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Tuesday, 20 June 2006
Page: 86

Mr GARRETT (6:56 PM) —Labor recognises the important role that the pay television sector plays in the development of Australian culture in our country. It is a relatively recent form of broadcasting but very clearly, over time and into the future pay TV will contribute substantially by way of the broadcast of Australian generated material—Australian content, Australian stories and Australian dramas. It will employ Australians and take Australian stories out to the viewing audience. We certainly recognise that this industry will be a critical part of Australia’s broadcast future, particularly for Australian material that is broadcast to people.

The Broadcasting Services Amendment (Subscription Television Drama and Community Broadcasting Licences) Bill 2006 amends the Broadcasting Services Act in two ways. Schedule 1 proposes an amendment to division 2A, part 7 of the BS Act to change the requirements of subscription television licensees for producing Australian content on drama channels and has the potential to produce some important results for the film and television industry in Australia. Schedule 2 of the bill gives the Australian Communications and Media Authority, ACMA, the capacity to transfer community broadcasting licences.

Under current arrangements, the act provides a requirement for subscription television licensees to spend at least 10 per cent of total program expenditure on new drama programs in each financial year. The effect of this bill is to amend that requirement so that subscription television licensees, the pay TV licensees, can count preproduction expenditure on script development as part of the quota. Additionally, the bill will allow the licensees to carry forward any drama spending in excess of the 10 per cent requirement to the following financial year. There is, I think, some sense in having arrangements of that kind reflected in this bill.

The additional amendment to the community broadcasting element of the act will allow the Australian Communications and Media Authority to approve the transfer of a community broadcasting licence where the new licensee represents a common interest or constituency. That approval process would be subject to a merits review by the AAT. That is important particularly, as I am sure members are aware, with Indigenous community broadcasting stations, which quite often find themselves having to go back to the authority because their circumstances change and there is a requirement that there be a new licensee.

Labor supports the bill, but we do believe it is very important to both scrutinise and review the operation of the changes that are proposed, particularly in relation to the amount of locally produced drama on pay TV. The changes to community broadcasting will give some certainty to broadcasters and make for a better regulation of that aspect of the industry, and we support those changes. We will watch very closely, though, the progress once this bill comes into law to make sure that the licensees themselves are not subverting the original intention of the Broadcasting Services Act.

I will reprise some history that led to this bill coming into the House. In March 2005 the government tabled the report Review of Australian and New Zealand content on subscription television broadcasting services. As an aside, New Zealand generated content does fulfil the requirements under the existing legislation and under this legislation. It was this review that informed the government’s decision and led to this bill coming into the House. The review looked at the act and identified the fact that the legislation of the original Broadcasting Services Act was enacted because of the importance of drama in contributing to a sense of Australian identity—that is one of the objects of the BSA—and because the greater costs of local production could mean that imported material might threaten their viability. This is indeed one of the great challenges that local producers of documentary, drama and other locally originated material face in meeting the cost requirements for getting a product like that script developed, filmed, produced and put to air. They face significant competition from the importation of programs, documentaries, dramas and other forms of broadcast material and works whose costs have been recouped through broadcast in other territories, particularly the United States.

An example that is probably well known to the House would be the television series Lost. I do not know, Madam Deputy Speaker, whether you are familiar with this piece of entertainment, but the preproduction costs were somewhere in excess, if my memory serves me correctly, of $100 million, which is way in excess of the sort of budget that we would expect for an entire program to be generated and developed by Australian producers, featuring Australian talent. As a consequence, it is extremely important, given economies of scale that operate to the benefit of overseas producers who seek to have their material sold into the Australian market, that there be a requirement for pay television licensees to show a certain amount, in this case in terms of their budgets, of locally originated material—Australian drama, Australian stories—on pay TV.

In August 2002 the Minister for Communications, Information Technology and the Arts directed the ABA to see whether the legislation needed to be amended to change eligible drama expenditure requirements for subscription TV, and that resulted in the review. It found that the production industry values the new eligible drama expenditure requirement imposed on subscription television operators, that it underpins many drama projects for subscription and free-to-air TV releases and that that particular requirement led in the years 2000, 2001 and 2002 to investment of more than $45 million in film and television projects, mainly supporting feature films.

The review also found that the current 10 per cent requirement that is identified under the existing act meets the intent of the act without being a burden on the industry and contains an implicit growth component that will apply to a growing range of drama channels post-digitisation. I will come to digitisation in a second. The government has decided as a result of the review that there is no need to increase the 10 per cent new eligible drama expenditure, although it may be necessary to re-examine that requirement. I want to put on notice that I do think it is necessary to re-examine that requirement. My personal view is that, for the present time, 10 per cent is probably not sufficient. In any event, we certainly support 10 per cent and, as we scrutinise the effect of this legislation, we will consider whether it ought to be increased. Under the USFTA it can go to 20 per cent. As I will mention later, as pay TV becomes more profitable I think there will be some strong arguments that it could come up.

The ABA also reported that no pay TV entity has reported any pre-production expenditure under the scheme to date and that the current rules were providing insufficient incentive for the subscription television industry to direct funds towards new and innovative programming. It also reported that, if limited pre-production expenditure on script development were allowed to count towards the requirement for new eligible drama production, that may encourage the production of higher quality screenplays and involve subscription TV entities in projects early in their development—and I think that is everybody’s hope.

The government has decided to allow limited preproduction expenditure on script development to count towards the new eligible drama expenditure requirement. To the extent that this would, hopefully, provide for a more robust development of scripts—certainly with more time spent on that as part of the process—that could and should be a good thing. Allowable spending on script development, though, will be limited to third parties for eligible projects and the script development expenditure will be allowed prior to the commencement of principal photography and will be capped at a maximum of 10 per cent of the total eligible drama obligations. I think those statistics make for at least a reasonable framework for these new arrangements to operate in.

The other issue considered through this review process was the treatment of the carryover of qualifying expenditure, and that is clearly what this bill goes to. The review considered, on the basis of data that the ABA provided, that it did not find there was any lack of compliance with the scheme, but it did find that the requirement in its current form offers little incentive for expenditure in excess of the minimum requirement and that there has been evidence of a tension between commercial pressure to spend funds in one financial year to ensure that particular programs are produced—for example, television drama series—and the timing of payments to meet a regulatory expenditure requirement. As a result of that review the government has decided that expenditure in excess of the 10 per cent requirement will be allowed to be carried forward and treated as new eligible expenditure in the following year. The government hopes that this will provide greater incentive for expenditure in excess of the minimum 10 per cent. Additionally, this measure is intended to remove potential constraints on investment decisions. As a consequence of these things, this bill has come into the House.

I have to say that Labor is generally concerned at the state of the film and television industry in Australia. Whilst it is true that there has been a mini revival of sorts, and many of us look hopefully to a continuation of whatever mini revivals may be on the landscape, with films such as Wolf Creek and the nomination at Cannes of Ten Canoes for certain criteria and awards—and there are a number of other Australian films that some of us would have seen and know about—the commercial success that the industry has previously and historically enjoyed has become less and less. Certainly fewer and fewer films have been capable of reaching the gross in terms of box office receipts that were a feature of a number of films produced during the 1980s and early to mid-1990s.

The Australian Film Commission’s 2004-05 national survey of feature film and TV production provides some statistical reinforcement of what is a pretty subdued and at times dour picture of the film and television landscape. Its findings are well known so I do not intend to rehearse them at great length this evening in the House. But it is worth while noting that in Australia, for the period 2004-05, the feature film and TV drama production industry spent $536 million. That is a reasonable amount of money, although not high. But it was 10 per cent down on the preceding year, which is a little surprising given that the economy generally was buoyant, and whilst the number of local feature productions increased slightly from some 16 to 19 it still remained below the 10-year average of 24. We produce very few feature films in this country in comparison with countries of similar population and gross national income size, and we seem to be producing fewer and fewer. I think there is a strong argument to say that the fewer feature films we produce the less likelihood there will be of having successful feature films.

Additionally, the Australian Film Commission national survey also showed that the increase in foreign feature activity during the past decade has meant that Australian productions in terms of total spending have fallen—and I think this is the key statistic here—from 60 per cent in 1995 to 18 per cent in 2004-05, and that spending on locally produced drama for television has fallen significantly over the past five years as well. In 2001 the total expenditure was $393 million, while in 2004-05 the figure was $205 million—a decline of some 50 per cent or more. Australian children’s television drama is at a 15-year low as well.

The fact that the number of hours of locally produced drama on television has also fallen suggests that policy is awry in terms of the ability of our story makers, our actors, our producers and our directors to get their product onto screen and for it to be seen and appreciated by people. We have about a million young Australians currently overseas. There is a great diaspora of talented and creative Australians who have had to go elsewhere to work, quite often in the film industry. I note that the United Kingdom has introduced a number of reform measures to deal with the lack of health of its film industry, which has included the restructure of its public funding arm for film. The UK Film Council, which has responsibility for the British Film Commission, British Screen Finance and the British Film Institute, as a consequence of consolidating and restructuring has made real headway in developing a much more healthy and vital export oriented film industry.

There is no doubt that subscription television licensees—pay TV—have scope for further investment in Australian content, particularly locally produced drama. Kim Williams, Foxtel boss, said last year, ‘We remain on track to reach cash flow break-even before 30 June 2006.’ Now that they have established themselves and now that their infrastructure costs have been depreciated, those profits are most likely to increase over time. So subscription television licensees do have the capacity to generate higher levels of locally produced drama, and we on this side of the House would certainly encourage them to do that.

One concern that I need to mention in the time left to me is that subscription television licensees have had annual shortfalls in their actual expenditure on local drama. This is clearly a problem in the way in which the industry has approached both the spending of the money and the requirements that it has to meet to spend the 10 per cent within the period of time designated in the act. But clearly there is also a problem in the way in which they are organising themselves and the priority they place on making sure that they get local drama projects up. To get a local drama series away is not an easy task. There are many skills, long time lines, a lot of development, a lot of work and a lot of investment that go into them. But I do not think it is an unrealistic expectation from this parliament that pay TV licensees should be meeting the expenditure they are required to, including with the changes that are forecast in this bill, as a matter of course. They should be seeking to do better than that, but they certainly should be seeking to meet it.

In closing, let me look quickly at the budget. I make mention of a couple of issues that arise from it, one of which is the provision of a subscription arm for the ABC. The ABC remains relatively underfunded. Certainly we welcome a budget commitment of some $30 million for a subscription arm to produce local drama and other material, but it is equally important that the subscription TV industry play its role. We have a deficit in our balance of trade in royalties from the screen industry, and in the audiovisual sector we run a deficit of around four to one. Yet we have an abundance of talent, capacity and ability in this country that could be utilised if the policies and the enthusiasm, particularly of the sector, were brought to bear.

The minister has announced an expansion of the review of tax incentives 10B and 10BA to go further and to consider additional measures that may assist generally in getting private sector investment in our film and television industry. I think the government must look much more seriously at further ways of harnessing scarce private investment to boost the production of local drama on our screens. It is not an exaggeration to say that many in the industry feel that things are in stasis, that they have effectively ground to a halt, that people have to go elsewhere to seek out employment and that the structures—the financial frameworks and the tax arrangements—are not of such an order as to generate increasing amounts of good, local Australian drama and material for our television screens—both free-to-air and pay.

I draw to the government’s attention the fact that, in relation to community broadcasting and community television, there is a lack of any provision for the digital roll-out of community television in the government’s recent proposals on media reform. It is absolutely essential that the government address this issue, because the community broadcasting sector, particularly community television, will be absolutely stalled unless they have the capacity to get onto the digital platform, and that will take necessary investment by this government. Many are concerned that a requirement that sits at 10 per cent and allows costs to be adjusted over a longer period is not sufficient, but for the moment Labor will carefully scrutinise and review the way that these changes play out.