How Badly Will Convergence Affect TV Networks?

A government review looking into how convergence will affect the media industry has just finished accepting submissions on what it should investigate, and unsurprisingly the existing free-to-air networks are pushing for a reduction in their licence fees, given the range of competition they now face. But is the problem as bad as the networks make out?

The Convergence Review, which will be carried out at an as-yet-unspecified point in 2011, finished accepting submissions on its terms of reference last Friday. The review will cover a whole range of issues, including what rules should control local content on TV and how community standards should be reflected in program classifications. However, the ultimate business question that the review could influence is how much commercial networks have to pay for their licences — something that is set by the government and which has a major impact on the profitability of TV stations. These have long been viewed as a licence to print money, but in a more competitive environment, that isn’t necessarily the case.

Most of the submissions made to the review have been made public, and in this context, those from organisations representing commercial TV networks are of particular interest. Free TV Australia, which represents the commercial networks collectively, makes no bones about wanting the rules around licence fees changed. Here’s what it had to say:

The existing system has been in place since 1964 and has not been reviewed since 1987. Australian broadcasting licence fees are out of step with international best practice when compared with other countries whether measured as a percentage of industry revenue, a percentage of GDP or on a per capita basis. In the current converged media environment the old system of licence fees needs to be reviewed.

The organisation also points out that while the market has become more competitive, the regulations apply to different media are inconsistent:

A young viewer watching TV at 6 pm for example may not even register whether they are watching a G-rated episode of The Simpsons on a free-to-air channel or a PG-rated episode on a pay TV channel or downloaded through Apple TV but the regulation applying to those three platforms varies greatly.

There’s no denying that there are far more options (legal or otherwise) for attracting our eyeballs than there were two decades ago. However, while that may have reduced the number of total viewers for any given program, it doesn’t necessarily mean that TV isn’t the dominant medium — or that it won’t be in the future.

According to research firm Ovum, by 2015 digital terrestrial TV will have reached 5.894 million households in Australia, with an additional 823,000 accessing mainstream TV via satellite. Pay TV will reach 2.175 million households, only a slight rise on the current figure of 2.080 million. And while IPTV services are expected to grow impressively, from just 90,000 now to 342,000 in 2015, that still’s only a fraction of the reach which free-to-air TV will have.

Of course, those figures don’t include the two most obvious sources of distraction: quasi-legal options like YouTube (which will remove illegal content if asked, but which has plenty of TV of dubious legality ready for viewing), and entirely illegal but wildly popular options like Channel BT. I’d have more sympathy towards commercial networks on that front if they didn’t have their head in the sands when it comes to acknowledging the existence of peer-to-peer downloads as a threat.

And then there’s the issue we always seem to return to when discussing TV in Australia: the fact that the networks treat their existing customers so poorly. In a challenging business environment, it makes sense for TV networks to push regulators for changes that might reduce their input costs. But it also makes sense to acknowledge the changed environment when planning and delivering your programming, and on commercial TV, we’re still not seeing much evidence of that.

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