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Lessons from Down Under

The Australian Media Reform Bill has finally been passed in the country’s Senate, after vociferous allegations against law makers having…

Lessons from Down Under

(Photo: Getty Images)

The Australian Media Reform Bill has finally been passed in the country’s Senate, after vociferous allegations against law makers having made a national benefit trade-off in bolstering scale and efficiencies for Australian media companies in the face of serious competition from American tech companies. With expansion in digital media distribution in world markets, it bears value to follow the motivations for these reforms and find resonance with our domestic Indian media market. The Government has reasoned that the reforms will reconcile the gap between technology advancement and the outdated regulation of media content and distribution in Australia.

In our view, the two main aspects proposed for repeal in the Australian Broadcasting Services Act 1992 that can be lesson-worthy for India are – (a) The proposed repeal of ‘the 75 per cent reach rule’ prohibiting commercial television broadcasting licensees from controlling licenses for territorial areas that comprises more than 75 per cent of the Australian population and (b) The proposed repeal of an entity controlling no more than two out of three radio, television and newspaper media channels in any particular commercial radio licensing area. At the time of enactment of the Act, distribution of digital media content was in its infancy with minimal levels of cross-geographical reach to local government areas.

Commercial radio licensing was localised and aggregated in regional areas, television broadcasting locally and internationally conducted under different media rights distribution negotiations and newspapers catering to local and international print media were controlled by oligopolistic entities. Regulatory authorities governed the functioning of such media channels based on prevailing supportive technology and the legality of regulation directly correlated with commercial objectives for maintaining an open competitive market in the media sector. Due to advances in distribution of digital media content and the creation of digital content itself, entities in the local media sector are now facing stiff competition from internet-based media services such as Google and Facebook.

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The prevailing regulatory regime has had limited authority over them, but from a consumer perspective, media from the world over are now easily accessible through devices such as smartphones at very low-cost. Thus relevance of entities in the local Australian media sector is challenged as their delivered and distributed media can be directly provided by such services without any regulation. Currently, domestic Australian television broadcasting agencies produce and distribute content in accordance with relevance for consumers in different regional areas on the basis of points (minutes and local news content).

The reform as stated intends this relevance to sustain so that local population can benefit from access to local news and media content. Media consumers in regional areas now receive the same media content as those in the metropolitan areas due to a variety of content distribution agreements and affiliations between media networks to provide streaming services, which supports the abolition of the 75 per cent reach rule. Proponents of the Bill feel the repeals could potentially enable consolidation of the Australian media sector and enable collaborations between local and international entities for a higher reach-out to the benefit of media consumers.

Accordingly, the Australian Competition and Consumer Commission (ACCC) released draft Media Merger Guidelines on 26 August 2016 to address consolidation activities. These guidelines work to follow a with-without test, whereby the ACCC considers the likely future competitive environment if the merger proceeds (the “with” position) to the likely future competitive environment if the merger does not proceed (the “without” position) and determine whether the proposed acquisition is likely to substantially lessen or foster competition in the relevant market. The changing nature of media technology and the competitive impacts of the technology over a period of time are also expected to be factored in, while making such determination. These may be read over one to two years and in certain cases even longer. Therefore the ACCC assessments must be based on best available evidence to be thought of as being reliant and non-speculative.

To clarify and understand market trends, a crucial driver to the success of online media creation and distribution is advertising revenue which necessitates leveraging upon the popularity and reach-out amongst media consumers. In 2005 online advertising revenue accounted for only 6.1 per cent and by 2017 it had the largest share with 42.5 per cent in the revenue generated by all media platforms. The search-based advertising model has generated $ 3.1 billion (a 24 per cent increase) in the year 2016 while the display based model has generated $ 2.4 billion for the same period (43 per cent increase from FY2015). Going by the IAB/PwC Online Advertising Expenditure Report, at its present rate of growth, display based advertising is set to outpace its counterpart.

A counter-trend is observable for television broadcasting which has witnessed a decline in the past couple of years in terms of the average number of hours of broadcast television as viewed in homes. This is a result of streaming services such as Netflix which have diverted the traffic online. Radio services though have largely been stable in their growth, as advertising on air has not translated to marked increase in revenue. Even within the ambit of radio services, according to data from Nielsen, a significant section of Australians are tuning into online Radio services rather than Terrestrial Radio services.

Thus, while traditional media platforms have continued to remain profitable and attract significant audiences, consumers are moving to new sources of video, audio and news content and are also developing user generated content (UGC). Arguably, while UGC by its mere presence does not displace demand for professionally generated content, it does however create another competitor (though not a direct one) by creating a new category of entertainment. These aspects are seminal features of the information age, and validate the need for qualified, experienced, well-resourced independent media which gives attention to generation and promulgation of local and regional content. The repeal of its two-out-of-three rule has been opposed by the Labor Party, cautioning that it will subdue strong Australian media voices, dissent, quality journalism and the health of their democracy overall.

Eventual creation of a monopolistic rule will have substantial negative impact on maintaining the intra and interstate competitiveness of the Australian media industry. Thus the bill is being viewed as anything but pro-consumer or pro-innovation, and at best a compromise. In the same vein, the role broadcasters play in producing strong local content that is vital to the strength of the Australian identity and democracy has come to the forefront. At present the Government uses a points system to ensure that larger regional communities have access to local news broadcasts.

Broadcasters in regions such as Queensland, New South Wales amongst others are subject to local content obligations whereby they are obliged to produce at least 720 points of local content per six-week period. As per this classification each minute is worth one point or two points if the subject matter contains local news. To allay concerns over the possible reduction of local content with the proposed changes to media ownership rules, the media reform package has aimed to increase the amount of local content points to 900 per six-week period. These conditions would come into force in the scenario of a trigger event or when the combined license control for a region exceeds the 75 per cent requirement. A review is to be carried out by the Australian Communications and Media Authority (ACMA) within a gazetted period of time.

The accompanying legislation complimenting the move to repeal broadcasting license fees and datacasting charges is the Commercial Broadcasting (Tax) Bill 2017 which shall introduce tax on the use of broadcasting spectrum.

New set of taxation agreements for television and radio will also be introduced. Unlike the prevalent system of imposing broadcasting licenses on the basis of revenue, this system characterised by reduction in cost to the broadcasters made possible due to the repeals takes into account the power level of the transmitter, the particular band of spectrum used and the amount of spectrum used. This approach would in theory enable broadcasters to compete with online competitors and invest in their business to produce quality content, along with valuing spectrum appropriately and balancing concerns regarding market competition. In absence of proof, one is skeptical whether the proposed laws will generate free and fair competition between local and international media content creators and distributors.

Whether the local media will enjoy greater freedom to achieve efficiencies in the face of static and declining audiences and a crumbling advertising base remains to be seen. With television networks reaching a larger aggregate audience than any other competing digital service, an impact assessment of whether the advertising expenditure on broadcasting is still much higher than what goes to digital video streaming services despite the presence of Google and Facebook is needed.

In its absence one may wonder whether the intent is to move forward with a media reform package that encapsulates the advantages of the new age of digital transformation, or merely serve the monopolistic agendas of certain media conglomerates though at present, the Bill seems to have been given a unanimous push by the lawmakers.

Lessons for India

India would do well to take heed of the experiment with media reforms in Australia. With access available to services such as Netflix and Amazon Prime since 2016, the online streaming market has become competitive in India. This is not to state that online streaming did not thrive earlier, as the likes of Hotstar, Eros Now, Voot and TVF have existed for some time. However, two recent developments explain how streaming content has become a mainstream phenomenon now. The first is that internet users in the country have grown to a staggering 420 million in 2017 and are expected to grow to more than half of India’s population by 2021 (i.e. 829 million or 59 per cent of the population).

The second is that enforcement of a stricter ‘digital policy’ has clamped down on instances of video piracy, thus allowing streaming services to emerge and flourish. Notably, while the entry of the two American giants has made the online streaming space competitive, they have largely been unable to trump domestic giants such as Hotstar so far.

Having close to 130 million downloads, Fox/Star owned Hotstar has been a clear market leader in India with its extensive content and affordable pricing. With over 60 per cent of online streaming comprising of domestic content and very limited viewership for Western content, it has done well to capitalise upon this segment.

It offers a range of domestic content in Hindi, Tamil, Kannada, Marathi and others along with having rights to stream Indian Premier League (IPL) cricket matches and popular foreign shows. Amongst global players, while Netflix has been slow to recognize market attributes, Amazon Prime has been a quick learner. Ever since its launch in December 2016, it has been building its Indian content. It is swiftly becoming a dominant player in digital media content distribution. Therefore, it is predictable that India will stand at a similar point of apprehending market conditionality influenced by a single player predominant in the sector as was the case in Australia.

As evidenced by its success in the United States, where Amazon Prime has around 54 million subscribers, it is billed as an advertising haven for Amazon Inc in global markets. Competitors such as Hotstar have limitations in terms of the degree of financial outlay that is being made by Amazon on its Over the Top (OTT) service. Thus, it would be appropriate to combine two of Prime Minister Modi’s seminal initiatives of ‘Digital India’ and ‘Startup India’ to give a big push to the online streaming segment of the Media and Entertainment Industry. With domestic production houses such as Balaji Telefilms launching their own streaming services, ALTBalaji, it seems that not only viewers but even investors view the medium as commercially viable. Given that digital rights are no longer sold with broadcast rights, it is imperative to ensure that requisite financial backing and technological support is provided to small and new OTT providers.

At the policy level, steps taken by the Telecom Regulatory Authority of India (TRAI) in releasing Prohibition of Discriminatory Tariffs for Data Services Regulations in February 2016 are encouraging. These regulations were the first attempt at designing a specific law or regulations directly concerning the services provided by OTT service providers and deserved public consultation. More importantly it was the first initiative by the government to deal with the issue of ‘net neutrality,’ which requires internet users to be able to access all online content without being discriminated by Telecom Service Providers (in terms of speed and cost).

These regulations were aimed at protecting domestic OTT services which according to TRAI enhance consumer welfare and increase productivity. In the absence of such a framework of price regulation, the internet would be divided between the haves and have nots (in terms of those who can access certain services and those who cannot). The government should work in furtherance of the principle of net neutrality as discrimination by TSPs could be detrimental for emerging OTT service providers who may not be able to pay their way out. This could serve as a major impediment for consumer access to quality and innovative content produced by such services.

Further, in a bid to ensure the continued competitiveness of local service providers against global behemoths and appropriate usage of spectrum, a higher net worth standard could be imposed to grant licenses to International OTT providers as well. Notably, unlike the Australian market, developing Indian content is deemed essential for any foreign OTT provider to establish itself in India. It is essential however to have regulations governing content generation. Of late there have been concerns regarding the self-censorship carried out by OTT providers without the direction of the Central Board for Film Certification (CBFC). While legislation would appear impractical due to the vast corpus of content that would require monitoring, any derailment on the front of consumers having quick access to viewable and a wide selection of audio-visual content would lead to the business model of OTT providers taking a serious hit.

Instead a set of guidelines advocated in consensus by the CBFC, TRAI and OTT service providers could be the way to move forward. Unrestricted censorship can lead to over censorship as well. The maturity ratings specific to the country and region which are provided by the streaming sites can be deemed as being sufficient to regulate the viewership as well as remove any ambiguity regarding governing regulations.

Any derogation from the above and an act of self-censoring is a violation onto the agreement that the service providers have with the consumers. As the terms of use for subscribing to these streaming services guarantee access to content which is uncensored if the service providers are not able to offer such content, it would be negatively impact consumer retention and be counterproductive for their business models, ensuring that users download pirated content off the internet and not use their streaming services.

The developments in Australia can be examined in greater detail in that light. With the news of Digital Mobile Wallet Company Paytm starting its own in-app digital news service, Corporate India is learning from their American Counterparts in Google, Facebook and Amazon. A pro-active involvement in the regulatory sphere is now expected of the Indian Government to ensure that India establishes itself as a tech superpower rather than a mere market for online content consumption in the world.

(The writers are, respectively, Assistant Director of the Center for Intellectual Property and Technology Laws, O.P Jindal Global University and a final year student of the L.LB programme at the Jindal Global Law School.)

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