Network Insight Institute

Discussion - session 1

Discussion - Session 1

Frank Goodman, Project Television: I noticed that Ian McGill mentioned an increased pool for Australian production. One of the things that interactivity gives is the ability to switch off, whether it is advertisers or party political statements. My belief is that the current switch to interactive media means that there will be a severe revenue crunch. Could somebody comment and tell me why I'm wrong?

Andy McIntyre, Network Ten: I'm happy to start. It has been interesting to see the US experience, where the companies which manufacture TIVO, Replay TV, and to a lesser extent DishPlayer, have not achieved anywhere near the levels of success that they expected those relatively straightforward consumer devices would achieve. Notwithstanding the fact that in many respects they revolutionise the way that viewers look at television, there has been no discernable change thus far in either the level or manner of advertising revenue generated by the US broadcasters. Normal commercial spots continue to be the principal source of advertising revenue. Over time you may find a situation where there is more integration between program content and sponsors, for instance with tonight shows doing live commercials. However, the Ten Network continues to believe that there will remain sufficient concentrations of revenue in the one place to allow Australian viewers to watch the programs that they want to watch. That means we must ensure that Australian producers make those programs. It would be untenable to have an environment where we saw this country's relatively small advertising expenditure spread across more and more and more media, to the point that everyone shared a little bit of it and it was almost impossible to get anything of any substance and quality made for Australian audiences.

At the risk of suggesting a 'field of dreams' argument, I think that people will come and the dollars will come. We are a very long way away from there being any significant inroads made into the traditional advertising models.

Mark Armstrong: Andy, while you are thinking about that, could you go on and say where the multi-channel ingredients, including pay TV and digital TV, will fit into that picture in five years. Five years bring us to 2007, when current restrictions on numbers of free-to-air channels will end. Consider the trend where pay TV is managing to get itself back together into viable co-operation, as recently decided in this very building through the Foxtel/Optus agreement. Incidentally, Ian McGill was the person who hosted and presided over all those discussions about Foxtel/Optus co-operation, in this very room at Allens Arthur Robinson.

Andy McIntyre: I will gaze into the crystal ball for a minute, which I preface by assuring you that I am almost guaranteed to be wrong, at least in some way. It is very difficult to look ahead on that kind of time scale, but I will address the points individually.

Digital has obviously come at an enormous cost to the free-to-air industry in Australia. Collectively, more than $1 billion is being spent in the digital rollout across the commercial networks, both metropolitan and regional, and that does not bring in one iota of additional revenue in the short term. That has presented us with some additional challenges to satisfy the ever increasing demands of shareholders. So, there is no particular revenue upside in digital broadcasting for us in the short term. Furthermore, the triple-casting legislation exacerbates that condition. That is not to say that the Ten Network won't be complying with its obligations; it certainly will be. I would point out however, having regard to the American experience in particular and our continued association and reliance on US-sourced content for a significant part of our programming schedule, that the difficulty in obtaining high definition content for the free-to-air broadcasters will become an issue as we move into the regime in 2003, when we are required to start broadcasting 20 hours of high definition television per week. While we are in a position to manipulate our domestic slate to comply with that obligation, our expectation that between 60 and 70 per cent of that content could be sourced internationally is a very long way from being the case. Once again, there is another cost taking money that we would prefer, if we had our way, to be investing in new Australian programs, rather than paying for high definition content. I understand the reasons for that, however.

Multi-channelling is interesting. Obviously the penetration of subscription television in this market has not had a significant impact thus far on the viewing habits of the audience, notwithstanding some of the terrific pay TV channels on offer. The key concentrations are in Showtime and feature films on Foxtel, and also in sports. Notwithstanding the private views the networks might have on the recent announcements, it will certainly benefit Australian audiences to see more money spent on content, rather than infrastructure, in any broadcasting environment. As far as free-to-air multi-channelling is concerned, that really depends on your content model, which in turn depends on your aspirations to develop sports or other specific program genres. I can say from a Ten Network perspective that, with our current content model, neither subscription multi-channelling nor free-to-air multi-channelling makes commercial sense at the moment, given our current formats. I am yet to see a business model that puts up any sort of compelling case for multi-channelling in the short term, even three to five years out.

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