Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Environment and Communications Legislation Committee - 29/04/2016 - Broadcasting Legislation Amendment (Media Reform) Bill 2016

GILL, Mrs Clare Maree, Director, Regulatory Affairs, Nine Entertainment Co.

MARKS, Mr Hugh John, Chief Executive Officer, Nine Entertainment Co.


CHAIR: Welcome. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. I now invite you to make a brief opening statement and then the committee will ask questions.

Mr Marks : Thank you for the opportunity to address the inquiry. Nine Entertainment Co. is a diverse media content company. We turn over $1.6 billion annually and broadcast over 7,000 hours a year of Australian programming. We are a significant employer in the Australian media sector, directly employing over 2,300 staff across 18 sites around the country, and many more are engaged indirectly as a result of the nearly $600 million we spend on Australian content. We own and operate NBN, which holds a television broadcast licence for the northern New South Wales region. NBN produces a one-hour local news bulletin every night, with around 18 minutes of local news for each of the six submarkets. It is a critical brand to that station.

While we enjoy some economies of scale through some back office integration, those savings are being more than eroded as a result of declines in the revenue base for free-to-air television resulting from audience fragmentation—issues affecting television more broadly. Any advantages that can be gained through increased scale, as noted in the explanatory memorandum for the bill, should focus on the viability of the current business and not the ability to cope with more costs and more regulation. Nine Entertainment Co. are seeking to mitigate the impact of audience fragmentation on our business by continuing to invest in high-quality news, current affairs, sport and other Australian content to ensure we stay relevant and competitive while also focusing, importantly, on growing our digital audiences as well through enhanced content offerings across multiple platforms outside free-to-air television. This, however, requires significant investment in new innovation and Australian programming.

Our submission to the committee in the context of the current commercial environment and competitive landscape highlights three points. Firstly, licence fee relief is the most important and pressing issue for Nine. Nine currently pay $51 million a year in licence fees on top of company and payroll taxes and other obligations. Secondly, we understand the need for the proposed changes of repealing the 75 per cent reach and two-out-of-three rule but believe they should only be considered together and more broadly as part of holistic reform. Incremental changes will not bring about the reform required for the ongoing viability of our industry. Finally, the local content provisions in the bill are attempting to address a market failure in the provision of local news in rural and regional Australia. Nine believe the ABC, as the public broadcaster, should be a mechanism for addressing what is a market failure.

The Australian commercial free-to-air TV broadcasters, including Nine, recognise that to stay relevant and commercially attractive to advertisers we need to tell Australian stories and provide quality news, sport and Australian entertainment for free. The health of our sector is important to the government's policy objective of diversity. If we do not remain healthy and competitive, the biggest threat to diversity is a contraction in the Australian commercial free-to-air television sector. Therefore, the current discussion with regard to diversity of Australian voices should centre on measures to maintain diversity and the health of the Australian free-to-air television sector, which supports the great bulk of content creation in Australia. A real and meaningful reduction in onerous licence fees will have an immediate impact in underpinning the presence of diverse Australian voices and content on our screens.

Beyond licence fee relief, media reform is multidimensional and should include a review of all regulations, not just one or two rule changes. Real reform requires examination of all rules that affect ownership restrictions, the role of the public broadcasters, the regulatory framework for online content, how multinational content providers are regulated and issues around retransmission, producer offsets, antisiphoning and children's quotas. An incremental approach of one or two rule changes jeopardises the ability to negotiate the right balance in a broader reform package.

The necessity of licence fee relief is immediate. Not to act now will immediately jeopardise the volume of quality Australian content. There is a real chance, if we do not act, that in the future Australians will have to pay for content such as sport, drama and entertainment—content they currently enjoy for free.

I am happy to take questions.

Senator URQUHART: You talked about holistic reform, and we heard this as well, I think, in evidence at our previous hearing in Canberra. Do you think that the current provisions in this bill are short-sighted or not holistic enough? Should it actually go through in this form, or should we take a longer term to think about what that holistic reform should be?

Mr Marks : I believe that the two rules that are the subject of this bill are obviously outdated regulations that belong to a different era. The concern, certainly with the removal of one of those rules as opposed to both of those rules, is that you may end up with an outcome that is unintended, because you are changing one part of the system without considering the system as a whole. Two of the things that obviously are important and that are being considered are the diversity of Australian voices and the provision of quality content. These are the parameters under which, I would say, holistic media reform needs to be considered, and we need to look at the whole industry's part in how that public policy objective is maintained. Our role as a publicly listed company is, obviously, we are governed by the need to drive shareholder returns and profits, but there are a number of players in the sector and a number of rules and regulations and different factors that I do think warrant analysis. To me, holistic media reform is where we should be addressing our attention as a priority.

Senator URQUHART: Were you consulted by the government in the development of the bill we are talking about today?

Mr Marks : Yes. As I said, we were consulted and we support the removal of rules that are outdated, and we understand that it is a pathway. Often a reform is a pathway and not done immediately. I think we need to stop and take conscious thought of what the unintended consequences of changing one or other rules might be and look at what is the ultimate objective and where that pathway reform is going to end.

Senator URQUHART: Can you provide more detail on the form of that consultation and at what stages you were consulted? Did you put forward that more holistic reform approach during those consultations?

Mr Marks : I am a constrained in that I have been in the role only for the last five and a bit months and obviously this is a process that has been ongoing for some time. So I will not comment on what happened pre my time in the role. By the time I joined, I would say that this was a process that was well down the path. Since that time, yes, we have had conversations about what is important to us as a business and what we think is important in terms of reform. I think those conversations have been very fruitful and we have been well heard.

Mrs Gill : I have only been in the role for three months, but my understanding is that we were adequately consulted as we went through and we did get a chance to communicate our position.

Senator URQUHART: In your submission, you said that Nine recognises the importance of free Australian content, and you have touched on that, but you have called for more flexibility in the allocation of the quota. What would you actually like to see happen in that space?

Mr Marks : Are we talking about the content quotas?

Senator URQUHART: Yes.

Mr Marks : I am a content guy. I have come through the production sector. My job every morning when I walk into the office is how to get more and better quality content on our network because that is what is going to deliver our business model. The challenge for me, sometimes with quote obligations, is whether as networks we comply with these quota obligations with real purpose and vigour and the results that are sought or whether there are times when these quota obligations may produce unintended consequences or just do not achieve an outcome? One example for me is children's content. And this is not a proud statement to make but, unfortunately, kids are not watching our kids content on our free-to-air platforms. We spend quite a bit of money on it because we have a quota obligation that demands a number of hours of content, but we probably allocate that money too thinly across too many hours of content for the result we achieve. I support and I recognise our responsibility to provide local content. I think we need to constantly re-examine the outcomes from each rule and whether those outcomes are the outcomes that are desired or not is something that should be part of the conversation.

Senator PATERSON: It is my understanding that the ABC is very successful in its children's content programming. Would you say that that is an example of how the publicly funded broadcaster is crowding out your private alternative?

Mr Marks : Well, they were very funded to start up. The children's content hit for us obviously came when the ABC introduced ABC3, which is a great service that lots of kids consume. That is fantastic. For me, it is a perfect thing for the public broadcaster to be doing. As a result of that channel and then the introduction of video-on-demand services and other things where kids are consuming vast amounts of children's content, there is just not the audience available for us to be able to compete in that space. Maybe, if we had some flexibility in how we allocated funds, I could put my funds into one property that may be a significant contributor to the diversity landscape and provide great content. But when I have a quota obligation that requires me to fulfil a number of hours, the hours tend to overcome the quality, and it is not the best outcome.

Senator PATERSON: So just very briefly: would you say that you lose money on children's broadcasting—it is not a profitable exercise?

Mr Marks : Absolutely.

Senator PATERSON: You said in your submission that the ACCC was well placed to protect diversity. I understand that the media and acquisition provisions of the Competition and Consumer Act and the Foreign Acquisitions and Takeovers Act apply to media transactions, but is there any anything specific in these acts that would require the ACCC to consider the impact of proposed mergers on quality and diversity of media content? I am specifically talking about news and current affairs.

Mr Marks : As an obligation that they consider that?

Senator URQUHART: Yes.

Mr Marks : Again, I am not an expert; I am not aware of obligations. I know that the ACCC is active and interested in any transactions that we would be considering or looking at, and I am sure it would have the skills of the people there to be able to provide the right analysis. Again, I am not aware of the specific—

Mrs Gill : My understanding is that they are not limited from looking at that as part of substantially lessening competition.

Senator McKENZIE: Thank you, Mr Marks and Mrs Gill. I have lots of questions. And we have lots of time—brilliant. You made some comments about the ABC being the 'market failure' broadcaster, if you will. I only wish the ABC would start to see themselves as that. On page 9 of your submissions, you say:

Questions must be raised with regard to further investment by public broadcasters in multi-channeling and an already over-serviced digital market.

Could you expand on your concerns for Channel 9 and your profitability.

Mr Marks : I think, again, in the landscape of where the media sits at the moment, we suffer competition greatly from this new raft of international competitors. That has had a definite impact on our audiences and has had a definite impact on our profitability. Ultimately, it will have an impact on our ability to provide local content. What we are also finding at the same time is, to me, an increase in competition, as well, from public broadcasters. I would love to have the funds available to do some of the things that the ABC has done—not to criticise them; they do some amazing products across various platforms. But, again, they are almost ahead of us in the ways they are able to provide content in the new platforms. We are developing those models. We have to innovate our business. We have to be able to get into those new platforms and find the right business models. But, yes, certainly there is always a growing level of competition from the public sector. I will give you a small example. There was a recent television festival in Cannes. It happens twice a year. It is a buyers and sellers market for television shows. As an example, the ABC would send three times the number of executives that we would send to that market.

Senator McKENZIE: Well, there is something for next week's estimates!

Mr Marks : We are also finding that with LA Screenings, which happens in May—again, there is more competition coming from all sources to us. You have to remember that we spend 60 per cent of the amount of money that is spent on screen culture in Australia. It comes out of the commercial free-to-air broadcasters. So the competition that happens at the margin at that level is where the key competition is. It is that competition at the margin that really affects our business.

Senator McKENZIE: You also say on page 9 that your television production costs are up to 30 per cent more efficient than those of the ABC. Did you want to expand on that?

Mr Marks : I do not want to get into a long discussion about where we and where they sit. But if I look at the amount of content that we have to produce across our channels and the budget that we are able to do that with—if I exclude sport—and then if I look at the amount of content the ABC are required to do, and which they achieve with their budget, their budget is significantly higher than ours. With the amount of content that we produce, in the analysis that we had that 30 per cent more efficient outcome was the number we landed on.

Senator McKENZIE: You make some critique, I guess, of the additional quotas within the legislation as they only come into effect after the trigger event, meaning that no genuine market failure exists. Is that still your view?

Mr Marks : The news quotas? Where there is obviously a demand for rural news and current affairs services, there seems to be a demand that the commercial sector should be doing that, with the additional regulation and additional cost on the commercial sector to do it, when there seem to be other alternatives. The ABC holds itself up as a fantastic provider of rural and regional news services.

Senator McKENZIE: Not all of us agree with that.

Mr Marks : Again, in this context of media reform, that has to be part of the debate. What is our role as commercial operators? What is the ABC's role—and SBS's, for that matter—as public broadcasters? What is the right balance that should be achieved in that context? I am not sure that imposing additional costs on regional broadcasters whose business model is already threatened and challenged will get the outcome that people might think it would achieve.

Senator McKENZIE: The regional broadcasters' business model is threatened and challenged. I would argue that one of those challenges is live streaming of product that they have bought, essentially, through agreements with their metropolitan affiliates and that is being undermined by that very affiliate broadcasting that same product into the lounge rooms and onto the desktops of people in those rural and regional areas. You state that we have outdated regulations, which is what the bill is all about, and there does not seem to be much debate about that issue within the major broadcasters in particular. Would you agree that Minister Alston's 2000 definition of a broadcasting service—that is, anything over the internet back in 2000 was not considered a broadcasting service—is equally outdated as the regulations in the legislation we are looking at today?

Mr Marks : Actually, strangely enough, I do not believe so.

Senator McKENZIE: Why is that? It seems to fly in the face of the views of every commonsense academic we have had in today—I know that sometimes might be an oxymoron, but not today. If I went to the man on the street or into any schoolyard and said, 'If I'm watching the footy on my computer or watching my footy on the TV via WIN or directly streamed from Nine'—

Mr Marks : It is the same thing.

Senator McKENZIE: It is the same thing. The law should reflect society's expectations, should it not?

Mr Marks : That is true. I certainly agree that the viewer considers it the same thing, potentially. We as a business know that they are different things. We have had to negotiate rights agreements in contracts to ensure that we acquire all the rights that we need to operate in a modern media context. The way that the industry has been set up over decades and the way that it operates now is that all of those rights are individual rights that we need to acquire. We have gone about that process in our rights negotiations so that we can provide all of the services that we need to provide in a modern media context. You touched on the affiliate arrangements and us streaming into regional areas. We have had to make a major investment to be able to provide streaming to our audience, and, in fact, it continues to be an investment because all that uses bandwidth and CDN—I will not get into the detail of the cost side of things. Again, we are open to talking. A rational or efficient affiliate arrangement should be able to deal with streaming and other issues by way of commercial negotiation in the same way that we need to commercially negotiate with the people we are acquiring rights from.

Senator McKENZIE: So you think that that still stands—a 16-year-old definition from when the internet was not being used as it is today, such a part of our daily lives? You are comfortable with the then minister for communications' determination of a broadcasting service? I am not asking about how it is applied, and how you conduct your business within that legal framework is obviously premised on the fact that we do not define anything put over the internet as a broadcast service.

Mr Marks : I am not sure of the specific definition; I do not have it in front of me.

Senator McKENZIE: We can get it for you. It says that 'a service that makes available television programs or radio programs using the internet' is not a broadcast service. It is that simple, and ridiculous and outdated.

Mrs Gill : But I think that that is a perfect example of looking at one regulation without looking at the whole industry. If that definition is changed, the public policy implications of how we negotiate our rights—it turns everything up on end. We negotiate different digital rights than we do broadcasting rights. You make a point in relation to how the user perceives it, but that is how the industry operates. If we do look at a rule like that, we cannot look at it in isolation. It must be looked at in the broader reform.

Senator McKENZIE: Everything I hear from Channel 9, everything I hear from Channel 10 and everything that I am sure I would hear from Channel 7 is that we should not be doing this in isolation, that it is about different measures impacting the whole et cetera. If we are talking about a digital age, this seems to be a very basic definition issue that is affecting a whole lot of conversations and commercial arrangements, which I would say render a lot of that irrelevant and outdated.

Mrs Gill : If you define broadcasting as 'over the internet', you have public policy implications. Netflix suddenly come in as a broadcaster—

Senator McKENZIE: I absolutely agree.

Mrs Gill : We understand what you are saying, but it is a challenge for the policymakers in relation to what are the consequences of changing that single issue.

Senator McKENZIE: I am simply asking: do you think that it is a reasonable definition in the 21st century?

Mrs Gill : As the way the industry is structured—

Senator McKENZIE: No. I am asking you if Channel 9 thinks that defining a broadcasting service as only something that is available over TV or radio is still relevant in the 21st century media market.

Mr Marks : Unfortunately, potentially it is, because of the way that we acquire rights, which is that we acquire terrestrial television rights, which deal with that exact definition.

Senator McKENZIE: So you think that that is modern—

Mr Marks : It is not modern, but it is the way that the industry has adapted. I agree with you that it is not modern.

Senator McKENZIE: In your negotiations with your affiliates, you are, as Channel 10 said, taking into account the fact that you live-stream 24/7 into the same licensing area as somebody who is purchasing your product?

Mr Marks : Yes. It is something that we are—

Senator McKENZIE: How would you cost that in?

Mr Marks : It is not difficult. Obviously there are investment costs required to establish that service, as in capex, that need to be recouped and operated. There are operating costs that relate to the operation of those services, and then there is revenue that will apply to advertising that potentially will come through the provision of that service. All of those things are relatively transparent and able to be part of a negotiation.

Senator McKENZIE: So the removal of local businesses in regional communities to advertise and promote themselves, because there is no longer a WIN, a Southern Cross or a Prime in their area—do you promote; I am trying to think of one now: Rodwells rural supplies—

Mr Marks : I always use 'tyres in Ulladulla'!

Senator McKENZIE: Rodwells rural supplies in Alexandra; let us go there—how do they buy some ad space on Channel 9 that is affordable for them?

Mr Marks : It is really interesting. As that particular technology progresses, people like that will be able to buy ads in the streaming service targeted at people who are actually in regional Australia and, even more, can probably target 50 years-plus, or 30 to 45 and—

Senator McKENZIE: I completely agree, Mr Marks, but we are not there yet.

Mr Marks : I know, but we are pretty close.

Senator McKENZIE: We are pretty close?

Mr Marks : Yes.

Senator McKENZIE: With the provision of digital infrastructure that regional Australia needs to access your live streaming?

Mr Marks : That is a separate issue.

Senator McKENZIE: But very linked.

Mr Marks : Yes. In terms of our ability to be able to service local ads as part of a stream, we are making the investments now so that will be an option in the not too distant future.

Senator McKENZIE: In terms of affiliation fees, you would not expect your affiliates to pay the same fees that they have been paying over the recent past in this new sort of environment, where you are live-streaming into their areas?

Mr Marks : I think the whole nature of the commercial arrangement will have variations to it at the margins, like the media is changing at the margins.

Senator McKENZIE: But are you asking your affiliates to pay more money, whilst you are reducing their capacity to earn a dollar through local advertising, or are you asking them to pay less money for the privilege to broadcast your material?

Mr Marks : I would like to think that, ultimately, we are enabling them to make more money by helping them to better tailor the advertisement in their regional markets and that we should be able to work together in a way that encourages a greater net economic outcome.

Senator McKENZIE: For them? And for the regional communities?

Mr Marks : For them and for us, because, ultimately, if we are sharing in their revenue, we benefit.

CHAIR: You said you 'would like to think', which is not actually a very definitive statement. Can you just clarify a bit more about whether you actually think it or whether you would like to think that that is the case, because obviously it could be either. How exactly will that actually help them?

Mr Marks : Help regional broadcasters?


Mr Marks : Ultimately, we as an industry have the ability—and this is where the industry is heading: obviously, if we lose thousands of audience then we are charging advertisers more for the thousands that they are reaching, which is the basic premise and the issue that we have as a business.

CHAIR: But how does that assist your affiliates?

Senator McKENZIE: [inaudible] Alexandra cannot afford thousands more to have that—

Mr Marks : So how do we deal with that? We deal with that by providing a better targeted product to advertisers. So, ultimately, advertisers—

CHAIR: Sorry, but my question was: when you said that you 'would like to think' that it would help your affiliates, for example, how exactly do think that will help your affiliates?

Mr Marks : Because, as technology evolves, if I can access a more defined audience that I think is relevant to my product then I can afford to pay more for that product than I can accessing a broad and generic audience.

CHAIR: So what sort of time frame are you talking about?

Mr Marks : I think our budget is that, by the end of financial year '17, we will be able to provide that service. Of course, that is where the internet has made great progress—in the internet's ability to service targeted advertising. So we, as an industry, need to respond to that in a consistent way.

Senator McKENZIE: If you are planning that for the end of 2017, I am assuming you have done quite a bit of research into rural and regional Australia's adaptation to and adoption of digital technologies. Can you give us a bit of a sense of where you think we are at?

Mr Marks : It depends on the particular area of course. They are probably—and you would know this better than me, I expect—in areas like Newcastle or, bizarrely, Canberra, which is still considered rural and regional Australia—

Senator McKENZIE: There is our first problem under the ACMA 'local' definitions.

Mr Marks : as opposed to Dubbo or—

Senator McKENZIE: Bendigo—

Mr Marks : Bendigo—

Senator McKENZIE: Wodonga, Benalla, Wangaratta—

Mr Marks : or our farm in Crookwell.

Senator McKENZIE: Yes.

Mr Marks : Obviously there are limitations in terms of bandwidth and the ability to access alternative services in those areas. Again—remembering that the important thing for us is the innovation that is necessary—the innovation that we are doing is focused on the margins about where we are losing those audiences and places.

Senator McKENZIE: Mr Marks, it is not really about rural and regional Australia, is it, for you?

Mr Marks : Our imperative is to make sure that we return the best possible amount for our shareholders.

Senator McKENZIE: Your shareholders—absolutely. That is why you made your comments about market failure, about the ABC, about who is going to get access to 24/7 streaming, and the reality of the lack of infrastructure out there in the regions. It is really not about rural and regional Australia and local content and provision of new services that actually are relevant to them, for you, as Channel 9, is it?

Mr Marks : We are making those investments because we believe it is good for our business. The result of those investments is that those investments will also be available to regional broadcasters, should those negotiations proceed in that way and we reach commercial outcomes.

Senator McKENZIE: Just to clarify, those affiliation fees will be likely—accounting for all these changes—to be less than they have been in the past?

Mr Marks : I do not believe affiliation fees will decrease. Unfortunately, the cost of Australian content and the cost of our content obligations continue to increase. That is the challenge for us as a business. So, if regional television is requiring, effectively, that—

Senator McKENZIE: Isn't it sports rights?

Mr Marks : No. It is all over the platform. Unfortunately, high-quality content is a very competitive landscape, so all quality content is increasing in cost.

Senator McKENZIE: As to the reach rule, you want to see that removed, yes?

Mr Marks : I would not stress that that should be removed in isolation. I think what we are supportive of is understanding that the bill that is in front of us supports the removal of two rules that we think, yes, are redundant.

Senator McKENZIE: You are already circumventing the reach rule through your live streaming, aren't you?

Mr Marks : I do not know about that.

Senator McKENZIE: I think you do.

Mr Marks : Very much at the margins.

Senator McKENZIE: Is it relevant? What impact does it have if you stream your content wherever you like across this country? You reach into places that the man on the street would think you did not have a right to do.

Mr Marks : Again, I will come back to the point that in the context of an efficient affiliate arrangement, those should be things that we are dealing with, and we should be able to get a better net economic benefit between the two of us.

Senator PATERSON: How important is the passage of this legislation to Channel 9?

Mr Marks : I do not think it is critical to our business. It is an important first step in holistic media reform and a good first step in removing redundant regulation. But will it change our business fundamentally? No. Most important to us is the immediate need for licence fee relief and the importance of that in ensuring that there is vibrant local content and a diversity of voice that comes from that local content, going forward.

Senator PATERSON: You certainly have my sympathy on licence fees. I think you have made a good argument that you are paying well above the world average on that. On the other hand, I would argue that the rate that you pay for the spectrum is probably below what its true market value is. Do you have a view on whether reductions in licence fees should come along with, say, auctioning of spectrum on the market to ensure that it is going to its most valuable use?

Mrs Gill : I have come from the telecommunications sector, so I take a very different view on that. When you are going to auction for spectrum for telecommunications, you are buying a product that you are actually selling. In broadcasting the spectrum is a means to an end in relation to the delivery of the public policy. We cannot use our spectrum as we would be able to if we bought the property rights, such as in an auction. It is a very different equation.

In relation to the value of the spectrum, we cannot just talk about highest economic use—you also have to look at the public policy benefits of the use of spectrum. We have very onerous local content obligations. We have those as a trade-off for access to the spectrum. That is a public policy benefit of that. I do not see going into the open market and bidding for spectrum as a viable alternative, because they are different uses. If we had to bid against the telcos, it is a very different economic and social argument on public policy. We have lots of constraints on our business, which cost us lots of money, which are the 55 per cent Australian local content quota.

Senator PATERSON: Most of which I would like to get rid of. I agree. But what we are talking about here is that one of the rationales for licence fees that public broadcasters pay is that effectively you are protected from competition. You are an oligopolistic industry. You are given this privilege by government, for which you pay something in return. If we are proposing to remove licence fees or reduce them substantially, it would seem to me that you are getting a pretty great protection for no compensation to the public. One way in which we could address that is by floating spectrum and allowing it to be traded. If public broadcasting is its most efficient use, that would be what would happen, but if it was not then it would go elsewhere.

Mrs Gill : That is an economic argument.

Senator PATERSON: It is, yes.

Mrs Gill : And the Australian broadcasting and Australian voices is a public policy argument. So it is not as simple as reducing—

Senator PATERSON: I do not accept an artificial division between economics and public policy.

Mrs Gill : It plays into it, but Australian voices is just as strong an argument as well. It really is up to the government how you use your spectrum. If you want a strong Australian voices and a strong Australian production industry, allocation of spectrum to broadcasting services is important.

Senator PATERSON: That is one way of doing it. I can envisage many other ways of doing it that would be a bit more direct than giving a company beneficial and cheap access to spectrum.

Mrs Gill : If you look at it in relation to the highest economic use, if you auctioned it on the open market you would have absolutely no leverage for any business to apply the quota on content.

Senator PATERSON: Not through regulation, but through direct means like subsidy for local content. That is what we do with the ABC, for example. We are getting a little bit sidetracked here.

Mrs Gill : That is an argument that the public policy side of the equation has to look at.

Senator McKENZIE: In relation to what you are saying about competing with telcos, I thought that was really interesting given that going forward you are probably going to be competing with them for a whole bunch of stuff, including sports rights. Look at what Optus was able to purchase and do. Do you have any further comment to make about how it is not just the traditional players in this space any more?

Mr Marks : The world is changing fast around us. Everyone is looking at their business model. We have to be nimble and responsive to that. The players that we deal with will change. I expect that over the next 12 months you will see all sorts of different partnerships and alliances around, importantly, around good content. The provision of good content is of a real public interest and obviously something that the public is extremely interested in. The competitive landscape is changing quickly.

Senator McKENZIE: Will we see a trigger event soon?

Mr Marks : If the reach rule is removed? I do not know that there will be a rush of mergers and acquisitions. Again, for me as a business, the business has changed dramatically and my focus is the content business. As a content business, the platform starts to become less relevant. The platform is obviously relevant in terms of the legacy—

Senator McKENZIE: The platform is very relevant to previous minister Alston.

Mr Marks : The platform is very relevant, and that is the way the business is set up, but we are content business. What does adding an acquisition in regional Australia add to ourselves as a content business? I am not sure.

Senator McKENZIE: You are not really sure, Mr Marks? You run this company. I am sure you have assessed—

Mr Marks : Perhaps very little. For us, the content business that we run is focused on expanding the number of platforms over which we provide content. The sorts of content we provide and the business models around which we can monetise that content are the focus for us as a business.

Senator McKENZIE: Not regional Australia, from a commercial perspective?

Mr Marks : Not in terms of acquiring a regional television broadcaster. I do not see that as high on our priority list.

Senator McKENZIE: In terms of incentivising local content the way this bill envisages—locally produced, locally significant et cetera—do you see that as a positive or negative for rural and regional communities wanting to access relevant news, entertainment and weather?

Mr Marks : If you look at our example, in terms of NBN, we have a one-hour new service which was an integrated new services that services six submarkets in Northern New South Wales. It is the highest rating program that we have on our network.

Senator McKENZIE: We love it.

Mr Marks : It is a good commercial model. We have built that model based on audience impact—what for us is the content that is going to drive the highest audience. The highest audience will drive the highest revenue return. I think that is a great example. I use the terms 'local content', being Australian content, then 'local local content', which is state content, then 'hyper-local', which is down to—

Senator McKENZIE: Then I am talking hyper-local.

Mr Marks : The economics are challenging, but hyper-local content is a very effective model if you get it right.

Senator McKENZIE: What are the ingredients to get hyper-local content right? The rip and read does my head in. Can you share with us some of the secrets of your success?

Mr Marks : Location, good talent on site and in the story, being part of the story—those are the things that make effective news and current affairs.

Senator McKENZIE: Has the bill incentivised those ingredients appropriately?

Mr Marks : Certainly it rewards that sort of content more than other content. I would have thought that was appropriate.

CHAIR: Thank you very much for appearing here today and for your testimony. The committee greatly appreciates the time and effort you have gone to to appear here.

Proceedings suspended from 12:09 to 13:05