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Budget 2016: Pay TV, Free TV war of words over license fee reductions

While the free to air TV broadcasters are saying that a $163 million reduction in their license fees over the next four years – handed down in the Budget 2016 last night – is not enough to sustain local content production, the pay TV sector has called the reductions a “taxpayer funded gift”.

Budget statements released last night said the government will reduce licence fees for commercial television and radio broadcasters by 25 per cent applying from the current 2015‐16 licence period.

“This measure is estimated to have a cost to revenue of $163.6 million over the

forward estimates period. This incorporates the effect of lower tax deductions resulting from the lower fees paid by broadcasters,” the budget statement said.

“This licence fee relief is a result of the government’s review of broadcast licence fee arrangements, which found that the rapidly changing media market was placing significant financial pressure on commercial broadcasters. The government will continue to consider appropriate levels of licence fees as part of its broader reforms to broadcasting and spectrum policy.”

The decision was attacked by ASTRA (Australian Subscription Television and Radio Association), the pay TV lobby group. CEO Andrew Maiden said “in exchange for paying licence fees, Australian free-to-air broadcasters enjoy a legislated ban on competition, guaranteed access to broadcasting spectrum and the world’s most protected market for sports broadcast rights”.

“ASTRA is deeply disappointed the Government has chosen to add to an already large deficit by providing television proprietors with tax cuts,” Maiden said.

Maiden said Australian free-to-air television licence fees reflect the value of unusually significant protections and privileges enjoyed by the major broadcasters, rendering invalid any comparison with fees paid by their international peers.

“There should be no reduction in licence fees without a corresponding reduction in the privileges and protections from competition that free-to-air television networks have amassed over decades…. Few industries enjoy greater structural advantages than free-to-air television, and even fewer expect corporate welfare as changing technology and consumer choices challenge their privileged position. Tax cuts and protections in the broadcasting sector distort the market by directing investment away from innovative technology and business models towards the oldest and least innovative form of broadcasting still in operation today,” Maiden said.

But Free TV chair Harold Mitchell said changes to license fees are a urgent describing the reduction as “a modest first step” .

“In the new media environment, the government can’t afford to be complacent. We need to act now to make sure broadcasters can continue to invest in great Australian programming and in transforming our businesses.

The pace of change is unrelenting and licence fees must be reduced to international best practice levels without delay,” Mitchell said.

He added that commercial free-to-air broadcasters invest over $1.5 billion in Australian content annually and support over 15,000 jobs directly and indirectly across the Australian production sector.

Communications Minister Mitch Fifield said the license fee reductions were part of a package of media reforms to be delivered this year.

Seven West Media CEO Tim Worner meanwhile re-iterated Mitchell’s view that “The small cut in this budget is not nearly what the industry needs to compete and innovate in a fundamentally changing media environment”.

“We are disappointed that the Government has not recognised this,” Worner said. “It seems that commercial television broadcasters will continue to struggle under the burden of the highest licence fees in the world for the next few years and that the spectrum we use to provide our services is also under threat.”

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