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Senate Committee report on the changing landscape of the Australian screen industry

10 July 2019

#Technology, Media & Telecommunications


Ian Robertson AO

Published by Ian Robertson AO, Madison Tonkes

Senate Committee report on the changing landscape of the Australian screen industry

Earlier this year, the Senate Environment and Communications References Committee (Committee) released its report on its inquiry into the economic and cultural value of Australian content on broadcast, radio and streaming services (Report).

The inquiry examined the adequacy of the current regulatory scheme surrounding the Australian film and television industry, the value and importance of local content, and whether reform is required given the current state and operation of the Australian film and television market.

Content quotas

The Australian broadcasting landscape has been traditionally dominated by three commercial broadcasters and two public broadcasting services. The internet has drastically changed the means by which content is consumed, with streaming giants such as Netflix and Amazon, and local players such as Stan, allowing users to decide when and where to access television programs and other screen content.

Broadcasting regulation seeks to protect Australian screen producers by imposing Australian content quotas on Australian broadcasters. Australian commercial free-to-air television is required to broadcast not less than 55 per cent of Australian programming on their primary television services in a calendar year between 6am and midnight. Broadcasters are also required to broadcast 260 hours of children’s television programming a year, with at least 50 per cent comprising first release Australian programs. Subscription television services, such as Foxtel, are required to spend at least 10 per cent of their total program expenditure on new Australian drama.

The Report considered the inadequacies of the current quota scheme. Overwhelmingly, submissions noted how the current framework fails to recognise that audiences are now able to access content on multiple platforms thereby diminishing its effectiveness. For example, this is particularly the case with respect to children’s programming. Free TV Australia submitted that children’s programming costs “hundreds of thousands of dollars to produce, while only very small numbers of children are watching commercial free-to-air broadcasts”.

However, many submitters argued that content quotas are necessary in order to maintain the viability of the Australian screen production industry.

Consequently the Australian screen industry is increasingly vulnerable as a result of audiences turning to Subscription video on demand (SVOD) services which are not subject to  production quotas in the same manner as traditional broadcasters.

In the absence of content quotas, the vast majority of content being consumed, particularly by children and younger Australians, is not Australian. The Report noted that as at March 2019, the Australian Netflix catalogue features 2.5 per cent Australian content, and without any regulation, the rapidly growing SVOD market is unlikely to generate significant investment in new Australian content.

The Report acknowledges that applying traditional quotas to SVOD services would most likely be ineffective as, unlike traditional broadcasters, these services do not determine what is watched and when. Australian streaming platform Stan submitted that a key difference with SVOD services is that programs on these platforms derive value for the entire period that the production is licensed and available on the platform; as opposed to free to air television where the cost of the production has to be recouped from the time it premieres through advertising.

As an alternative, the Media, Entertainment and Arts Alliance submitted that SVOD providers “should contribute a percentage of their total Australian revenues into a statutory content fund” that will filter back to Australian film and television makers. In contrast, Netflix argued in its submission that applying regulatory obligations to SVOD services does not serve consumer interests or the interests of local content producers on the basis that streaming platforms create and increase an “organic demand for Australian content”.

By way of international comparison, the Report noted that in the EU, the revised Audiovisual Media Services Directive imposes obligations on SVOD service providers to have at least 30 per cent of European content in their European catalogues in an effort to preserve European screen industries.

Outmoded offsets?

The taxation incentives offered to the Australian industry are also considered to be confusing and are failing to maintain Australia’s international position in a competitive market. The Report explored the number of tax incentives available to the screen industry including the Producer Offset and the Location Offset. Under the current incentive scheme, a project is only entitled to one offset and they cannot be combined.

The current offsets available to screen projects are as follows:

  • the Producer Offset is a refundable tax offset for producers of Australian films equivalent to 40 per cent of the Qualifying Australian Production Expenditure (QAPE) incurred by the producer in making a feature film with “Significant Australian Content”. For eligible projects other than feature films, the producer is entitled to a 20 per cent rebate on QAPE
  • the Location Offset allows a rebate of 16.5 per cent of QAPE on eligible film and television productions, providing an incentive for large budget productions to shoot in Australia, with the Federal Government announcing in 2018 a $140 million top-up to the Location Offset over a period of four years to effectively boost the tax incentive closer to a 30 per cent rebate on QAPE for some projects
  • the Post, Digital and Visual Effects (PDV) Offset provides a 30 per cent rebate on the QAPE related to PDV production (including for productions originated overseas).

Many submissions argued that the offset scheme fails to achieve its desired aims in assisting growth of the Australian screen industry, and called for increases to the offsets and harmonisation of incentives across different types of film and television content.

The Australian Screen Producers Association pointed out that the decision in the UK to permanently increase the location incentive equivalent to 25 per cent transformed the UK creative industries into the nation’s fastest growing sector. Notably, New Zealand has also adopted a 25 per cent location incentive equivalent.

The Report also notes that the lack of certainty and consistency around access to these incentives has resulted in some large international productions choosing alternative locations where higher incentives are guaranteed.

Additionally, the Report acknowledged the ineligibility for SVOD services to access these incentives, meaning the Australian screen industry is missing out on a rapidly expanding section of the global film and television industry. To address this inconsistency, the Australian Government has decided to alter its interpretation of the relevant taxation legislation to allow television series and mini-series which are produced for SVOD platforms to qualify for the Location Offset and the PDV Offset. The decision applies to applications for those offsets received from 11 April 2019. Read more...

Conclusion

A key conclusion to be drawn from the Report is that the democratisation of content consumption and the rapid globalisation of the entertainment industry means the regulatory and incentive schemes impacting the Australian screen industry are no longer meeting their original goals and require urgent revision to keep up with this evolving landscape.

Authors: Ian Robertson & Madison Tonkes

Disclaimer

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Ian Robertson AO

Published by Ian Robertson AO, Madison Tonkes

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