Govt overhauls quotas from 2021

• Drama, Documentary, Children’s quotas replaced by 55% overall local content
• A limit on how many docos can be used to meet requirement
• 65 episode cap for funding eligibility is axed
• No quotas on Streaming but they must advise their spend on local content
• Producer offset 30% for all film and television
• $33m funding boost to Screen Australia. $20m to Aust. Children’s TV Foundation
• Foxtel drama content spend drops from 10% of revenue to 5%

There will be wins and losses on all sides in the Federal Government’s radical overhaul of local content requirements, which dispenses Drama, Documentary and Children’s Television sub-quotas. The government is injecting $53 million into the development and production of local film and television as part of the 2020-21 Federal Budget.

Update: There will still be a requirement to produce Drama but on a more simplified system which awards points based on budget.

But while some are welcoming the changes, others are already alarmed, especially in the area of Children’s Television.

Local Content

From 2021 networks will simplify quotas to allow commercial networks to meet their current 55% local content requirement -but there will be a cap on the number of hours of documentary content that can be counted towards meeting the requirement. The particular mix chosen will be a matter for each broadcaster based on its business strategy and judgement of audience appeal. Commercial broadcasters will continue to be required to provide 55 per cent overall Australian content on their primary channels between 6:00 am and midnight, and to provide 1,460 hours of Australian content per year on their multi-channels. The points scheme underpinning the sub-quotas will give more points to higher-budget productions, creating a stronger incentive to commission bigger budget drama which is more likely to be sold globally rather than only be seen in Australia.

How will the modified content quota work in practice?

The modified content quota will require each broadcaster to reach 250 points of Australian genre content in a calendar year which can be met by broadcasting commissioned Australian drama and documentaries, including children’s drama and documentaries, and acquired Australian films. Each hour of content will receive different points depending on its hourly production budget (see Table 1).

Table 1

Genre	Points per hour
Commissioned documentary	1
Commissioned children’s content (non-drama)	1.5
Commissioned drama (<$450,000 production budget per hour)	1.5
Commissioned drama ($450,000 – $700,000 production budget per hour)	4
Conditioned drama ($700,000 – $1 million production budget per hour)	5
Commissioned drama ($1 million to $1.4 million production budget per hour)	6
Commissioned drama (>$1.4 million production budget per hour)	7
Acquired Australian film (licence fee less than $50,000)	1
Acquired Australian film (licence fee more than $50,000)	2

This will mean that a broadcaster can meet their annual quota of 250 points with any combination of genres. However, a maximum of 50 points will be able to be acquitted on commissioned documentaries. To qualify as commissioned content, the broadcaster will need to have made a financial contribution to the production budget before the production has been completed.

In-house productions will be treated equivalently to commissioned programming for the purposes of the new quota. To qualify for the new quota, Australian films will need to have been produced in the last two years and to have not been televised before in the relevant commercial television licence area.

65 episodes

A series will no longer be ineligible for funding once it reaches 65 episodes. Currently under the Producer Offset a series is only able to claim the rebate for qualifying Australian production expenditure incurred up to 65 commercial hours. This change will also assist producers to invest in longer-running series knowing that the Producer Offset support will be available for as long as the series is in production. This change will also apply to children’s content.

Producer Offset

Producers currently receive a refund of part of their production budget through rebates. The television incentive rate is being increased from 20 to 30% but the same Film incentive rate drops from 40 to 30%.

Streaming

There will be no immediate impacts on streaming video services, although the Government will be asking the larger providers to report to the Australian Communications and Media Authority on their investment in Australian content, commencing from 1 January 2021. Work will continue under that process, including examining whether to introduce an Australian content spend obligation on streaming video on demand services above a minimum size threshold in the Australian market.

Screen Australia / Australian Children’s Television Foundation

Screen Australia will receive a total boost of $33 million. $30 million will be provided over two years from 2021-22 to support Australian film and television drama, children’s and documentary productions, and another $3 million over three years from 2020-21 to support the Screen Writing and Script Development Fund. The Government is providing funding of $20 million over two years, to the Australian Children’s Television Foundation (ACTF), in 2021-22 and 2022-23.

Subscription TV

The Government will legislate to reduce the obligations on subscription broadcasters by reducing the requirement for new drama programming from 10% to 5%

Minister for Communications, Cyber Safety and the Arts, Paul Fletcher MP statement:

“The Government is providing $30 million in funding to Screen Australia over two years to support the production of Australian drama, documentary and children’s film and television content.

“Screen Australia will also receive an additional $3 million over three years to establish a competitive grants program to cultivate quality Australian screenwriting and script development.

“We are also providing $20 million to the Australian Children’s Television Foundation over two years to boost the development, production and distribution of high-quality Australian children’s content.

“The old approach of treating film and television differently no longer makes sense. Increasing the offset to 30 per cent for television will mean additional funding for Australian television production – and in turn support higher production values and programs with a better prospect of being sold into the global content market, taking advantage of the opportunity created by the explosion of streaming video services like Netflix, Disney+, Stan and Amazon Prime.

“The Government very much appreciates the strong engagement we received during our consultations this year.

“The views of stakeholders and interested parties were very clear – we need to continue our support for the production of Australian content, but we also need to remove unsustainable obligations on industry and tailor our interventions to match the new and diverse ways Australian content is being produced and consumed.

“The measures announced today are designed to do just that. They begin to rebalance our regulatory framework and provide Australians with the opportunity to access Australian content across a range of media, regardless of whether they want to watch free-to-air television, subscription television or streaming services.”

Free TV Australia statement:

Free TV Australia today welcomed the Government’s announcement to update the Australian content rules that apply to commercial television broadcasters.

Free TV CEO Bridget Fair said, “Free TV broadcasters remain committed to making and broadcasting Australian content for a simple, powerful reason: Australians want to watch Australian programs. These reforms will deliver greater flexibility to respond to what our audiences demand.

“Today’s announcement is a huge positive for the Australian film and television production sector.  The Government has combined a more flexible quota system with strong incentives for production of quality Australian programs in a way that should stimulate a broad range of Australian stories.

“The old quota system was collapsing under its own weight.  There has long been a need for the onerous and outdated framework, in place since the 1980’s, to be updated.   We commend Minister Fletcher for recognising the need to ensure the sustainability of the sector. The Government has carefully considered this issue and the Minister’s decision has simplified and modernised the quota framework while supporting Australian production with strong incentives and direct funding.

“By ensuring broadcasters are incentivised to make the programs that are most relevant to their audiences rather than slavishly meeting sub quota obligations, these reforms will assist to maintain the health and sustainability not only of commercial television broadcasters, but of the entire content production ecosystem.

The real winners in this reform package are TV audiences, who will continue to enjoy the Australian programs they love”, Ms Fair said.

Screen Producers Australia statement:

The announcement today of various measures concerning the regulation of Australian and children’s content is predicted to reduce the amount of content being produced by at least fifty percent and remove thousands of jobs from the sector as well as opportunities for audiences across the world to engage with Australian stories.

“With the local screen industry already reeling from the impacts of COVID-19 and the freezing of contracting caused by the suspension of quotas since April, the announcement today is an unfortunate backward step and we predict will result in the demise of many Australian businesses and livelihoods,” said SPA CEO Matthew Deaner.

“Deregulation of legacy platforms without a transition plan into regulation of new platforms creates a disjointed and incomplete policy response that tinkers around the edges, appears to have been driven by old-world thinking and has scant regard to the future of Australian screen content. A once in a generation chance to reset the foundations for Australian stories for future generations and bring regulation into the 21st century has been presented to the Government in a unified way by the screen industry and the response presented today falls short and needs rethinking,” said Deaner.

“The effective abolition of children’s content quotas, the watering down of drama and documentary requirements and the halving of requirements for subscription TV doesn’t meet the Government’s articulated desire for forward-thinking policy-making. Instead, it presents as the adoption of the deregulation wish-list of legacy broadcasters and their owners and the international streaming companies,” said Deaner.

Measures today will allow broadcasters to meet an entire year’s content obligation across drama, children’s and documentary content through a single program such as Home and Away.*

Additional funding for Screen Australia and the Australian Children’s Television Foundation is welcome, however with no regulation to stimulate commissions, we are concerned as to the effectiveness of this as a measure to meet the needs of Australia’s child audiences as it doesn’t in its own right trigger production and could amount simply to development of projects with no pathway to audiences.

There is the clear potential for the proposals to shrink the Australian production industry to an unsustainable size, and to lose the critical mass in economic activity needed to ensure viable screen businesses and employment opportunities. No amount of incentives can protect a sector that starts to structurally become reliant on irregular and patchy commissioning.

A voluntary reporting requirement for streaming services represents the greatest lost opportunity, and leaves these incredibly popular and successful businesses free to reap rich benefits from the Australian market with no requirement to contribute back to Australian businesses, employment or culture. It will also see Australian audiences miss out on access to Australian content on the platforms which they are now using.

“As soon as the policy spotlight is off streaming services, there will be no incentive for them to commission in this market. Given the regulation outlined in other territories including across Europe and North America, Australia urgently needs a timeframe for transitioning streaming platforms into a regulated environment and without this, in the long run, we will become a backwater for investment,” Deaner said.

“We are also extremely concerned by the reduction in Producer Offset for feature film from 40% to 30%. The 40% offset for film had proven to be extremely successful and an integral part of financing for local features. We are not aware of any calls from any quarters for this vital financing lifeline to be reduced and the cut could mean the end of the line for so many great Australian feature films,” Deaner said.

All of these impacts were laid out in detail for the Government throughout its recent consultation process and the warning bell was rung many times by the industry. The Government has chosen not to liaise directly with industry on these specific measures announced today, which does not align with best practice policy-making.

Other critical issues raised during the consultation process and in the Government’s discussion paper which have not been addressed at all in this response include:

The inequality of bargaining relationships between commissioning platforms and content makers (an issue raised as part of the ACCC’s Digital Platforms Inquiry)
The loophole that allows New Zealand content to count as Australian
The need for a new pathway for children’s content
The need for minimum requirements and adequate funding for the national broadcasters
The need to harmonise regulation across legacy and new platforms
The need to reconsider and reform co-production arrangements and provide enhanced opportunities for export.

SPA will seek opportunities to highlight and mitigate the negative effects of these measures in the weeks and months ahead and look for opportunities to continue to prosecute the case for a sustainable forward thinking framework for our industry.

* Seven spokesperson responds, “In order for H&A to cover our whole content obligations, we’d have to meet some rather preposterous standards: either make 165 hours a year of H&A. We make 115 hours a year at the moment and that is already incredibly challenging. Or increase its budget to over $50 million a year.”