28 May ABC exists for market failure, not to be media conglomerate
James Paterson — Australian Financial Review — 28 May, 2018
The Treasury’s competitive neutrality review and a three-year freeze to the ABC’s funding presents an opportunity for the national broadcaster to cease its endless expansion and refocus on its core mission of providing services that can’t easily be provided by the private and community sectors.
Unfortunately, rather than making the tough decisions necessary, the ABC has instead chosen to respond with a clumsy attempt at political blackmail.
This shows why the ABC charter must be amended by parliament to ensure it delivers services that can’t be met by non-government providers, rather than the continued creation of a giant media conglomerate that is already making our media landscape less diverse.
As announced in the budget, the government will pause indexation of ABC funding until 2021-22, effectively freezing the national broadcaster’s operating budget at 2018-19 levels. This will provide a modest budget saving of $83.7 million – a mere 2.6 per cent of the $3.16 billion the ABC is set to receive over the same period.
In response, ABC managing director Michelle Guthrie vowed to “oppose the decision and seek every opportunity to reverse the cuts” and said it would make it “very difficult for the ABC to meet its charter requirements and audience expectations”.
Ms Guthrie even went as far as issuing an implicit threat about the political influence of the ABC. As she told staff: “In the coming year, Australians will head to the polls for the next election. More than 80 per cent of Australians value the ABC, a point that shouldn’t be lost on anyone seeking government.”
Guthrie’s response highlights exactly what’s wrong with the ABC’s current approach.
Rather than focusing on the gaps in our media landscape that the ABC is best able to fill – areas such as rural and regional broadcasting, state-based television news and current affairs, in-depth long-form journalism, and quality children’s television – the ABC has embarked on an empire building project that is making it harder for the non-government sector to compete.
During the tenure of Mark Scott – Ms Guthrie’s immediate predecessor – the ABC launched three additional digital TV channels – including a dedicated 24-hour news channel that competes with Sky News. It created a free on-demand online broadcasting service that competes with both free-to-air television and on-demand services such as Netflix. And it significantly expanded its news and current affairs – and even opinion – coverage into the online sphere, bringing it into direct competition with the newspaper industry for the first time.
The February opinion piece displaying ABC’s chief economics correspondent Emma Alberici’s economic illiteracy over company tax cuts, was enabled precisely by the ABC straying into these non-core areas. It was trying to compete with private news providers, but without the requisite skills to do so.
Non-government companies getting crowded out
This expansion has come at a time when for-profit media companies are struggling to adapt to a changing media landscape, with the loss of advertising revenue from the emergence of the internet undermining a once stable business model. Every commercial media outlet in the country has had to adapt, with vastly greater reductions in revenue than 2.6 per cent.
Unlike the ABC, these for-profit media companies rely on their readership metrics to drive advertising revenue and subscriptions. This is made more difficult when the national broadcaster offers the same service free of charge. And it’s even harder when the ABC adopts the novel approach of using taxpayers’ money to drive traffic towards its sites over those of its commercial competitors – as Senate estimates revealed last week, the ABC spent $1.4 million on Facebook advertising and $440,000 on Google advertising last financial year.
Actions like these show why an inquiry into the competitive neutrality of national broadcasters is necessary.
Competitive neutrality is the principle that government entities shouldn’t gain an unfair advantage as a result of their government ownership. This is a requirement for all government entities, and it’s specifically enshrined in the ABC’s own charter: “The Corporation shall take account of: (i) the broadcasting services provided by the commercial and community sectors of the Australian broadcasting system.”
Unfortunately, the ABC seems to have taken this to mean it should directly copy services that the community and private sectors already provide.
Take the case of PolitiFact, for example. PolitiFact was Australia’s first online fact checking website – a licensee of the Pulitzer-prize winning US site of the same name. Despite a strong start, this innovative company was abruptly forced to close after less than a year in existence, due to the ABC deciding to copy its service with the launch of ABC Fact Check.
This crowding out of non-government media companies is making our media landscape less diverse.
There are a number of important services that the ABC is uniquely capable of providing. But these services will be neglected if the ABC continues to transform itself into a media conglomerate attempting to compete with everyone from Fairfax to Netflix.
Left unchecked, the ABC will continue to make it harder for private sector media companies to compete, ultimately resulting in a less diverse media landscape. Communications Minister Mitch Fifield’s ABC reform agenda is already more comprehensive than we have seen it decades, but it could go even further. The government should amend the charter to explicitly restrict the ABC’s activity to services the non-government media sector is genuinely unable to provide.
This article originally appeared in the Australian Financial Review.