Melbourne Press Club Address
30 March 2016
E & OE
Thank you so much Mark.
It's great to be here.
Mark, you kindly didn't mentioned my role as Manager of Government Business in the Senate. In that role, as Christopher Pyne's Senate counterpart, I've come to accept that compared to the House, the Senate is rather "off Broadway."
But the Prime Minister has addressed that by recalling Parliament for 18 April where the Senate will be a main stage production.
But it's great to be here in Melbourne. Footy's back. And I can say there's never been a more exciting time to be a Hawthorn supporter, other than perhaps 2015, 2014 and 2013!
Melbourne is where I learned two terrific lessons about commercial media.
The first was when I set foot inside Channel 9's former studios in Bendigo Street in 1996, trailing around on the staff of someone who is now the Chair of Nine Entertainment.
Those of you who remember Bendigo Street will recall that it had a reasonably slick foyer, but once you went further inside everything was rather more functional.
The lifts threatened to trap you inside at any moment. The carpet was worn. The paint was on the verge of peeling. Really only those laminated posters of the stars were shiny.
Why? Because these were the things the audience would never see. So a dollar spent on them was a dollar wasted.
It was all geared towards audiences.
The other thing I remember about Bendigo Street when I became an MP was the horrible Sky News studio that was there. It was the size of a phone booth. It was an ugly studio. I don't mean ugly to look at, although it was. I mean it made everyone look ugly. There are certain studios that have that capacity. I think Sky figured that as politics is show business for ugly people, why change.
The other great lesson on TV came when I arrived one morning to do an interview with Sky News' Melbourne Bureau chief Ahron Young after Sky's move to Southbank.
The studio for our interview was sporting a fantastic new set. When I asked Ahron about it, I was stunned by his explanation.
As many of you would know, Sky News runs on the smell of an oily rag.
To create a new set for its Melbourne studio Ahron's boss, Angelo, gave him $2,000 and sent him off to Bunnings and Ikea. Ahron and his grandfather built the set.
My experiences at Bendigo Street and Sky taught me that Australian commercial media is dedicated to its audiences because they are the people that will determine your success or failure.
Commercial TV spends every spare dollar it has on what you see on camera. And a small subscription-based news channel, knowing it couldn't afford an expensive set, pulled off a D-I-Y job rather than let its audience down.
I know there would be many similar stories at radio stations and newspapers across the country.
You'll note I'm not making any contrast here with a large public broadcaster as we lead into triennial funding decisions. I am resisting temptation. But rest assured the ABC will be appropriately resourced to do its job. There won't be the need for Tony Jones to knock up the Q&A set.
Being relevant to your audience has always been an imperative for commercial media. But it is now more important than ever because Australia's media organisations of long standing, face more competition.
What I want to do – what the Turnbull Government wants to do – is free the media of the cast-iron shackles that our ancient media laws place upon it.
How many of you here remember 1987? Let me refresh your memories.
- You could buy a morning paper in Melbourne – the Sun News Pictorial, and an afternoon one – The Herald;
- The Fitzroy Lions were kicking around in what was still the VFL;
- Savings could be deposited with the State Bank of Victoria;
- The iPhone was still two decades away. There was no Wi-Fi. There were no DVDs;
- Tram tickets could be purchased from a conductor; and
- Melbourne Central Shopping Centre was still under construction.
Since then, the Australian media landscape, along with the entire world, has changed immeasurably.
Yet much of the law that governs the traditional media formats of commercial radio, commercial TV and newspapers stems from that year – 1987.
The laws have been tinkered with, but their core remains largely intact.
They have many flaws – but one in particular stands out. Our media ownership and control rules do not contemplate the existence of the Internet.
In fact I can still remember the first time I heard about the Internet. It was at dinner at a friend's house in about 1993 and the host was talking about "the web." How the web was chaos. How the web was the future. I thought to myself, "this web thing will never take off."
Among all the forces for change that have impacted on humanity since the Second World War, perhaps none have had more of a revolutionary impact on our lives than the connectivity and convenience afforded through the Internet and digital technology.
In fact, few people can now imagine or remember what life would be like without it.
Yet that is exactly what our media laws do. They maintain that the Internet never happened. That it doesn't exist. This is madness.
Not only does it exist – it is fundamentally reshaping our economy. If you don't believe that, just ask a taxi driver, a book store owner, a DVD rental store or a travel agent.
But I know I don't have to convince a room full of journalists of that point.
Greg Hywood noted in an opinion piece last week that when he started as a journalist he was "shown to a desk with a fixed-line telephone, a broken chair, an ancient and unloved typewriter and an empty ashtray."
Nowadays if news isn't tweeted straight away, it never happened.
And if your story isn't filed and online within an hour, it's old news.
The rate at which digital technology is reshaping and transitioning our economy is manifesting in all sorts of ways.
As Minister for Communications, it's had a material impact in my capacity as the Minister responsible for Australia Post.
Australia Post for its first 50-70 years of existence was the NBN of its day. Indeed so fundamental to communications was it that my role as Communications Minister was called Postmaster General until 1975.
With people increasingly choosing to communicate over the Internet, letter volumes are falling through the floor. Australians are now sending 1.4 billion (or 30 per cent) fewer letters per year than they were in 2008.
Letter volumes have now fallen to the level they were at in 1995.
This resulted in Australia Post experiencing its first ever corporate loss after tax in 2014-15 of $221.7 million.
But whilst this transition creates challenges for many businesses, it brings with it far more opportunities.
For Australia Post these opportunities are in e-commerce and online shopping.
Australians spent around $17.3 billion shopping online in 2014-15 with global business-to-consumer eCommerce sales forecast to reach US$2.3 trillion in 2016.
The lesson here is that digital disruption is a consumer-driven tidal wave of change. We can either surf it to greater prosperity, or allow it to drown us.
And so like cassette players, VHS tapes and the TVs with tubes that we have all tossed on the hard rubbish collection – so too must we dispose of old, redundant media laws.
Currently, Australia's media control rules are based on five numerical tests which are designed to be a proxy for media diversity.
Their basis is the historical dominance of newspapers, commercial radio and commercial television. And so the rules only apply to these media platforms.
- The '75 per cent audience reach rule'.
- The '2 out of 3' rule or 'cross-media ownership rule'.
- The '5/4' or 'minimum voices rule'.
- And finally - the '1 to a market rule' and '2 to a market rule' which prohibit a person from controlling more than one commercial television licence in the same area, or more than two commercial radio licences in the same area.
For many decades these control rules were a reasonable way of ensuring Australian media provided a diverse range of views. Technology has marched on, leaving some of these rules redundant.
To understand why, you need only put yourselves in the shoes of a media consumer.
Whereas once upon a time their choice of media sources was limited by their physical location. Now all one needs is a smartphone, a 4G or WiFi connection, and a swiping finger.
With those ingredients, a consumer can access nearly any radio station, any news website and increasingly, any TV channel, anywhere in the world.
Websites and social media are now the means by which close to 50% of Australians are primarily accessing their news.
So the rules that supposedly protect our media diversity completely ignore the means by which half the population accesses their news.
As you will be aware, the Government has introduced legislation to abolish the 75 per cent audience reach rule and the 2 out of 3 rule.
These rules currently prevent, for example, metropolitan commercial television networks from merging with regional commercial networks such as those that operate in Victoria - Prime, Southern Cross and WIN.
They also prevent cross-media consolidation in licence areas where the three regulated platforms (commercial radio, commercial television and associated newspapers) are present and are above the minimum voices threshold level set by the 5/4 rule.
These rules now impede traditional media from competing in the modern media landscape.
Many of the journalists here in this room already produce content across the three regulated platforms. You write articles for newspapers and you also appear as commentators on television and radio.
Fortunately there is no "2 out of 3" rule that applies to Patricia Karvelas or James Campbell.
Yet it does apply to their employers.
Now whenever you're talking about changes to media law, people in regional areas get nervous, particularly in relation to TV. It's a legitimate concern.
Here in Victoria, most of the state's regional areas are covered by what is known as the Regional Victoria aggregated market.
Currently broadcasters in this market must broadcast at least 720 points of local content every six weeks.
The Government's reform package will activate additional local content protections when regional broadcasters, as a result of a change in control, form part of media groups whose combined licence area populations exceed 75% of the Australian population.
This is termed a 'trigger event'.
Broadcasters subject to one of these trigger events will have higher minimum local content requirements. For most parts of regional Victoria this will mean broadcasting at least 900 points of local content every six weeks – an increase of 25%.
And in larger regional population centres where there are currently no minimum local content requirements, a new minimum will be introduced for the very first time.
So let me give you an example. Currently, there is no requirement for local content to be aired in Mildura and the surrounding towns within that TV licence area such as Robinvale, Ouyen, Underbool and Red Cliffs.
You would be aware that in May last year, WIN Television closed its Mildura news service.
Following that decision, WIN relocated the production of its nightly half hour Victorian news bulletin from Ballarat to Wollongong.
The reasons for this business decision by WIN echo those that I have been making.
An increase in competition. A need for efficiency.
The need for media law reform.
Now under the government's proposed reforms, if there was a change in control of WIN or Prime, leading to a trigger event, then residents of Mildura would have a mandated minimum local content requirement of 360 points over a six week period.
In addition, the local content requirements for broadcasters in larger regional communities in Victoria such as Ballarat, Bendigo, Shepparton, Warrnambool and Albury would also be increased to 900 points over a six week period.
And for the first time, regional broadcasters that are subject to trigger events will have a new incentive to film their news locally through an adjustment to the current points system.
Government shouldn't mandate where newsrooms and bodies are, but we can provide encouragement and reward for locally produced news.
In most cases, the level of local content provided is likely to continue to be much higher than the regulated minimums. For many, local content is good for business.
What is absolutely crystal clear though is there is one serious threat to local content that dwarfs all others. And that is the threat that these laws are not reformed.
All of the local content rules in the world are absolutely meaningless if there are not strong and viable media organisations capable of delivering that content.
Now that the Government has announced this reform package, attention rightly turns to its passage through the Parliament.
The Government has responded to the Opposition and the crossbench who have asked for an opportunity to examine the detail by referring the legislation to a Senate inquiry. The date for submissions has passed and the Committee will report by 12 May.
It is clear from the public comments by the Opposition that there is support for the removal of the reach rule.
But there is some hesitation about removal of the 2 out of 3 rule on the grounds that it remains an important diversity protection.
I find this a difficult argument to understand.
This is a rule that pretends there are only three media platforms and that the Internet doesn't exist.
The Internet does exist. So does the international competition that now challenges Australian companies.
Why would we shackle Australian companies with rules that don't apply to their international competition?
Australian media companies have a tough challenge even in the absence of these rules.
Australian media companies are playing in a global arena, competing for an increasingly fragmented audience.
For instance, according to Nielsen online ratings data for January, there were 41 news websites with over 300,000 unique visitors in that month.
Of those 41 news websites 19 – or nearly half - are 'international' or in other words, not owned by long standing Australian media companies.
Of the top 10 websites only half were owned by traditional Australian commercial media companies.
So even with the 2 out of 3 rule removed and consolidation occurring amongst long standing Australian media companies, there would still be significant ownership diversity amongst those top online sources of news.
Diversity of media is a concern most keenly felt in regional areas. With smaller populations than the capital cities, there tend to be fewer media outlets.
But the 2 out of 3 rule has little relevance to most regional areas. In 62 of the 99 regional and remote radio licence areas in Australia there are only two of the three regulated media platforms operating currently. So removal of the '2 out of 3' rule would have no impact.
In around a third of the remaining 37 regional and remote radio licence areas, further consolidation could not occur because they are all at or below the 'diversity floor' of a minimum of four 'voices' under the 5/4 rule.
So removal of the '2 out of 3' rule would only permit acquisition or merger activity in around a quarter of Australia's regional and remote media markets.
It's also worth noting that the Government is retaining the other three diversity rules.
Finally, whilst there are varying degrees of enthusiasm about the package amongst media organisations. From those who welcome it to those who wanted us to go much further.
There is near unanimity in one respect.
And that is – if the package is to go forward, the '2 out of 3' rule and the reach rule must both be removed.
I have repeatedly said that my firm belief is that this entire package is important. It is not the Government's intention to split it. It should pass in its entirety.
Whilst some things divide free-to-air broadcasters, there is one issue that strongly unites them all – licence fees.
Currently free-to-air commercial television and radio broadcasters pay licence fees to the Commonwealth Government that total around $173 million per annum.
That these companies would prefer to pay less, or none at all, is in one sense hardly surprising.
"Companies want lower taxes" is not likely to make it to the "breaking news" list.
That said, I have a lot of sympathy for their arguments.
It is clear that the licence fees paid by Australian commercial broadcasters are very high by international standards.
These fees were established at a time when television and radio essentially had a monopoly on the available audiences. Which is clearly not the case now.
Some argue that licence fee relief will enable local broadcasters to invest significantly more in local content and production. Others say any cut would help viability. Both are likely true.
But whatever the case – it's not really the point. Taxes should only ever be as high as they need to be.
The other angle to this discussion is that broadcasters depend on the use of spectrum, which is a scarce and valuable public resource.
So it is argued that because they get to use this valuable public resource to make a profit, broadcasters should pay to use it. I agree. And in fact this is what happens.
But at the moment the balance is wrong. Broadcasters pay only token amounts for the use of spectrum. Yet they are paying very large amounts as licence fees.
Spectrum pricing is an important policy discussion to be had. It impacts not just on broadcasters but on a whole range of users from telcos to the military and emergency services.
The price of spectrum should better reflect its value. The public owns this resource and they deserve to receive fair value for it.
Of course, the value of spectrum depends on what can be done with it. The Government has recently released a policy consultation paper that floats some of these issues.
Then there is the question of the future of terrestrial digital television. Advances in broadcast and compression technology are enabling television broadcasters to create more channels in higher quality.
But are we prepared for what is next on the horizon?
Already streaming video on-demand services like Netflix are offering content in 4K – a resolution that offers a picture quality four times that of the High Definition picture currently on Australian TV.
It won't be long before consumers expect their free-to-air sport and other content delivered in the same quality.
In the radio space we must consider the future of digital radio. The technology has been rolled out in the larger mainland capital cities and is currently being successfully trialled in Darwin and Canberra, but is unavailable anywhere else in the country.
How a broader rollout could occur is a question that warrants further consideration.
So you can see that the policy challenges in the broadcasting space - licence fees, spectrum and technological changes - present tremendous reform opportunities and are material issues for the sustainability of our broadcasters. We are committed to getting the transition right.
Australia's traditional media sector faces many challenges. Like all other sectors, it has to contend with the headwinds of change that our transitioning economy is creating.
How we respond to this transitioning economy will define our nation in the first part of this century.
Our future jobs, productivity and economic prosperity will be secured by embracing the digital age and fostering and relentlessly pursuing innovation.
The difficult reform tasks must be tackled. The too-hard basket must become lighter.
It was Malcolm Turnbull as Minister for Communications who first prosecuted the case for the media reforms I am introducing.
And it has been Malcolm Turnbull as Prime Minister who has had the will to see these brought forward.
Our media industry has a bright future. We owe it to them to allow them to embrace it without the iron shackles of ancient media laws.
Media contact: Justine Sywak | 0448 448 487 | Justine.email@example.com