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Environment and Communications References Committee
01/08/2018
Australian content on broadcast, radio and streaming services

SIVAKUMAR, Ms Rohini, Corporate Counsel, Commercial, Australian Recording Industry Association

SMALL, Ms Lynne, General Manager, Australian Recording Industry Association

[11:02]

CHAIR: Welcome. I now invite you to make an opening statement.

Ms Sivakumar : Thank you for the invitation to participate this morning. Our CEO, Dan Rosen, would have appeared this morning but, unfortunately, he is travelling at present. He sends his apologies. ARIA is the peak trade body for the Australian recorded music industry and was established in 1983. ARIA has more than 100 members, ranging from small, boutique labels or independent artists through to medium sized organisations and very large companies with international affiliates. ARIA is probably best known to the public as the organisation which stages the annual ARIA awards, which recognise excellence and innovation in all genres of Australian music, and for the publication of the weekly ARIA charts, which rank sales and consumption of music in Australia across various genres.

ARIA is also actively involved in representing the music industry in matters of importance to our members, including the protection of copyright. One of ARIA's primary objectives is to advance the interests of the Australian recording industry and support Australian music and create opportunities for it to be heard. We are very proud of all of our Australian recording artists, many of whom have demonstrated their world standing in recent years. Local artists such as Vance Joy. Flume, Sia, Troye Sivan, Gang Of Youths, Courtney Barnett, Iggy Azalea and Keith Urban enjoying international sales, critical claim and chart success. In June, Five Seconds of Summer, a local Australian band, topped the Billboard charts in America. Such international success not only benefits the Australian economy but helps position Australia on the world stage. Perhaps even more importantly, our performers play an important role in recording and reflecting our cultural identity, telling our stories from our own unique perspective.

We believe an appropriate policy framework supports the opportunity for Australian creators to continue to fulfil this important role, and local content requirements remain a critical element of such a framework. It is for this reason that we thank the committee again for providing ARIA the opportunity to elaborate on the key issues we raised in our submission to this inquiry. We don't wish to trouble the committee again by restating our submission, but there are a few points we wish to bring to your attention. Firstly, due to the global proliferation of online music services, traditional borders no longer apply and music is now typically released on the same day worldwide as part of the New Music Fridays initiative, under which there is now an aligned single global release day for recordings. This means music fans are able to hear new music on the same day worldwide, rather than having to wait for the national release day in their home country. It is in this crowded digital marketplace that Australian recording artists must compete. Australian recording artists are having to compete with overseas artists with established and bigger fan bases and promotional budgets. Consequently, it is of vital importance that Australian artists are given an opportunity to be heard.

The recorded music industry wholesale figures published by ARIA in April this year show that digital distribution now accounts for over 75 per cent of Australian recording revenues. This has been primarily driven by consumer adoption of music services such as Google, Spotify and Apple Music. Pre-programmed playlists, and playlists based on algorithms, influence listenership on these streaming services. While streaming services have contributed to the growth of the recorded music industry, they also bring greater difficulties for Australian artists to have visibility on these services and to be heard. As we noted in our submission to this inquiry, in the 2017 end-of-year ARIA charts, there were no Australian artists in the top 30 singles or the top 10 albums. Whilst it may be premature to attribute this to the Australian content requirements, it is worth noting that Australian content requirements do not currently apply to music streaming services or any music services that are solely available online.

We recognise it is difficult to impose local content requirements on services that are on demand—meaning the user actually gets to select which songs they listen to—and that these global services often do not control their playlists on the Australian version of their service. It is in this context that ARIA is of the view that streaming music services could support Australian music by having local employees dedicated to curating and supporting Australian content; investing in locally produced and curated song lists; ensuring that a proportion of Australian content is appropriately represented on its locally curated playlists; and highlighting Australian artists in its promotional material, both internally to its users and externally via its marketing channels. In light of this, ARIA has initiated ongoing positive discussions with some of the key music streaming services on this very topic.

The second issue relates to the importance of preserving local content requirements on traditional radio services such as commercial radio and community radio—and I will now hand over to my colleague Lynne Smith.

Ms Small : We note, and I think it was discussed earlier this morning, that community radio supports Australian music, particularly through the requirement in their code that at least 25 per cent of all music programming broadcasted must be Australian. The exclusions to that are the ethnic and classical music stations, which have a lower requirement of 10 per cent. The Australian music played is calculated as a percentage of all music played over a calendar month. The ABC was also discussed this morning. We note in their 2017 annual report that their 2016-17 radio station targets were no less than 25 per cent of Australian music, with the youth broadcaster Triple J setting a target of 40 per cent. The 2016-17 annual report showed that 56.5 per cent of the music broadcast on Triple J was Australian. ABC Country set a target of 25 per cent Australian music and reported an achievement of 57.4 per cent Australian music.

According to research published by Commercial Radio Australia, or CRA, commercial radio is still the most prevalent platform used by Australians to listen to music. In their 'Radio in 2017' information sheet which they published on their website, CRA noted that, in 2017, radio was the leading audio platform used by Australians, with 85 per cent of people listening to AM, FM or DAB+ via broadcast or online in an average week—ahead of online music streaming services such as Spotify, Pandora, Apple Music or Google Play. It also noted that nearly 10.5 million people listened to commercial radio each week.

As the committee is obviously well aware, Australian music benchmarks are included in the Australian Music Code, which is section 5 of the Commercial Radio Code of Practice. We note that 25 per cent is the most stringent requirement, with obligations ranging as low as five per cent for stations with a jazz or nostalgia format—and those different tiers relate to the format of the station. Whilst these levels are low compared to some other international standards, we are cognisant of our obligations under the free trade agreements which essentially cap the transmission quotas for free-to-air radio at 25 per cent. However, any reduction to, or non-compliance with, these existing levels is detrimental to the capacity of Australians to access, enjoy and experience Australian music.

The Australian Music Performance Committee, which was known as AMPCOM, was the committee previously responsible for the oversight of compliance with the Australian Music Code. AMPCOM was removed from the code in 2017. As part of the review of the code, conducted by CRA in 2016, ARIA made submissions in regard to our opposition to the removal of AMPCOM from the code. We would be happy to provide a copy of that submission if it is of interest. We did provide a qualification in our opposition, saying we would be open to the removal of AMPCOM provided that alternative independent oversight arrangements were put in place. This was ultimately not incorporated into the current CRA code, and there is no independent oversight at present.

There are two aspects of the compliance requirements under the current CRA code that we believe are problematic. The first aspect relates to digital radio—DAB+—stations, which do not have any Australian content requirements at all. The second aspect is the capacity for radio stations to self-categorise their format, which then impacts their obligations under the code. The Australian Music Code does not apply to DAB+ stations. During the last review of the code, conducted in 2016, we again advocated that those stations should not be exempt from the content requirement quotas. However, that request was not implemented. Our position remains unchanged: digital radio services should be subject to the same content requirements as other commercial radio broadcasts. As noted in our submission to this particular inquiry, DAB+ is a transmission technology, not a format, and we can see no reason why benchmarks should not apply.

In 2010, when CRA sought the inclusion of that exemption, it noted in its advertisement relating to the review that 'the imposition of Australian music quotas on new digital-only channels would prevent licensees from providing a wide range of new and diverse programming and hence would defeat one of the government's key broadcasting policy objectives.' It is unclear to us how the imposition of Australian music requirements would affect the development of such programming. Eight years later it is even more troublesome, particularly as the stations that are available on the spectrum, such as hot hits, easy hits, classic rock digital, and urban hits, are playing music with very broad appeal.

Digital spectrum is a public asset, and it is our view that access to that asset should be accompanied by some public responsibilities—and it is appropriate that one of those should be the provision of Australian content. This exemption is to be again reviewed in conjunction with the next material review of the code, which we think is due to happen in around 2020. Once again, we will be strongly advocating that those exemptions be removed.

Our second problem is that, under the current code, radio stations can self-categorise within the formats prescribed within the code. Currently each radio station is able to self-determine whether it falls within a particular format—ranging from contemporary hits to classic rock or easy listening through to talk formats. The formats prescribed in the code are not defined and have not been updated for some time. The ability to self-categorise without prescribed definitions means that the station could self-categorise itself as nostalgia, and be subject to only a five per cent Australian music requirement—instead of a hits and memories station, for example, which would have a requirement of 15 per cent. So the situation of self-categorisation inhibits the effectiveness and impact of the current code.

In closing, we believe it's important that minimum quotas or benchmarks for Australian music remain. This will ensure that Australian voices continue to be heard. The content requirements also help to foster the development of a diverse Australian culture that provides all Australians with the opportunity to hear Australian music of all genres from a range of cultural backgrounds and perspectives. Radio and streaming services are significant channels for access to Australian culture, and their commitment to the support of Australian music is essential. ARIA will continue to work collaboratively with all music outlets, from commercial radio to the streaming services, to ensure that Australian music is an important inclusion in these services. We otherwise refer the committee to our submissions to the inquiry and of course welcome any questions you have on those submissions or any of our comments this morning.

Senator URQUHART: There are just a couple of issues around your opening statement. Who monitors the self-categorisation, or is it monitored?

Ms Small : No, I don't believe it's monitored. I believe that, under former versions of the code, AMPCOM—the committee—was the entity that was intended to monitor it. But, in practice, that didn't occur. AMPCOM was a committee made up of representatives of the music industry and representatives from radio, so it really didn't have much capacity to influence.

Senator URQUHART: So there's no real indication as to whether or not those percentages are actually being breached or the style of music is actually being breached?

Ms Small : I think the categorisation issue means that, periodically—in fact, once a year at present—CRA provides ARIA with a report of the station's compliance under the code, which we publish on our website. In that document, the station categories are shown. Recently we have been advised occasionally when stations are recategorising, but, prior to that, it was something that would appear when the report came through each year.

Senator URQUHART: So after the event as opposed to during?

Ms Small : Exactly.

Senator URQUHART: Can you expand on the digital radio audience? Is it actually expanding?

Ms Small : I'm afraid I couldn't tell you that. We'd have to seek information and come to you, if that would be helpful.

Senator URQUHART: If you could do that. I just wonder if you know what percentage of content on digital stations is Australian?

Ms Small : No. I'm sorry, we don't get any reporting that I'm aware of that would encompass that.

Senator URQUHART: I don't know whether you can answer this, but do you know if the proposed amalgamation between Fairfax and the Nine Network will have any effect on Australian content and, particularly, do you have a view on the importance of local content requirements for commercial television? How important is locally-produced television to the success of the Australian music industry?

Ms Small : I think that our focus has generally always been on radio and the broadcast areas, but certainly it would be my observation that programs that are made locally are more likely to incorporate music either written by or recorded by local creators.

Senator URQUHART: Your submission highlights Canada as a comparable music market. Can you talk us through what measures the Canadian government implemented to ensure the promotion of Canadian music?

Ms Small : My awareness of the Canadian market is somewhat limited, but my understanding is that they have a 35 per cent local content quota which is across the board. It's a substantial quota compared to the ones that we're operating in when you consider that some of the stations are as low as five per cent locally. So that is one way that Canada protects its musical culture. I think we are also aware that there is significant investment in the Canadian music industry by the Canadian government through a range of vehicles.

Senator URQUHART: What aspects of the regulatory framework in Canada do you think could be implemented here in Australia to support Australian music?

Ms Small : As we review the situation and review the code, I look at it now and wonder why we need the format categories. I think there are probably very few areas where there isn't sufficient Australian music available. For example, I don't see why country should necessarily have a lower requirement than a different category, so I do think the whole format situation could be and perhaps should be reviewed.

Senator URQUHART: Coming back to that code, you indicated that you had very strongly proposed that there be some quotas for digital platform. That was obviously not taken up. I think you said that you would vigorously put that back into the 2020 one. What was the rationale that you received back as to why that didn't happen?

Ms Small : My recollection is that there was a view—I think it was the CRA statement—that quotas on new channels would prevent the licensees from providing a wide range of new and diverse programming. They felt that, based on that statement, that the requirement to have Australian music could limit what they could offer on those digital channels.

Senator URQUHART: Would it be fair to say that some of those digital channels are actually not new? They have actually moved from one band to another.

Ms Small : I believe that's correct. I don't have any specific examples.

Senator URQUHART: I know there are radio stations that I listen to in Tasmania that have moved from an AM band to an FM band, so they're not actually new.

Ms Small : No. I think I mentioned in my earlier statement that, where we look at some of those DAB+ stations that are available, they may be very good stations but they don't seem particularly different or diverse to other broadcasting when they're things like hot 100, easy hits or classic rock.

Ms Sivakumar : In 2008, when this was introduced, digital radio was actually quite new. But, now, in 2018, the niche programming that was discussed back in 2008 really hasn't transpired. As Lynne mentioned, you have stations like Koffee, which provides jazz and easy listening, and Triple M Classic Rock. These are stations which are playing commercial sound recordings, and there is a lot of Australian music that could fit within the program and format.

Senator URQUHART: In your submission, you say that in 2017 there were no Australian recording artist in the top 30 singles of the chart or in the top 10 albums of the year. You've talked about that. What's required from either a policy or maybe a funding perspective to increase the popularity of Australian music? Why isn't it hitting those top 30 singles and top 10 albums?

Ms Small : There was some discussion earlier this morning about policy frameworks. I think Jonathan Carter mentioned that there's no silver bullet. We would say that there are a range of factors that can assist—certainly funding and the way that that funding is available for new recordings and to help developing artists. The Australia Council offers a range of funding, but there are other territories where that is significantly higher. We would see these content quotas and content requirements as being another lever that can be tweaked to provide a greater opportunity for artists to develop their careers and to be heard so that people are familiar with them and can enjoy and appreciate their work.

Senator URQUHART: The Australia Council underwent some funding cuts through the budget process a couple of years ago. Have you seen a decline since then or is it just something that has always been there?

Ms Small : I think it's something that has always been there. Although there is a level of funding through the Australia Council—and the Australia Council, particularly the music section, does a very good job—they're working with that they have.

CHAIR: Ms Small, you mentioned that part of the restrictions in relation to quotas may be Australia's agreement under various free trade deals. Could you expand on that a little bit for me?

Ms Small : My understanding is that, under the agreement, Australia's obligation is not to increase any pre-existing quotas. My understanding would be that, even if we aspire to the Canadian model, we would be limited at a 25 per cent quota, which is what was in place when the free trade agreement came into play. I'd like to confirm that I'm not a legal person and I haven't analysed the agreement but I do understand that that is the situation.

CHAIR: Are you talking to the TPP agreement or are you talking to the free trade agreement with the US?

Ms Small : The free trade agreement with the US.

CHAIR: During the TPP negotiations, the second version, Canada actually held out on those negotiations for some time because they wanted to be able to strengthen their own local content rules for both music and screen, was my understanding.

Ms Small : Yes. I'm not aware of that but that would not surprise me.

CHAIR: I guess this is the problem when you lock yourself into these agreements with the changing nature of things like how people are accessing their music or their near entertainment content. We might get some more details on that. You gave us a number of recommendations for how streaming services could engage with promoting more local content. Are you suggesting that there shouldn't be a quota on streaming services per say and there should simply be more requirements to show intent and enthusiasm for Australian content?

Ms Small : Rohini, please correct me if I'm wrong. I think that our free trade obligations would put limitations on whether or not such quotas could be introduced. ARIA has been working, we think, very collaboratively with services. We have strong relationships with them. I note that many of the things we mentioned are things that they are actively doing. The main services do have local employees who are curating local playlists and do invest locally. We are really having a conversation about how perhaps that could be more benchmarked to ensure that it is ongoing and perhaps doesn't change with various changes in policy that could happen over time in big organisations. We do note and appreciate their support. I mean, by way of example, Apple has been a strong supporter of the ARIA awards and certainly gets behind and promotes local artists that are nominated and participates in those awards each year. So there is activity and a lot of it is positive. We are just looking to, as our colleagues from APRA are, try and formalise that to some degree and have some benchmarks across the services and we are hoping we can do that through those discussions.

CHAIR: And what about government incentives for those types of services to engage more with local content? Beyond quotas, are there other things that you think the government could do?

Ms Small : I hadn't considered it before but incentive certainly sounds like something that might interest the services. But to be honest, I think that question would perhaps be better directed to those services as to what would help them to do more for Australian music.

CHAIR: I asked a question of previous witnesses around the impact of royalties and the amount of money that is gathered or collected from royalties from music being played here, particularly on radio. I guess, the same goes for streaming services now as well. You are an industry peak body. Ultimately you need the Australian artist to be sustainable and succeed and actually be able to do this as a job.

Ms Small : Absolutely.

CHAIR: Can you see the flow-on effect of having quotas and whether it's quarantined money spent on the industry to promote local content. Does that all help or are royalties not the main game when it comes to supporting Australian artists?

Ms Small : I think royalties are very important. Licence fees are paid by, obviously, the streaming services and by broadcasters. Commercial radio, commercial television, all of them are paying licensees for the use of music, both recordings and new musical works, and any increase in the use of Australian music within that overall usage has a positive impact on earnings coming back to Australian companies and Australian artists. And we do believe that those royalties and income streams are incredibly important for sustainable careers, particularly now in a world of streaming. Rohini mentioned earlier that our industry revenues have shifted to 75 per cent digital. Often those are smaller payments, as and when things occur. They're payments at a lower level, but they are very, very important to artists and their capacity to make a career of their craft.

CHAIR: Again, ensuring that Australian artists are given more airtime means money stays here in Australia.

Ms Small : It translates directly into payments to local creators for local recordings.

CHAIR: You were quoting the figures in relation to the ABC and saying that their internal targets are being exceeded. What's your view on whether the ABC and public broadcasters should have quotas per se? Are internal targets enough? Is it working?

Ms Small : It does appear to be working. Of course, while it's working, we see no need for quotas. Obviously, if that shifted, we would be very keen to open up a discussion to ensure that it continued to happen. The figures that we quoted this morning we obtained from a report simply from the ABC website. It's here and available if anyone would like it.

CHAIR: Thank you. I want to go back to the point around the digital radio services. I guess this is a question we need to put to the radio industry themselves, in a way. Is it like what's happened with television, where more and more audiences go off the more traditional FM and AM wavelengths and, instead, they start to access more and more content on the digital platforms or is it a totally different service and therefore it will exist in a broader ecosystem?

Ms Small : I think there is a move to where people are accessing content constantly between the introduction of the streaming services, which are now very well established, and seeing great growth. These are all more options that, if you like, split the market to some extent. I don't think we're in a position to predict where digital radio broadcasting is likely to go. Overall, the reports from CRA seem to indicate that the commercial radio broadcast sector is not suffering any decline in its audience, which is interesting when you see that in conjunction with the growth of the digital services as well.

CHAIR: The self-categorisation of the commercial radio stations, which has a direct flow-on effect in terms of the quotas from a minimum of five per cent, seems crazy. You either believe in Australian content or you don't, I guess. Is that self-categorisation a direct result of trying to avoid quotas or is there something else that drives why a radio station will categorise themselves as a particular format?

Ms Small : I think the categorisation possibly relates to obligations under the code, but certainly a radio station's choice of format would be a commercial decision based on what they think would work best for them in the market. They are, understandably, choosing the format they think makes commercial sense for their business. The naming of the format and the categorisation, if you like, as far as I can see, only affect the quota obligations.

CHAIR: What I'm trying to understand is whether that is driven because there is a way it can be exploited—that is, there's a loophole. If you close the loophole, there is a certain quota across the board. It doesn't really matter, then, what the driving factor is in terms of the categorisation.

Ms Small : Exactly. I don't know how those decisions are made at the stations and it probably wouldn't be fair to comment. It could be a range of things, depending on the station.

CHAIR: Ms Small, is there anything else you'd like to add?

Ms Small : . I don't think so, no. Certainly any extra information you need at any stage we're happy to provide.

CHAIR: Great. Thank you very much.