The Media Report

Channel 4, Australia - 1 July 2004
(Credit: ABC Radio)

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?

Program Transcript

Mick O’Regan: Hello, and welcome to The Media Report.

This week we’re interested in the prospect of a fourth free-to-air network committed to broadcasting 100% Australian content.

Forget 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 culture.

Last week at the Australian Broadcasting Authority conference in Canberra, the big news was all about the Macquarie Media’s interest in such a network. Now we’re 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.

In these days of free trade agreement conditions and tight regulatory control, it’s tantalising to speculate what such a network might be like.

KOOKABURRA SOUNDS:

Announcer: Coming up tonight on Channel 4, the Channel for and By Aussies, we’ve got a great line-up of home-grown TV delights.

Straight after the News, be sure to catch ‘The Yard Goes On Forever’, where this week we’ll show you how to build your own barbie.

Then following our new series of local home videos, don’t miss our Movie of the Week, ‘The Man From Snowy River’.

And 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 Goes Offshore.

KOOKABURRA SOUNDS:

Mick O’Regan: 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.

However, when he spoke to Kerry O’Brien 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.

John 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 there’s no showcase for their talents, there’s no showcase for their writing talents, there’s no showcase for their performing talents.

So 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.

Mick O’Regan: John Singleton.

Now as I mentioned, at the moment there’s 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 hasn’t diminished the enthusiasm of the Singleton group for a new network.

They 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.

John 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, I’m 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.

Kerry O'Brien: But $500-million is still a lot of money. You’d pay big bucks for a licence, you’d produce 100% reasonable quality Australian content, and you’d still

John Singleton: All this, why not one great

Kerry O'Brien: But is it all

John Singleton: Why not great content, it doesn’t just have to be reasonable.

Kerry O'Brien: And you’d still make good profits. The existing TV proprietors would say that’s fantasyland.

John Singleton: Well if they’re right we’ll go broke, and as I understand it, that’s still permissible. After four years of hard labour I don’t intend to blow it unless we’ve done our homework, and there’s 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 it’s feasible.

Mick O’Regan: Not only feasible, but as he said, profitable. Especially if the sort of viewers who are attracted fall into what’s known as the AB-demographic, with high disposable incomes. John Singleton didn’t 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.

John Singleton: We’ve 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 dollar.

Mick O’Regan: Advertising executive and fourth TV network proponent, John Singleton speaking to Kerry O'Brien on The 7:30 Report.

That 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.

Mark 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.

All 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.

Mick O’Regan: Those comments came at the very end of Mark Carnegie’s formal address to the ABA conference, and neatly encapsulated the arguments he strongly advanced for a fourth TV network with 100% local content.

Earlier 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 industry.

Peter 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 that’s available to free-to-air is reduced, or otherwise that mass is carved out among incremental licence holders or sub-licence holders.

There’s a point in time, what’s known as a tipping point, when does that tipping point occur? I don’t know, but if it does occur, you can never go backwards. So all I’m 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, it’s a classic failed market, there’s nothing wrong with it, you can have profitable failed markets, but that’s how it should be analysed.

Mick O’Regan: Peter Yates, former PBL executive.

Now needless to say, the Yates analysis didn’t 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.

Mark 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 Australia’s it is not three families, and what the government needs to be doing is mandating the amount of that cash flow that’s 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.

I think this is a regulatory failure as opposed to a market failure. If it were a market failure, my partners and I shouldn’t 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 won’t just be us, it’ll 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 we’re a small country, 20-million people, and we can’t 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.

The 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 I’d 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 guy’s spectrum, both analogue and digital.

So we don’t 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, we’ll end up on some spectrum that people can’t see, and 20 years hence when the number of digital sets has moved from 5% to 10%, we’ll still be sitting there and fighting over the 10% of the players. Forget it. And you know, even for the 10% of players, what’s going to be happening is half of those people won’t be able to make the digital controls work, if they’re anything like me.

So that’s 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.

Mick O’Regan: Investment banker Mark Carnegie, speaking at the Australian Broadcasting Authority conference in Canberra.

The disagreement continued. Peter Yates rejected the notion that the answer to the industry’s problems involve more regulation.

Peter 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, that’s 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 can’t comment for all the industry, but I suspect that in the case of Channel 9 or Channel 7, they’ve 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, that’s just nonsense, it’s not true.

Mick O’Regan: Peter Yates.

As we’ve 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 I’m now going to play at some length, dwelt much more at what might be called the cultural imperative.

In Carnegie’s eyes, Australians are really worried about their culture right now. They’re worried about what the media is doing, or isn’t doing. They’re 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.

Mark 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 Peter’s shoes or anybody else’s shoes, either as a director or a manager of a public company, in a situation where you’re asking them to serve two masters, the master of the media culture and the master of profitability, you just can’t 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.

You can’t go anywhere else. So don’t 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, it’s going to work. It just isn’t. It’s not going to work if our licence, the fourth licence we buy, is bought free of any regulatory conditions, and it’s 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 mind.

The 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, that’s just the way it is. If you’re chasing rating, you’re about the lowest common denominator, there’s nothing you can do about it.’

So what we’re 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.

The second way that you can do it is you can go back in history to 2000 and look at the Productivity Commission’s 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.

You 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 market.

And finally, let’s 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 we’ve 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 children’s television programs and an $82-million investment in high quality drama. So a billion dollars, $100-million for those two. They’ll get it up, they’ll get it up.

The idea that they got given the spectrum for free and that they’ve 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 you’ve 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.

Assume 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.

You 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. We’re sure even with 100% Australian content we can make a handsome profit on the spectrum, paying commercial rates for it.

We 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, we’re 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 who’s 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 least.

Mick O’Regan: Media investor, Mark Carnegie, arguing for a local content driven new TV network.

But 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?

Richard Harris is the Executive Director of ASDA, the Australian Screen Directors’ Association, and he has some reservations.

Richard Harris: As a general rule in a limited broadcasting market, if you want to guarantee certain levels of high quality local content, there’s 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 it’s a kind of a quid pro quo that’s been generally accepted within broadcasting terms, and there’s 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.

Mick O’Regan: Just explain that for listeners? How does that contradiction work?

Richard Harris: Well basically it means that they’ll actually be prepared to spend on local programming which is actually much more expensive, because they’ve 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 Springsteen’s 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 you’re going to be doing is importing in cheap stuff.

Mick O’Regan: Right. Now in a moment I’d 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 you’ve said, there’s a limited number of outlets, there’s a major investment in the more expensive end of television production, namely drama, and I suppose to some extent, children’s 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?

Richard 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 it’s worth noting that what we’ve 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.

What we’ve 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, it’s meant that there’s actually less work out there now in those areas. It’s actually harder work, in that their schedules have been cut by a half, and it’s 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 you’ve fractured the market?

So 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 I’ve had some discussions to say maybe this isn’t 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 quality content?

Mick O’Regan: 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, wouldn’t an all-Australian content television network be not possible?

Richard Harris: It would be very difficult for – in fact it would be impossible if the Free Trade Agreement goes in as it’s 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 that’s what they’ll do, they simply couldn’t make that happen. So that does throw into some question about the extent to which that licence could be framed in those terms.

Mick O’Regan: Richard Harris from the Australian Screen Directors’ Association.

Over 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 licence holders.

Kim 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.

Mick O’Regan: 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, let’s just see how it flies.

Kim Dalton: We view any developments and changes within the broadcasting arena with a great deal of seriousness. We’re following very closely the debate around the introduction of a fourth channel, we believe that it’s 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.

So I think we would take very seriously a proposal from a new licensee, and we’d 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 they’re going to deliver very high levels of Australian content.

Mick O’Regan: Kim Dalton from the Australian Film Commission.

Finally to the most recent indication of corporate interest in a fourth TV network, from one of the world’s most significant media companies, Sony.

The 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 TV.

Jack 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, ‘Hero’s 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 I’m very used to operating in that environment, where we are both investors of, and then ultimately sellers of, Australian television program material.

Mick O’Regan: Right, well as you would be aware, there’s 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 Sony’s input into this debate in either, if you like, argument or practical terms might be?

Jack 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. It’s 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.

Mick O’Regan: Jack Ford, the Managing Director of Sony Pictures Television in the Asia Pacific.

And we also tried to include the views of Free TV Australia, the group representing commercial television in this country, but unfortunately their spokesperson was unavailable.

That’s The Media Report for this week.

And before I go, a few Thank-yous. As always to Producer Andrew Davies, and to our Technical Producer, Jim Ussher.

Also thanks to the board members and staff of the ABA for their assistance during last week’s conference.

Guests on this program:
Richard Harris
Executive Director of the Australian Screen Directors' Association.
Mark Carnegie
Investment Banker & Macquarie Media Shareholder.
Peter Yates
Former Publishing & Broadcasting Limited Chief Executive.
Kim Dalton
Chief Executive of the Australian Film Commission.
Jack Ford
Managing Director of Sony Pictures Television Australia.

Presenter: Mick O'Regan
Producer: Andrew Davies