The COVID-19 pandemic has precipitated major reforms across the Free-to-Air Television Broadcasting industry, with further changes expected. The Federal Government is seeking to achieve a delicate balance between supporting the local screen sector, while also not discouraging production expenditure from global media giants such as Netflix.
The Morrison Government has announced changes to the quota for domestic broadcast content, which is expected to give television broadcasters greater flexibility in providing popular content to Australian audiences. Furthermore, the government has also flagged the potential introduction of local content quotas for multinational streaming services, which traditional broadcasters argue would level an uneven playing field.
‘Local content quotas have come under increased scrutiny as traditional TV broadcasters have struggled to compete with international streaming services, which are currently not required to invest in or broadcast Australian content,’ said IBISWorld Senior Industry Analyst Will Chapman.
Television broadcasters have already received notable support throughout the COVID-19 pandemic, including a 100% rebate on their Commercial Broadcasting Tax over the year through February 2021.
Changing the rules
Operators in the Free-to-Air Television Broadcasting are currently required to broadcast at least 55% Australian content between 6 am and midnight on primary channels, and 1,460 hours of Australian content between 6 am and midnight on non-primary channels. In January 2021, the Federal Government reformed the quota requirements to a points-based system, with different types of Australian content allocated different point values. This system gives broadcasters greater flexibility in the types of first-release Australian content they can air to meet the requirements.
‘With revenue for free-to-air television broadcasters expected to decline at an annualised 4.7% over the five years through 2020-21, networks are looking to rationalise their operations for an increasingly digital operating environment. The new points system will likely enable broadcasters to optimise their content spending to maximise return on investment,’ said Mr Chapman.
Australian pay-TV broadcasters are currently mandated to spend 10.0% of their total drama expenditure on Australian content. However, the Federal Government’s reform package is reducing this quota to 5.0% of expenditure from July 2021. This change is anticipated to assist pay-TV broadcasters, particularly dominant player Foxtel, in optimising their content expenditure. However, this change will likely constrain demand for the local Motion Picture and Video Production industry, which typically relies on local TV projects for ongoing demand.
‘Broadcasters have increasingly had to adopt new strategies in response to rapidly rising competition from internet video platforms, including an increased focus on live-to-air content, particularly sport. In particular, Foxtel is seeking to reposition itself as a comprehensive entertainment service in an attempt to protect its market share in the Pay Television and Internet Protocol Television Services industry,’ said Mr Chapman.
Quota quandaries
Included among the Morrison Government’s changes to broadcast content quotas is a requirement for streaming services to report on their Australian content investments. There has also been a call for submissions to an inquiry that is exploring content quotas for subscription-video-on-demand (SVOD) providers such as Netflix. SVOD providers are currently not obligated to spend any portion of their content expenditure on Australian content.
‘While the Federal Government has not divulged a specific quota proposal, any quota would need to finely balance the interests of local industry and global entertainment firms, which may be dissuaded from producing local content if the requirements are too onerous,’ said Mr Chapman.
Any local content quota would also face some difficulties in terms of enforcement, as international streaming players such as Netflix use their Australian entities to collect subscription fees on behalf of parent companies based overseas. Consequently, the quota mechanism would likely need to be based on metrics other than expenditure.
‘The EU has recently directed streaming services to offer at least 30% European content from 2021, providing a potential model for an Australian quota system. However, the Australian market’s comparatively small size could make implementing a similar quota challenging,’ said Mr Chapman.
Sector outlook
If the Federal Government ultimately imposes a hard quota on SVOD services, the Motion Picture and Video Production industry stands to benefit most. Without the quota, industry revenue is forecast to increase at an annualised 2.4% over the five years through 2025-26, to $2.6 billion. While a quota would likely only provide a modest boost to industry revenue, it would reduce industry revenue volatility, which largely stems from fluctuations in the number of large-budget film projects being filmed in Australia.
While traditional TV broadcasters could benefit from a quota for SVOD services through co-production opportunities, they are still forecast to face mounting competition from internet-based challengers over the next five years. Nevertheless, an increased focus on live-to-air content and stronger economic conditions are projected to support free-to-air broadcasters over the period. Revenue for the Free-to-Air Television Broadcasting industry is forecast to decline at an annualised 0.4% over the five years through 2025-26, to $4.3 billion.
IBISWorld reports used to develop this release:
- Free-to-Air Television Broadcasting in Australia
- Pay Television and Internet Protocol Television Services in Australia
- Motion Picture and Video Production in Australia
- NXE Australia Pty Ltd (Foxtel)
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@ibisworld.com
