7: Efficient delivery of services
- Contents
- Foreword
- Introduction
- 1: The role of national broadcasting
- 2: Harnessing new technologies to deliver services
- 3: Informing and entertaining Australians
- 4: Education, skills and productivity
- 5: Social inclusion and cultural diversity
- 6: Presenting Australia to the world
- Appendix A: Submissions Process
- Appendix B: Overview of the ABC and SBS
- Appendix C: The Changing Digital Environment
The ABC and SBS receive a significant amount of public funding. Over the three years to 2008-09 the ABC received more than $2.5 billion and the SBS more than $560 million. These public funds should be used in the most effective and efficient manner possible. In particular, the ABC and SBS, wherever possible, should harness the potential of digital technologies to lower production and operating costs and optimise the impact of their services for audiences.
Asset management
Capital
Broadcasting is a capital-intensive industry. For example, the ABC has more than $750 million in fixed assets and the SBS more than $75 million.
Digitisation is changing the composition of the national broadcasters' asset base, with plant equipment and computer software taking up a proportionally higher share. As these assets tend to have a shorter useful life than that of land and buildings, the level of depreciation expense and capital reinvestment required may have increased.
The national broadcasters will therefore need appropriate contingencies to make the capital reinvestment required to keep pace with these changes.
Property including production facilities
As a broadcaster with a mandate to deliver services throughout Australia, the ABC has significant property holdings and substantial production capacity. There has been some rationalisation of property holdings in recent years with the sale of property in Sydney and Perth.
There has been much debate about the benefits for the national broadcasters of in-house production versus external program commissioning. It has been argued that independent production offers flexibility, provides support for Australia's independent production industry and offers the potential for production efficiencies.
SBS operates a predominantly outsourced production model. It commissions all of its domestic television contentbarring news, current affairs and sports programmingfrom the independent production sector.
However, it can also be argued that there are merits in retaining some functions in-house. This is likely to be the most appropriate model for certain programming genresnews and current affairs, for example. In-house production may also yield cost efficiencies through vertical integration, as well as spillover benefits through the creation of 'incubators' for talent and skills development.
The ABC operates a mixed model and has recently confirmed that it intends to retain a mix of internal and external production, and continue with television production in the states.30
The decision to retain a mixed model follows a detailed review by the ABC of its approach to television production. A new division now manages the ABC's in-house and outsourced production.
Common functions
At the Australia 2020 Summit, SBS advanced a proposal to create a common manager and purchaser of transmission and related services for the ABC and SBS.
It suggested that there would be efficiencies to be gained by combining the management of ABC and SBS transmission and distribution services. SBS noted that the introduction of digital radiowhereby the national broadcasters will jointly own a company to manage common infrastructuremay provide an effective model.
If a common platform such as this were established it might generate efficiencies and could provide a vehicle for the delivery of other 'back office' corporate functions, such as legal services or information technology.
The distribution of ABC and SBS services was previously managed by a single organisation, the former National Transmission Authority, without any adverse effect on the separate identities of the ABC and SBS.
Additional funding sources
The Australian Government is not considering significant changes to the funding models for the ABC or SBS.
- The ABC is primarily funded by the Australian Government and it is prohibited by legislation from broadcasting commercial advertising on its domestic television and radio services.
- SBS is permitted under its legislation to operate on a hybrid funding model, which includes limited advertising on all platforms (up to five minutes of advertising per hour on television, with other restrictions).31
The Australian Government remains committed to maintaining the prohibition of commercial advertising on the ABC and does not support advertising on the ABC's mainstream websites. The Government does not support the introduction of industry levies or household licence fees to fund national broadcasting.
However, as technologies and audience habits change and evolve, arguably there may be merit in considering ways in which the existing funding arrangements can be augmented, at least for specific targeted activities over and above core functions.
Pay-per-view content
The broadcasting services of the ABC and SBS have traditionally been provided to audiences free of direct charge, and there are no plans to change this. However, in an online environment, the ABC and SBS face additional infrastructure and service provision costs for each additional user of content, particularly for downloaded or streamed content. For these services, it may be appropriate to consider whether the ABC or SBS should seek to recover some or all of the additional cost from users, or to otherwise charge for online programming.
The ABC has already made moves towards pay-per-view distribution by launching a service in July 2008 as part of its iView internet television offering. The ABC Shop online makes a range of current and past programs available for download for $2.95 per episode. The ABC and SBS also currently charge for physical merchandise, such as CDs of audio programming, DVDs of television content, books and clothing.
This contrasts with the other programs available through the ABC iView service and podcasts of various ABC radio programs, which are free to view and download.
Any further pay-per-view initiatives need to be carefully considered in the light of the broad public-interest objectives for the ABC and SBS. Growth of such services would be a significant change from the traditional free-to-view or free-to-listen approach that has underpinned the operations of the ABC and SBS to this point.
Open contracting for public broadcasting content
There may be merit in considering whether government funding for particular types of public interest broadcasting programming might be made available via contract or other agreement with the Commonwealth on a contestable basis. Under this model service providersincluding the ABC and SBSwould be able to bid to develop and/or provide particular public interest broadcasting content for transmission on traditional broadcasting or new digital platforms.
This approach of contestable funding has been adopted in New Zealand, where a statutory agency, NZ On Air, funds the development and broadcast of programs that fulfil certain public service objectives. In the United Kingdom the regulator, Ofcom, is considering options to increase the level of contestable funding for public service broadcasting.
In Australia, an open funding model is already in place for the provision of overseas television broadcasting (see section 6: Presenting Australia to the world). This model could be applied to specialised forms of public broadcasting content, particularly content that will be primarily delivered online, for example, training or educational material or programming.
Questions: Efficient delivery of services
- How is the transition to a digital operating environment changing the capital requirements of the national broadcasters?
- What changes might be considered to the national broadcasters' management of property and facilities to allow them to deliver their outputs more efficiently?
- Is there an optimal mix of in-house and outsourced production and, if so, how might it vary across different types of programming?
- Is there scope for combining certain parts of the operations of the two national broadcasters that provide for improved operating efficiencies without compromising their separate identities?
- Should additional funding options for national broadcasting programs be considered, such as user-pay systems for programs distributed online, or open contracting for public interest content? If so, how might such arrangements operate, and to what types of content should they apply?
Footnotes
- Australian Broadcasting Corporation, Creation of ABC Resources, media release, 27 March 2008.
- The SBS Act allows SBS to broadcast advertisements that run during periods before programs begin, after programs end or during natural program breaks. These advertisements must not run for more than five minutes in any hour of broadcasting. SBS generated $41.7 million in gross revenue from advertising and sponsorship in the 2006-07 financial year.
