Chapter 2 - Implications of retaining section 160(D) of the Broadcasting Services ACT 1992
2.1
As long as section 160(d) of the Broadcasting
Services Act 1992 is retained in its present form, the Australian
Broadcasting Authority (ABA) has little choice in the wake of the High Court’s
“Project Blue Sky” decision, but to devise a new Australian Content Standard to
replace the one that had been found to be “unlawful”. The ABA’c challenge is to
accommodate Australia’s international obligations as required by the provisions
of the Act, while still attempting to support the cultural object set out in
section 3(e) of the BSA. The latter requires free-to-air commercial TV
channels to promote a sense of Australian identity, character and diversity.
The ABA’s
response: the draft new Australian Content Standard
2.2
The ABA met that challenge by first releasing a
Discussion Paper canvassing various options in July 1998 and inviting comments
on its proposals. This was followed by the release of the draft of its proposed
new Australian Content Standard in November 1998. The most significant change
in the new Standard is that ‘Australian program’ is replaced throughout by
‘Australian or New Zealand or Australian/New Zealand’ program. An Australian
program is one which satisfies the Australian creative elements test (ie
certain personnel involved must be Australians); a New Zealand program is one
which satisfies an identical New Zealand creative elements test; an
Australian/New Zealand program is one whose personnel between them are Australians
or New Zealanders.[1]
2.3
The ABA made other changes as a result of its
consideration of the likely impact of including New Zealand programs.[2] They are -
- The subquota for first-release Australian documentaries is
increased from 10 hours to 20 hours per year, ‘in recognition of the
vulnerability [to replacement by New Zealand programs] of the minimal 10 hour
obligation under the current quota’. The ABA considered similar arguments in
relation to the subquotas for drama and children’s drama, but does not propose
any change to these, as it regards the risks as less severe: ‘...it is premature
to increase these subquotas for drama and children’s drama at the introduction
of a new standard.’[3]
- The 32 hour quota for first release Australian children’s drama
will only be satisfied by programs for which the licence fee is at least
$45,000 per half hour. This prevents the quota from being filled by New Zealand
programs sold at much cheaper prices in what (for New Zealand) is a secondary
market. The requirement is proposed for children’s drama ‘...where the ABA
considers the argument for a minimum licence fee more compelling as the
purchase of children’s drama is more likely to be cost driven.’ The ABA
considered and rejected arguments for using minimum licence fees more widely.[4]
- The ‘prime time’ within which the quota for first release
Australian drama must be shown is redefined from 5pm-midnight to 5pm-11pm. The
reasons for this are not stated very explicitly in the ABA’s November 1998
paper, but clearly reflect production industry concerns to prevent broadcasters
from showing a cheap, low-rating New Zealand program late at night, when there
are few viewers, to earn quota points.[5]
Several submissions to this inquiry pointed out that ‘...if a network bought just
one New Zealand strip drama and screened it five nights a week in a low ratings
[ie late night] time slot, it would meet over half that network’s adult drama
obligations...’[6]
2.4
‘First release’ is redefined to exclude programs
more than 18 months old (except feature films). This is to prevent New Zealand
back catalogue from counting as first release in Australia.[7] Less directly but nevertheless
of relevance to the issue under consideration was the following change:
- Eligibility under Division 10BA of the Income Tax Assessment
Act 1936 is removed. The ABA comments: ‘...in the event that 10BA is retained
as a gateway, the equivalent New Zealand tax certification for qualifying
programs would need to be included... [this] could result in differences in
operation through the built-in discretion contained within each test. The ABA
therefore proposes to remove the 10BA gateway from the revised standard.’[8]
2.5
Other proposed changes were not directly related
to the Austalian/New Zealand content problem and are not discussed here since
they are not directly relevant to the Committee’s inquiry. .[9]
2.6
Project Blue Sky’s challenge of the current
Australian Content Standard determined by the Australian Broadcasting Authority
represented a challenge to the australian content quotas for the commercial
television industry. Submissions to this inquiry recognised this as being the
crucial issue.
Australian Content Quotas on Television
2.7
There was overwhelming support from submissions
and witnesses to this inquiry for Australian content quotas. The majority of
witnesses were adamant that quotas are essential for maintaining appropriate
levels of Australian content for cultural purposes; in particular, for
preventing Australian television from being dominated by imports from the
United States. The Committee was told, for example:
‘If you want to look at the
history of Australian television, it is self-evident that there has been a
direct increase in the level and, I would argue, the quality of Australian
programming in line with regulation. It has been no accident that Australians
now enjoy access to a diversity and quality of programming that would have been
unimagined by my parents when television first came to this country... You need
not look in the statute books to find out what the local content rules are in
Fiji or Pakistan; you need only look at their television guides. If it is
saturated with reruns of I Love Lucy and McHales Navy, you can
bet your bottom dollar that the national government has not made a decision
that it is important to regulate in the public interest for local content.’[10]
2.8
The ABA noted in its Discussion Paper that
domestic content quotas for television have been adopted by most western
countries. Most are of similar type, sharing the objective of ‘promoting the
enhancement of national culture by limiting the consumption of foreign
programs... Invariably, over 50 per cent of the airtime is reserved for domestic
programming.’[11]
A noteworthy exception is the USA, but in that huge market practically all
free-to-air television is under American creative control in any case.[12] Further information on
overseas local content rules is in APPENDIX 1.
2.9
Consistent with the support for the quota system
to maintain a genuinely ‘australian” feel on the nation’s television screens,
the majority of submissions to this inquiry called for the Committee to
recommend repeal of section 160(d) of the Broadcasting Services Act 1992
to enable the ABA to pursue the cultural objective of the Act without
constraints. Most felt that the object of the Act was irreconcilable with the
provisions of section 160(d) and that together, they placed the ABA in “an
impossible situation”.[13]
In the following section, the Committee examines first the implications of
retaining section 160(d).
Industry Reaction to the new Draft Australian Content Standard
2.10
The majority of submissions to the Committee
strongly rejected any approach, which would treat New Zealand programs as
“australian” for the purposes of the australian content quotas. Witnesses
appearing before the Committee at its public hearing (held after the release of
the ABA’s new Draft Australian Content Standard) reiterated their opposition to
such an approach and many supported their stance in further written submissions
to the Committee.
2.11
Notwithstanding the views of the High Court judges
that the ABA can develop an Australian Content Standard that complies with
section 122 of the Broadcasting Services Act 1992 without breaching
section 160(d), the majority of submissions to the Committee stated that that
there is a fundamental tension between the cultural objective of the Act and
the free trade objective of the CER Protocol. For example:
‘SPAA [The Screen Producers
Association of Australia] submits that there is a fundamental and
irreconcilable conflict between the purpose of local content regulation to
promote Australian cultural representation on television and the aims of trade
liberalisation expressed in the Closer Economic Relations (CER) agreement...’[14]
‘The ABA simply cannot
determine a standard which achieves the cultural imperatives required of it
under the Broadcasting Services Act, under the cloud of section 160(d).’[15]
2.12
The strong feelings which many objectors had
against the draft standard and/or against paragraph 160(d) are clearly fuelled
by what they see as the absurdity of defining an ‘Australian’ content standard
to include New Zealand programs.
‘...It cannot really be called
an Australian content standard at all. I think the Australian Broadcasting
Authority might run foul of the Trade Practices Act under the misleading and deceptive
conduct provisions, because this is an Australian and New Zealand content
standard... You may as well call a spade a spade rather than continuing to call
it an Australian content standard.’[16]
Any other changes to the standard?
2.13
The ABA, in forming the draft revised Australian
Content Standard, considered and rejected a number of options, including:
separate quotas for New Zealand programs; increased subquotas (but it does
propose an increase for documentaries only); an ‘on-screen’ (‘Australian look’)
test; minimum expenditure requirements; limits on subsidised programs; a first
release in Australia requirement; a market attachment requirement. These
were rejected either because they are impractical, or because, aiming to
exclude New Zealand programs in practice, they might offend Article 8 of the
CER Protocol (which prohibits ‘disguised restrictions’ on trade); or because
the ABA considers that the mischief they aim to avert is not certain enough to
warrant the action ‘at this stage’.
2.14
The last point applies particularly to the
possibility of increasing the subquotas, as some submissions suggested, to make
room for New Zealand programs without reducing Australian programs. The ABA
thinks that ‘...it is premature to increase these subquotas for drama and children’s
drama at the introduction of a new standard’, using words that imply further
monitoring and review in due course.[17]
2.15
The Screen Producers and Directors Association
of New Zealand, by way of reassurance to the Australian production industry,
proposed a phased-in ceiling on NZ programs in quota time.[18] The ABA has not followed this
up as it thinks the proposal has ‘significant practical and operational
difficulties’ and is not CER-compliant.[19]
2.16
This Committee does not propose to duplicate the
ABA’s consideration of these matters. The committee is satisfied that that ABA
has done its best to make a draft standard that reconciles the cultural
objective and the CER Protocol within the constraints of the present BSA
and the High Court judgment. There is no magic solution yet undiscovered, to
this problem. If 160 (d) is retained in its present form and the new ABA
Standard implemented, it is only after the new Standard has been in operation
for some time that its effectiveness in reconciling the cultural objective and
the requirements of the CER Protocol could be measured.
Fears of an influx of New Zealand
programs
2.17
One of the chief matters of concern expressed in
evidence was the likely result, in practice, of admitting New Zealand programs
to Australian content quotas. How much Australian content quota time will be
taken up by New Zealand programs?
2.18
In general the Australian production industry
and related interest groups stressed the traditional structure of the TV
production industry with its practice of marginal pricing making for cheap
prices in secondary markets. They fear that broadcasters will take up
significant quantities of presumably cheaper New Zealand programs, replacing
Australian programs in quota time, to the detriment of the cultural objective
of the Australian Content Standard.
2.19
Concerns about replacement by New Zealand
programs were chiefly focussed on the three subquota types: first release adult
drama, first release documentaries, and children’s programming (particularly
children’s drama). These are considered further below. Other program types,
which make up the balance of the 55 per cent Australian content quota include
news, current affairs, sport, infotainment, lifestyle and light entertainment
programs. The ABA believes that these, being mostly local or ephemeral in
character, are less vulnerable to replacement,[20]
and the silence of most submissions on this suggests wide agreement, though the
Australian Film Commission does caution:
‘It is also very significant that Ten Network just met the overall
transmission requirement in 1997 and 1996 [ie unlike the other networks, which
overfilled the quota - see APPENDIX 3]. It has generally been believed that the
areas which make up the balance of the transmission quota, news and current
affairs, sport, infortainment and light entertainment, are less vulnerable to
displacement by important programming... However, the Ten Network transmission
results indicate this may need reassessing.[21]
2.20
To the general arguments about possible
replacement by cheap imports, the Federation of Australian Commercial
Television Stations (FACTS) and/or the New Zealand production industry made
several answers. They stressed that historically New Zealand programs have not
rated well with Australian viewers. They argue that this is a more important
factor than licence fees.
‘Programs made for the New Zealand market have to date had very
little impact in Australia.... that will not change if such programs become
eligible for the Australian quota. Broadcasters will continue to look for broad
audience appeal in programs, even more than cost-effectiveness, and there seem
to be no grounds for believing that programs made for the New Zealand market
will become more attractive to Australian viewers.’[22]
2.21
FACTS pointed out that most Australian networks
overfill most of their quotas, and spend much more on quota-satisfying
programming than the quotas demand. The argument is that this proves that
audience appeal is the more important thing, and that the networks are not
driven by a search for cheap ‘quota quickies’ that New Zealand might supply.
‘Australian commercial broadcasters spend over $800 million a
year on local programming... They deliberately choose to commission quite an
amount of expensive drama. They could obviously meet their quota requirements
with fairly cheap serials. They choose not to because it is essentially a
market driven broadcasting sector... The great bulk of the work Australian
broadcasters do in the way of [supporting] local production is not quota
driven.’[23]
Details of the networks’ compliance with the quotas are in
APPENDIX 3.
2.22
SPADA-NZ and FACTS stressed the
small size of the New Zealand production industry compared with the Australian
production industry, and the fact that only a small proportion of its product
(certainly, only a small proportion of its government subsidised product) is
sold outside New Zealand.[24]
The implication is that even if Australian broadcasters were minded to buy New
Zealand programs, there would be little suitable product available. In FACTS’s
view:
‘There is only a small amount of New Zealand programming
relevant to the subquotas. That comprises 410 hour of children’s programming
(but no children’s drama), 189 hours of documentaries (of generally parochial
interest only) and approximately 150 hours of [adult] drama per annum.’[25]
2.23
Screen Producers and Directors Association of
New Zealand (SPDANZ) pointed out that... ‘Australian dramas, serials and format
programs have established a significant market share and audience acceptance
within New Zealand. The same is far from true in reverse, with a combination of
local content regulations and cheap, less risky (from a ratings perspective) US
and British programs, combining to keep New Zealand programs effectively out of
the market. Between 500 and 600 hours of Australian programs are screened on
New Zealand free-to-air television per year. This compares with around 20 hours
of New Zealand programming broadcast annually on Australian television.’[26]
2.24
The Committee was not convinced by the arguments
put forward by SPADANZ in relation to this last point: Whether New Zealand
programs are competitive against US and British programs outside quota time
says little about whether they will be competitive against Australian programs
within quota time.
2.25
It seems inconsistent for SPDANZ to point to the
present imbalance in trade in support of including New Zealand programs in an
Australian Content Standard while simultaneously giving reassurances that there
will probably not be much change to what is broadcast on Australian TV screens.
As a matter of cultural policy, if New Zealanders see a problem in the amount
of Australian programming on New Zealand TV, that is an issue for their
government to consider. It has no bearing on the Committee’s deliberations in
the Australia’s cultural policy.
2.26
The Committee notes here the argument of the
Australian production industry that since New Zealand does not have local
content quotas, ‘there is no reciprocity’. That is, Australian programs in New
Zealand, since they must compete against the rest of the world, are
disadvantaged relative to New Zealand programs in Australian quota time, which
will need to compete only against Australia.[27]
It was suggested that:
‘Interestingly, the New Zealand case is not for complete free
trade in television programs. If that were so they would have joined the mainly
American push against all forms of local content regulation. The New Zealand
argument is not for open competition with all suppliers of programs to the
Australian domestic market. Instead they seek to have equality of advantage
with Australian programs producers in Australia.’[28]
Effect of including New Zealand Programs on the Subquotas
2.27
The inquiry revealed widespread fear in the
Australian film production industry that the inclusion of New Zealand made programs
for the purpose of meeting the “australian content” quotas as required in the
ABA’s Standard would have a major negative effect on the australian industry.
Many submissions argued that some subquota types are particularly vulnerable to
replacement. They are: first release Australian drama, documentaries and
children’s drama. [29]
Submissions pointed out that programs of these types comprise less than three
per cent of total commercial broadcast hours.[30]
The Australian Film Commission said that:
The [first release Australian] drama requirement provided in
1997 an average of 168 hours of Australian drama per network - just half an
hour a day and a mere 1.9 per cent of all programming.[31]
2.28
The inference from such statements is clearly
that these subquotas are so small that they should be jealously guarded. In
response FACTS argued that to express the subquotas as percentages in this way
is scarcely relevant:
‘What this [the 1.9 per cent just quoted] presumably means is
that first-release Australian drama (which by definition is scheduled between
6.00pm and midnight) comprises 1.9 per cent of first release and repeat hours
scheduled by stations from 6.00am to midnight. That is clearly a meaningless
figure, as it confuses quite different categories and time periods. As a
proportion of all first-run prime-time programming, Australian drama is more
like 15 per cent.’[32]
2.29
The ABA’s subquotas currently amount to about 3
per cent of total broadcast time. The Committee considers that arguments about
percentages are not directly relevant here since this is not an inquiry about
whether 3 per cent is a good figure. This question for this inquiry is what proportion
of the 3 per cent is vulnerable to replacement by New Zealand programs.
Similarly (recalling the arguments of the New Zealand production industry in
the previous section), whether the New Zealand production industry is smaller
than the Australian production industry is beside the point. The question for
this inquiry is whether the New Zealand industry, small though it may be, is
well positioned to replace a significant proportion of the 3 per cent of
broadcast time.
2.30
The actual hours of New Zealand production, and
Australian broadcasting, in the three subquota categories, can be seen in
APPENDICES 3 and 4.
First release Australian drama
2.31
In 1997 336 hours of New Zealand made
drama/comedy were broadcast in New Zealand, of which 170 hours were first
release. 62 hours of drama/comedy production were subsidised by New Zealand on
Air, the New Zealand government funding body. The Australian content quota is
between 80 and 258 hours per year (depending on the mix of program types chosen
to make up 225 points), and the networks broadcast, on average, 168 hours.[33] See APPENDICES 3, 4 and 6.
2.32
Several submissions pointed out that:
...If a network bought just one New Zealand strip drama and
screened it five nights a week in a low ratings time slot, it would meet over
half that network’s adult drama obligations...[34]
2.33
FACTS rejected that argument on the basis that
New Zealand drama is not likely to be appealing to the networks:
‘...programs like Shortland Street already have equivalents
in Australia, eg Breakers, Pacific Drive, Heartbreak High, where it can
be argued that Australia is a secondary market and, as a result, the cost of
such programming is already moderate compared to international product.
Networks are not going to take the additional risk of scheduling New Zealand
programs such as these (with lower production values, and containing New
Zealand-specific language and issues) in order to save very little.’[35]
2.34
FACTS also stressed the networks’ voluntary
expenditure on quality Australian drama, and the fact that they overfill the
quota, to show that they are not in search of ‘quota quickies’:
‘If programming decisions were made purely on cost, there would
be a very different line-up of programming on Australian television, including
much more lower-cost Australian drama. What current schedules demonstrate is
that cost is only one factor.’[36]
2.35
In answer to this the Australian production
industry pointed out that the networks’ expenditure on and broadcasting of
Australian drama has declined in recent years. According to the Australian Film
Commission (AFC), from 1995/96 to 1996/7 the networks’ expenditure on
Australian drama has declined by 4.4% while their expenditure on foreign drama
has increased by 14.6%; and hours of Australian drama broadcast have declined
from 195 in 1993 to 168 in 1997.[37]
The AFC quotes with approval a September 1995 ABA report that ‘...there has been
a steady decline in expenditure on Australian drama since 1990.’[38]
2.36
FACTS’s response is that these figures are not
what they seem, partly for various technical reasons to do with changed
data-gathering and accounting methods; partly because -
‘Nowadays, overseas sales of these programs mean that the
Australian broadcast licence fees can be considerably less than 100 per cent of
the production cost... This means that broadcasters may be able to secure the
Australian drama inventory they wish to schedule more economically than they
could in past years... Taken as a whole, there is no doubt that Australian drama
in 1998 is of significantly higher quality than it was in the late 1980s.’[39]
2.37
The ABA, in deliberating on the draft standard,
considered and rejected proposals to increase the adult drama subquota to
compensate for the risk of replacement. Its reasoning echoes the argument of
FACTS -
‘Historical evidence indicates that drama produced in New
Zealand and shown in Australia does not perform well, and is therefore not a
viable or attractive option for Australian networks at this stage...’[40]
2.38
Many in the Australian production industry
remain sceptical that the changes will not have a dramatic effect on the number
of programs made in Australia (or New Zealand) that would be broadcast to fill
the subquotas:
‘I do not accept the proposition that New Zealand programs are
somehow so inherently poor that they will not be well received in our markets...
We should not be allowed to take any comfort from that argument.’[41]
2.39
The ABA does propose to cut back the quota-defining
‘prime time’ from 5pm-midnight to 5pm-11pm to limit the possibility of
screening a cheap import late at night to gain quota points. This, however, has
its downside, admitted by both FACTS and the Australian production industry: it
limits a network’s ability to test a new program or to play out an unsuccessful
one, outside prime time (that is, outside the real prime time
mid-evening). This... ‘will force networks to become far more conservative in
their development [of new Australian drama] and far less willing to take risks
in the commissioning of new programs’.[42]
FACTS uses this point to argue against truncating ‘prime time’; the Australian
production industry mentions it, implicitly, to reinforce their general
position that the ABA, in the new Standard, is being asked to do the
impossible. The Australian Writers’ Guild also claims that should a network
wish to screen a ‘quota quickie’, the 5-6pm ‘shoulder’ period is still
available.[43]
First release Australian
documentaries
2.40
In 1997 269 hours of New Zealand made
documentaries were broadcast in New Zealand, of which 189 hours were first
release. 99 hours of documentary production were subsidised by New Zealand on
Air. The Australian content quota is 10 hours of first release Australian
documentaries per year, and the networks broadcast about 35 hours on average (7
Network), 23-27 hours (9 Network) and 10.5 hours (10 Network). See APPENDICES
3, 4 and 6.
2.41
According to Film Australia, documentaries are
particularly vulnerable to replacement:
‘...high quantities of documentaries in the travel and adventure,
and wildlife areas are produced in New Zealand each year. In the 1996-97 year,
269 hours of local documentary were broadcast on New Zealand commercial
television and 89 documentaries were produced for $NZ27.6m... Of this
expenditure, government subsidy contributed $NZ 12.2m, with New Zealand On Air
the largest investor contributing $NZ 9.7m towards 99 hours of documentary
production... It is obvious from these figures that the documentary sub-quota is
extremely vulnerable to displacement by New Zealand documentary programming.
The amount of documentary screened could fill the Australian content quota for
each commercial network 20 times over; the amount subsidised could fill the
current quota almost 10 times.’[44]
2.42
On the other hand, FACTS describes New Zealand
documentaries as ‘of generally parochial interest only’[45] and the Screen Producers and
Directors Association [NZ] stresses the small overseas sales of New Zealand
documentaries:
‘Over the last nine years, an average of 12 hours of documentary
programming have been sold internationally per year. This is the equivalent of
around 10 per cent of total documentary hours funded [by New Zealand On Air].’[46]
2.43
The contrast between the different points of
views highlight the difficulty in extrapolating from what is currently
the case (12 hours per year of New Zealand documentaries sold overseas) to
predict what might be in an uncertain future for which there is no
precedent (99-269 hours of New Zealand documentaries potentially available to
fill Australian quota time[47]).
2.44
FACTS argues incidentally that, since most
stations overfill their documentary quota in any case, the documentary quota
serves no good purpose and should be abolished.[48] Film Australia regrets what it
calls the networks’ lack of commitment to documentaries other than travel,
adventure and wildlife; quotes evidence suggesting ‘a substantial unmet demand
for Australian documentaries’; and sees the quota as a longer term investment
in encouraging the networks to take risks with a wider variety of documentary
material ‘...in much the same way their programming decisions in the drama area
have met with much success (even though they may have been sceptical at the
outset’.[49]
2.45
The ABA acknowledges the vulnerability of
Australian documentaries, and proposes to increase the documentary subquota
from 10 to 20 hours ‘...to serve as a safety net for Australian documentaries’.[50] Film Australia welcomes this
but regards it as an inadequate response to the real nature of the problem:
‘An extra 10 hours per year - given that two of the three
networks are already screening that amount - of quota material will make no
impact on the attractiveness of New Zealand programming...’[51]
Children’s programs
2.46
In 1997 806 hours of New Zealand-made children’s
programs were broadcast in New Zealand, of which 366 hours were first release.
410 hours of children’s programs were subsidised by New Zealand on Air. The
Australian content quota for first release Australian children’s programs is
130 hours per year, and the networks each broadcast 130-135 hours. See
APPENDICES 3, 4 and 6.
2.47
Children’s programming generally should be
distinguished from children’s drama. The Australian Children’s Television
Foundation had concerns about possible replacement of children’s programs
generally, based on the proportions of the above figures:
‘...the New Zealand production industry is easily capable of
producing enough programming to meet our entire children’s programming quota
for each of the three commercial broadcasters.’[52]
2.48
The ABA told the Committee that,‘...most other New
Zealand children’s programming would not meet the ABA C [children’s] and P
[pre-school] classification standards.’[53]
While the New Zealand industry commented:
‘New Zealand on Air has supported the production of children’s
programming, as distinct from children’s drama, in significant hours. However,
a very significant proportion of that is magazine studio-based shows which have
a very short shelf life and no life outside New Zealand. An average of nine
hours per year, or 2.5 per cent of the total hours funded for children’s
programming, has been sold outside New Zealand in the course of the last 10
years.’[54]
2.49
A substantial number of submissions used the
example of children’s drama. The Australian content quota for first release
children’s drama is 32 hours per year (28 hours in 1997), and all the networks
only just meet it (see APPENDIX 3). It is generally admitted that children’s
drama, being unattractive to advertisers, is quota-driven. This would make
replacement by cheaper imports attractive.
‘[Children’s] Programming prior to the introduction of the
standard was price driven and if the option to acquire cheaper programming and
still fulfil the requirements of an ‘Australian’ content standard emerges, it
is difficult to see that price will not again become the major determinant in
the purchase of programs... If one Australian network chose to screen half an
hour a week of New Zealand children’s drama it would meet 80 per cent of its
quota requirement.’[55]
2.50
To allay these concerns FACTS pointed out that
‘...networks already have well-developed plans or commitments with Australian
producers which are sufficient to meet their ‘C’ [children’s] drama
requirements for the next three years’.[56]
The NZ production industry stressed that ‘...no children’s drama programs have
been made in New Zealand in last six or seven years’, and does not foresee any
change to that trend:
‘In an environment in New Zealand where there is a steadily
eroding amount of domestic fudging available to finance local productions, and
also in an environment where there is no disposition on the part of New Zealand
broadcasters to commission children’s drama, I do not see that that situation
is going to improve in the medium term.’[57]
2.51
The Australian production industry is not
reassured. The Australian Children’s Television Foundation queried the New
Zealand definition of ‘children’s drama’:
‘NZ On Air’s Annual Report for that year [1996/97]... does not
indicate what would qualify as ‘drama’ programming. One of the programs funded
last year by NZ On Air was a computer-animated series entitled Squirt.
This 25 episode series could well be classified as drama under the current
criteria in the Australian Standard.’[58]
2.52
The Australian Film Finance Corporation,
acknowledging that ‘...New Zealand producers are not currently making large
amounts of children’s drama programs’, perceived a risk of replacement ‘at
least in the medium term.’[59]
The implication is that New Zealand producers might start producing for the
Australian quota market.
2.53
The Committee is particularly concerned about
the likely effect on children’s drama and documentaries of admitting New
Zealand programs as part of the subquota. It notes the submission of the
Western Australian Chapter of the Screen Producers Association of Australia who
stated:
In Western Australia these two activities (children’s drama and
documentaries) represent the foundation of the industry. In fact, apart from
the occasional telemovie or feature film we produce little else but C
classification children’s drama and documentaries. It has taken 16 years to
build the reputation and output of these two areas to a point where we now have
national and international markets... Our industry would suffer a very severe
setback if section 160 (d) is not repealed... While not underestimating the
effect on the industry generally I believe the impact on regional industry
would be catastrophic.[60]
2.54
On this issue, the ABA comments: ‘If programs
were produced to meet the standard, the costs would approach those of locally
[Australian] produced programs.’[61]
In other words, a New Zealand program produced for the Australian market would
have to recoup its costs in the Australian market (or at least, in the joint
Australia/ New Zealand market): it would have to compete with Australian
programs on its merits, without the advantage of secondary pricing.
2.55
The ABA does propose, as a ‘safety net’, to
institute a minimum licence fee of $45,000 per half hour for first release
children’s drama programs to satisfy the quota: ‘The modest amount of
children’s drama required each year is a further reason to ensure that it is
not subject to substitution due to price cutting.’[62]
Problem of subsidies to New Zealand TV programs
2.56
An argument relevant to all the vulnerable types
of programs is that New Zealand programs will have an unfair advantage because
they are said to be more widely or more highly subsidised by government than
the equivalent Australian programs.
‘A significant proportion of the New Zealand programs are
produced with Government subsidy from New Zealand On Air whereas in Australia
less than 2 per cent of programs currently qualifying as Australian content are
in receipt of any subsidy.’[63]
2.57
In 1996/97 NZ On Air funded 62 hours of drama,
99 hours of documentary, and 410 hours of children’s programs, and for the
subsidised programs the subsidies represented between 55 and 80 per cent of
production costs (see APPENDICES 6 and 7). According to the Australian Film
Commission:
‘Subsidy through NZ On Air available for a wider range of programs
and to a significantly higher percentage of a program’s budget than is
available in Australia. - for example, long running series and serials for
which no subsidy is available in Australia... Subsidy is also available for
general children’s programming, an area not subsidised in Australia.’[64]
‘...in Australia, federal subsidy through the Australian Film
Finance Corporation (FFC) is only available for adult drama programming for
miniseries (up to 8 hours) and telemovies. State funding bodies provide some
support for series in development and production but this is a small proportion
of overall production costs.... Large amounts of documentary programming are both
broadcast in New Zealand and supported by NZOA. This contrasts with Australia
where the documentary production that is subsidised through the FFC and other
bodies such as Film Australia rarely makes its way onto commercial television...
It is evidence that documentary is more popular and better supported by New
Zealand television than it is by commercial television in Australia.’[65]
2.58
The Australian Children’s Television Foundation
saw a risk that ‘...Australian commercial broadcasters would be encouraged to
commission the production of children’s programs from New Zealand producers,
who are able to access NZ On Air funds, and thus be able to provide programming
at a much cheaper cost to the Australian commercial networks than new
Australian programs would involve.’[66]
2.59
In reply the Screen Producers and Directors
Association (SPADA) [NZ] pointed out that ‘...the New Zealand On Air subsidy
system is the only form of protection or support for the production industry in
New Zealand.... By contrast, Australia has a combination of policy mechanisms,
including public service broadcasting (ABC and SBS), direct government subsidy
(AFFC, CTVF and state level funding) and local content regulation.’ According
to SPADA, the consequence of this broader public service role of New Zealand On
Air is that few of the programs it supports are made with any thought of
international sale:
‘Over the last nine years, an average of 12 hours of documentary
programming have been sold internationally per year. This is the equivalent of
around 10 per cent of total documentary hours funded. An average of 9 hours per
year (or 2.5% of total hours funded) of children’s programming has been sold
outside New Zealand.’[67]
2.60
SPADANZ also argues: ‘The funding history of a
program has no relevance to the price at which it might be sold. The fact that
there are differing subsidy and support arrangements amongst the member states
of the European Union has not been considered relevant in drawing up the
provisions for unrestricted intra-European trade in television programs.’[68]
2.61
According to the ABA:
‘The differences in the types of programs subsidised and the
preconditions associated with programs qualifying for subsidy assistance make
it difficult to compare the levels of subsidy provided in Australia and New
Zealand... However, with the exception of children’s programs, it appears that
levels of subsidy as a percentage of production costs are roughly similar.’[69]
Longer term effects
2.62
There was an undercurrent in submissions by the
Australian production industry to the effect that even if the short term risks
of the new standard seem small, the longer term risks should not be
underestimated. There are several issues here:
- A fear that Australian networks would be tempted to replace
Australian with New Zealand programs, if not at once, then at the time when a
popular series ends and the high start up costs of commissioning a new one must
be faced.[70]
- A fear that the New Zealand industry, helped by government
subsidies, could gear itself up to produce for the Australian market:
‘It is apparent from reading the New Zealand trade press and
from Project Blue Sky’s public comments that the New Zealand industry intends
to gear production to the Australian market. It is also worth nothing that the
last few years have seen the growth and consolidation of three to four major
production groups in New Zealand capable of supplying product of sufficient
quality to replace Australian series. NZ On Air has been increasing its subsidy
percentages in recent years. Further, Project Blue Sky’s stated strategy is to
encourage “NZ On Air and the New Zealand Film Commission to widen funding
criteria to allow New Zealand ideas which are designed for the international
market.”’[71]
- The perceived ‘medium term risk’ to children’s drama mentioned
earlier (paragraph 2.52, even though no children’s drama is now produced in New
Zealand) contains the same idea.[72]
A related idea is that Australian producers would be encouraged to work in New
Zealand, ‘...draining our local industry of talent and resources.’[73]
- A fear that broadcasters, even where they do not actually use New
Zealand imports, will use the threat of New Zealand imports as leverage to
force down licence fees for Australian programs generally.[74]
- As a logical extension of the previous point: a fear that a
single market in TV production will lead to reduced licence fees in both
countries and reduced production in the two countries in total:
‘If one drama series will do for both Australia and New Zealand,
why would two be made, one for each country?’[75]
2.63
For the Australian production industry, it is
irrelevant whether the future proves that their fears were unfounded: the lack
of certainty is in itself a chief objection:
‘The potential changes to the Standard ensure there is no longer
ANY certainty about minimum levels of Australian programs that might be
broadcast. Thus, providing no level of certainty to the Australian production
sector about future base levels for independent program production.’[76]
‘This is a highly volatile, difficult industry. The margins are
getting slimmer, particularly with the introduction of digital technology and
with new players coming on the market... For anyone to leave this room thinking
that in the future there is not a significant chance that high cost Australian
programming may be displaced by New Zealand programming which is looking to
pick up its secondary market - much of which is heavily subsidised by the New
Zealand government - is extremely naïve.’[77]
Committee comment
2.64
If, as a result of the new Standard, New Zealand
producers decide to produce for Australia as their primary market, they
will not be able to sell in Australia at secondary prices. [78] However the Committee
recognises that there is a possibility that they could compete with the
Australian produced programs at primary prices, and that this would have
implications for the cultural objective of the Australian Content Standard.
2.65
The Committee is sympathetic to the concerns of
the Australian production industry and related groups in the broadcasting and
film industries about the possible negative effects of New Zealand programs on
Australian programs within the australian content quotas. The major difficulty
facing the Committee in this debate is the fact that the anticipated negative
effects from the ABA’s new Australian Content Standard are merely speculative.
The Committee agrees with the Department of Communications, Information Technology
and the Arts that there is no way of knowing how the situation will develop.[79]
2.66
The Committee notes that the ABA is committed to
monitor and review the situation in two years ‘to assess how well the standard
is achieving its cultural purpose’.[80]
Should the ABA’s new Standard be implemented the Committee recommends a close
monitoring of the situation.
2.67
The Committee is also concerned that the
approach that the ABA has taken in devising its new Australian Content Standard
within the constraints of section 160(d) of the Broadcasting Services Act
1992 might give the erroneous impression that, in the ABA’s view,
Australian culture and New Zealand culture are one and the same and are
interchangeable. Accordingly,
Recommendation 1
The Committee recommends that the Australian Broadcasting
Authority (ABA) state in the introduction to its new Australian Content
Standard that Australian culture and New Zealand culture are different from
each other. They each have their own distinct characteristics and are not interchangeable.
The ABA must make it clear that if the new Australian Content Standard gives
special status to New Zealand productions the aim is solely to make the
Standard consistent with Australia’s obligations under the CER Protocol.
Recommendation 2
The Committee recommends that, in the event of the ABA’s new
Australian Content Standard being implemented, its effects on the number of New
Zealand programs broadcast as part of various television quotas should be
closely monitored by the ABA, with a view to taking remedial action if the ABA
finds that object 3 (e) of the Broadcasting Services Act 1992 is no
longer being met. The ABA should report to the Minister after 2 years of
operation of any new Standard.
International Implications of Retaining 160(d)
2.68
A number of submissions expressed the fear that
if paragraph 160(d) of the BSA were retained in its present form, other
nations who have treaties with Australia which include ‘no less favoured
treatment’ clauses, would seek the same favoured treatment accorded to New
Zealand under the “australian content” quotas for commercial television.
Others argued that in its present form, the CER sets a precedent that will
weaken Australia’s bargaining position in negotiating for a cultural carveout
in future trade agreements.
Possible
‘no less favoured treatment’ obligations to other nations
2.69
Of particular concern in some submissions, were
the Basic Treaty of Friendship and Co-operation between Australia and Japan
(the Nara Treaty: Australian Treaty Series 1977 no. 19) and the OECD Code of
Liberalisation of Current Invisible Operations (Australian Treaty Series 1971
no. 11).
2.70
The Nara Treaty requires the parties to give
each other treatment which is ‘not discriminatory between nationals of the
other Contracting Party and nationals of any third country’ (Article 9). The
fear is that Japan could demand access to Australian television no less
favourable than New Zealand. The Australian Film Commission argued that this
scenario could eventuate because:
‘Japan has a thriving children’s animated program industry and a
number of such programs have been shown on Australian television. Animated
programs are already dubbed... so redubbing in English does not have the same
difficulties from the audience point of view that dubbing drama has.’[81]
2.71
The OECD Code requires members to liberalise
trade in certain listed ‘invisible operations’, which include importation of
recordings for television broadcast (Articles 1 & 2; Annex A). Within this
positive list (Annex A) reservations (ie negative lists: Annex B) are allowed,
and Australia has reserved ‘time-quota limitations on the television screening
of programs which are not of Australian origin.’ However, a different article
of the Code demands that members shall not discriminate between other members
in liberalisation of the matters in the positive list (Article 9). Some argue
that this article makes no allowance for a negative list, and
accordingly any OECD Code signatory could demand equal treatment with New
Zealand in the matter of importation of recordings for television broadcast.[82]
2.72
In its submission to the Committee, the Attorney
General’s Department stated that it believed these concerns to be unwarranted:
‘We have considered whether
there would be any flow-on effects... we have examined Australia’s obligations
under the following international trade instruments to which Australia is a
party:
• the OECD Code of Liberalisation of Current Invisible Operations (‘the OECD
Code’) [ATS 1971 no. 11]
• the Basic Treaty of Friendship and Co-operation between Australia and Japan
[ATS 1977 no. 19]
• the General Agreement on Trade in Services (‘GATS’) [ATS 1995, no. 8]; and
• bilateral Investment Promotion and Protection Agreements (‘IPPAs’).
‘There are good arguments Australia could rely upon against the
application of these treaties through paragraph 160(d). For example, Australia
has made express reservations under some of these agreements. Australia has
reserved ‘time-quota limitations on the television screening of programs which
are not of Australian origin’ in relation to the OECD Code (article 2(b) Annex
B) and the provision of television services does not form part of the
Australian GATS offer.’[83]
2.73
The Committee accepts that there are ‘good
arguments’ along those lines but the Committee notes that there are those who
argue that the matter is not free from doubt. Some question whether Australia
and New Zealand are a ‘customs union’ (which would remove the problem in
respect of the OECD code).[84]
2.74
Submissions also mentioned the possibility that
Australia has other relevant obligations unnoticed among the 900-odd treaties
to which Australia is a party. In this context, the
Committee notes the supplementary submission of the Australian Film Commission [85] in which it tendered legal
advice on this issue, provided by Associate Professor Donald Rothwell of the
University of Sydney.
2.75
The Attorney-General’s Department suggested in
its submission, that one option would be for paragraph 160(d) to be amended to
“refer specifically to the CER Protocol”: In AG’s opinion,
Such an amendment would also have the effect of excluding the
operation of other treaties in the context of the formulation of broadcasting
standards.[86]
2.76
The Department of Communications, Information
Technology and the Arts suggested another option:
One approach which could be considered as a way of assisting the
ABA in the exercise of its regulatory responsibilities would be to amend s.160
(d) to mirror s.580 of the Telecommunications Act 1997, which requires
the ACA to have regard to Australia’s obligations under any convention of which
the Minister has notified the ACA in writing. If an identical provision were to
apply to the ABA, the Minister could notify the ABA either to have regard to
the CER Services Protocol alone, or such additional treaties as the Minister
considers relevant.
2.77
The Committee believes that the possibility of
paragraph 160 (d) applying to other international treaties is not an issue that
can remain unresolved. In the Committee’s view, the issue is of such importance
that it should be clarified through amendments to section 160(d). Accordingly,
Recommendation 3
The Committee recommends that section 160(d) of the Broadcasting
Services Act 1992 be amended to require the ABA to perform its functions
having regard to Australia’s obligations under any convention of which the
Minister has notified the ABA in writing.
Australia’s bargaining position in
future treaty negotiations
2.78
Several submissions fear that to allow New
Zealand access to Australian content quotas will weaken Australia’s bargaining
position in arguing for ‘cultural carveouts’ in other treaty negotiations in
future.
‘In the Uruguay Round of negotiations under the auspices of the
General Agreement on Tariffs and Trade (GATT), now World Ttrade Organisation
(WTO), Australia, like most countries, made no commitment to lieberalise
assistance mechanisms in the audiovisual sector... Nonetheless, the USA will
undoubtedly continue with its battle to reduce barriers in the next Round which
is due to start again in the year 2000, because it clearly suits the interests
of their industry. To compromise the Australian Content Standard by giving
prominence to the CER would severely compromise the ability of Australia to
maintain its position...’[87]
2.79
The Department of Foreign Affairs and Trade
acknowledges that ‘...it is possible Australia will be asked by trading partners,
and specifically the US, to remove or reduce the television local content
quotas.’[88]
2.80
On the other hand the Screen Producers and
Directors Association [NZ] believes that it is possible and desirable for
Australia to ring-fence the CER - as a pre-existing agreement - without
implications for other international trade and trade policy interests Australia
might wish to pursue.[89]
We note also the argument of the Australian Writers’ Guild that:
‘There is clearly an enormous level of precedent for treaties to
contain cultural reservations... If the Australian government fails to resolve
this issue and act decisively, rather than being respected in diplomatic
circles we will be a laughing stock...Defending our right to regulate would not
be regarded as unreasonable by our trading partners as the right to regulate in
this area is internationally recognised....’[90]
2.81
This was part of an argument that the CER
Protocol should be renegotiated to avoid creating a bad precedent. The
committee affirms the importance of cultural carveouts in free trade
negotiations, and we expect that the Australian government will maintain that
position.
Problem of
New Zealand/ third party co-productions
2.82
The draft Australian Content Standards retains
Australian official co-productions as a gateway to quota. Several submissions
were concerned that New Zealand/ third party official co-productions could
demand equal rights. According to the ABA, all except the New Zealand
Government and the Screen Producers and Directors Association [NZ] agree with
the ABA that New Zealand/ third party co-productions should be excluded.[91]
2.83
The New Zealand government, in its submission to
the ABA review, argued that ‘...if a gateway is provided for Australian
programmes made under the provisions of a co-production treaty, then the same
criteria must apply to New Zealand programmes.’[92] SPADA [NZ] considers that New
Zealand/ third party co-productions should be accepted ‘...but with acceptance
that the benefits of the CER Agreement should not extend beyond the member
states.’[93]
It is not very clear how this proviso would work in practice.
2.84
FACTS considers that even if New Zealand/ third
party co-productions are accepted... ‘This is not likely to pose a problem of any
practical significance, given the small number of co-productions involved.’[94] Others in the Australian
production industry are more concerned. According to the Australian Film
Commission:
‘The predominance of television programming in New Zealand’s
co-production program is significant. As this includes series and serials, in
addition to mini-series and telemovies, the television hours involved are much
greater than is suggested by 15 programs.’[95]
2.85
The Attorney-General’s Department gave evidence
to the Committee that in its view, the CER Protocol does not require equal
treatment for New Zealand/ third party co-productions, since ‘...nothing that New
Zealand does in an agreement or a treaty with a third country combines
Australia.’[96]
In a supplementary submission to the Committee, the Attorney-General’s
Department reiterated its advice that New Zealand-third party co-productions
are not covered by the CER Services Protocol. This is the approach that has
been adopted by the ABA and the new draft Australian Content Standard excludes
New Zealand/ third party co-productions. However, the ABA has indicated that it
would be seeking a “side letter” [97]to
the CER Protocol:
The ABA has decided to retain official co-productions as a
gateway by including them in the new part of the standard dealing with
Australia’s international obligations. The ABA will also be seeking a side
letter to the CER protocol which excludes official New Zealand co-productions
with countries other than Australia.[98]
See APPENDIX 10 for the Attorney General’s Department advice
on the issue of side letters.
2.86
The present position of the New Zealand
government in relation to co-productions was put to the Committee thus:
‘The view of the New Zealand government is simply that we are
disappointed that New Zealand official co-productions will not be eligible for
the quota.’[99]
2.87
In view of the level of concern in the industry
revealed in submissions to the Committee and described in paragraphs 2.82 and
2.84, the Committee believes that every step should be taken to clarify the
status of New Zealand/third party co-productions. Therefore,
Recommendation 4
The Committee recommends that on the question of
New Zealand/third party co-productions, the government should negotiate with
the New Zealand government with a view to exchanging side letters to the CER
Services Protocol to clarify both countries’ understanding of the meaning and
application of the CER Services Protocol in relation to New Zealand/third party
co-productions. The side letter should make it clear that New Zealand/third
party co-productions would not be eligible for the purposes of the Australian
Content Standard quotas.
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