk about it both publicly and
privately at the ABA conference in Canberra last week.
So putting it another way, the sharks are just starting
to circle, just as some of us who are old enough to
remember, such as myself, can remember when the Channel
Ten licences were awarded 20 or more years ago.
ORegan: Jack Ford, the Managing Director of
Sony Pictures Television in the Asia Pacific.
we also tried to include the views of Free TV Australia,
the group representing commercial television in this
country, but unfortunately their spokesperson was
The Media Report for this week.
before I go, a few Thank-yous. As always to Producer
Andrew Davies, and to our Technical Producer, Jim
thanks to the board members and staff of the ABA for
their assistance during last weeks conference.
on this program:
Executive Director of the Australian Screen Directors'
Investment Banker & Macquarie Media Shareholder.
Former Publishing & Broadcasting Limited Chief
Chief Executive of the Australian Film Commission.
Managing Director of Sony Pictures Television Australia.
Producer: Andrew Davies