Malcolm Turnbull (Wentworth, Liberal Party, Minister for Communications) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

Introduction

The Communications Legislation Amendment (SBS Advertising Flexibility and Other Measures) Bill 2015 provides the Special Broadcasting Service with increased flexibility in the scheduling of advertising and clarifies SBS's ability to earn revenue through having product placement during programming.

The bill also makes minor technical amendments to the legislation governing SBS and the Australian Broadcasting Corporation, and repeals various redundant acts and provisions from the communications portfolio legislation.

SBS advertising

SBS is Australia's multicultural broadcaster, founded, as we were discussing on Monday, by Malcolm Fraser. It operates under a mixed funding model. While the majority of SBS's operating budget is funded by the Australian government, the remainder is drawn from SBS's commercial activities including advertising and sponsorship.

In 2014 my Department of Communications conducted an efficiency study to identify savings that could be made in the back-of-house operations of the ABC and SBS—in other words, savings that could be made without reducing the resources available for programming.

This study identified an opportunity for SBS to earn additional advertising revenue without increasing the maximum amount of advertising it was permitted to show over a 24-hour period.

SBS has a strict limit of five minutes of advertising per hour, which equates to a maximum of 120 minutes of advertising shown per day. However SBS earns the majority of its advertising revenue during peak viewing times—between 6 pm and 10 o'clock at night—or when it broadcasts special events such as the FIFA World Cup.

This bill will amend the Special Broadcasting Service Act 1991 to allow for a more flexible approach enabling SBS to show up to 10 minutes of advertising per hour but within a daily overall limit of 120 minutes.

This will allow SBS to schedule up to 10 minutes of advertising during higher rating programs to increase its overall advertising revenue, while scheduling less advertising during other hours so that the 120-minute daily cap is not exceeded.

The 120-minute daily cap on advertising is still well below the 350 minutes per day the commercial broadcasters can devote to advertising.

It is important to note that SBS has many programs, particularly sporting programs, which have natural breaks that are suitable for advertising well in excess of the five-minute limitation at present.

It is also important to note that the SBS does not currently fill 100 per cent of the time it has available for advertising across all channels and markets.

This is particularly the case in regional markets where SBS is regularly unable to fill five minutes of advertising per hour per channel, even during peak evening viewing times when its higher rating programs are generally shown. In markets with insufficient demand, the additional flexibility afforded by the proposed measures is unlikely to result in significant change to the amount of advertising SBS is able to attract. So the benefit of this will really be found in the metropolitan markets.

Product placement

The ABC and SBS efficiency study also identified an opportunity for SBS to earn additional revenue through the use of product placement within particular types of programming, such as food programs and sporting programs.

Product placement is widely used by broadcasters to earn additional revenue and subsidise the cost of content production.

SBS currently broadcasts acquired programming which already contains product placement from agreements made to the benefit of third parties, prior to SBS's consideration of the program.

However, SBS does not use product placement in its own commissioned programs due to a lack of clarity in the SBS Act regarding its use. A significant portion of SBS's prime-time schedule, of course, does not lend itself to integrated branding such as Insight and other documentaries. However commissioned food and sport programming, for example, can provide opportunities for branded content.

The bill amends the SBS Act to specifically allow SBS to earn revenue through having product placement in its programming. It also requires the SBS board to develop and publicise guidelines regarding the use of product placement and report on its use and earnings in the annual report. The same requirement exists in the SBS Act for the use of advertising and sponsorship announcements.

Financial impact of advertising changes

In the short term, additional advertising revenue will be directed towards meeting the government's efficiency savings applied to SBS from 2015-16. If the SBS advertising measures in the bill are not passed before the end of this financial year, the SBS will need to find other ways to achieve the necessary savings, which it has indicated may involve reductions in programming and/or services.

In the longer term, the government's intention from these changes is that SBS becomes a stronger and more sustainable broadcaster. Advertising flexibility strengthens SBS by making it less dependent on government and helps secure its future and its independence.

It is anticipated that the SBS advertising measures will result in an increase in SBS's advertising revenue of $28.5 million over four years from 2015-16. In later years, if they exceed that run rate, the additional revenues can be directed towards delivering more distinctive and innovative content and services in line with its charter responsibilities.

Additional revenue earned by SBS is highly unlikely to have a material impact on the advertising revenue of the commercial television broadcasting industry, which totalled $3.9 billion in 2013-14. SBS is, in advertising terms, a minnow in that market.

Since the introduction of in-programming advertising on SBS in 2006-07, SBS's advertising revenue has increased, peaking at $72.3 million in 2009-10 and $73.4 million in 2013-14, due to advertising associated with the 2010 and 2014 world cups. Advertising revenue, for example, in the previous year 2012-13 was $58 million.

When you compare that to the $3.9 billion earned by commercial television advertising overall, honourable members can see that an increase in SBS advertising is really of very small significance to the commercial television sector. Needless to say, they are not welcoming this change

I have to say that the forecasts of additional advertising revenue that this change will deliver for SBS, while still very small in the context of the overall pool of commercial television advertising revenue is, in any event, unrealistic in our view and in SBS's view.

It is important to note that those two highest revenue results for SBS, that is to say in 2009-10 and 2013-14, constituted less than two per cent of the commercial television industry's revenue for the respective financial years.

The steady growth of SBS advertising revenue over this period has not historically led to a reduction in overall commercial advertising revenues for free-to-air television.

That is likely because of the continued growth of the entire television advertising spend over the period, which has significantly outstripped the growth in SBS's own advertising revenues.

I acknowledge the opposition to this bill from the commercial television networks; they are under pressure from new entrants to the advertising market that are available over the top or on the internet. This is particularly the case with reaching younger people. The median age of prime-time television viewers is considerably older than the median age of the Australian population.

The last figures that I have seen—and they are the best that we have available—showed the median age, for example, for prime-time viewers of the ABC was 61. So, half the audience of prime-time ABC viewers is over 61. The median age for viewers of, for example, the Seven and Nine networks is in the high to late 40s. The median age of the Australian population, I believe, is around 36 or 37.

The challenge for the free-to-air television industry, whether it is commercial or public broadcasters, is that younger demographics are not watching free-to-air linear television as much and they are getting access to their video content over the top, over the internet on catch-up platforms. Of course, with the entrance of new global players like Netflix that trend will continue.

So the challenges, the pressures, on the commercial television industry—for which we have great respect and regard and which I am very familiar with, as honourable members know, from my previous life—are not coming from SBS. They should not be worried about SBS. Their issues are essentially online and changes to television viewing habits and the way in which all of us consume content.

Miscellaneous legislative changes to the ABC and SBS acts

The bill also makes minor technical amendments to the Australian Broadcasting Corporation Act 1983 and the principal SBS Act to provide consistency with other broadcasting legislation and to remove redundant provisions.

The amendments involve the insertion of some broadcasting definitions and terms in the SBS Act to make it consistent with the Broadcasting Services Act 1992 and the ABC Act, and to reflect SBS activities that are provided in the current converging digital environment. It also removes redundant definitions in the ABC and SBS acts about election periods.

Repealing spent provisions from communications portfolio legislation

In addition, the bill repeals a range of provisions from communications portfolio legislation which are spent or otherwise unnecessary. Repealing unnecessary legislation within the communications portfolio will ensure regulation only remains in force for as long as it is needed and that remaining legislation is easily accessible. Conclusion

The government is introducing the bill at this time to allow for any inquiry into the proposed legislation, which would involve a call for submissions and potentially a public hearing, to be completed prior to the winter sittings. As stated previously, it is important that the SBS advertising measures are passed before the end of this financial year to allow SBS to generate additional revenue to meet the required savings from 2015-16, without affecting programming and services.

The government is committed to repairing the federal budget and ensuring the public broadcasters are as efficient as possible. The government has recently reformed the procurement of and funding arrangements for transmission services for the ABC and SBS to encourage the broadcasters to adopt more efficient practices and realise savings that can be directed towards producing new content and services.

Similarly, the SBS advertising measures in this bill will allow SBS to earn additional advertising revenue which could in the future be used to fund new programming.

Government funding currently comprises around 75 per cent of SBS's operational budget. Measures in this bill will also lessen SBS's dependence on government funding in the future.

I commend the bill to the House.

Debate adjourned.