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Estimates & Committees
Scott Ludlam 30 May 2011

Environment and Communications Committee Wednesday 25 May 2011

Senator LUDLAM: Mr Brown, I owe you a significant apology for not being able to attend the last time you sat in front of us. I am very glad to be here this evening. I would like to start with something that I am not sure whether you mentioned in your initial remarks or not, which is your online service. There is a huge amount of material online there. It is very well presented. I think it is a great service that has changed quite significantly in the last little while. What can you tell us about the traffic that you get and what it tells you about your user base?
Mr Brown: I will probably take on notice the specifics in terms of unique browsers, although we have been consistently averaging a million in recent months, and that is a marked increase. We are now targeting two million. But I think in general what it demonstrates is the beginning of a change in audience behaviour towards an on-demand model. I think most of us in the industry have been aware that that is coming. Virtually all of our programming is now available on catch-up. That is getting significant use. We would expect that to expand.

Senator LUDLAM: But the minister sitting next to you is busy rolling out a network that guarantees that is going to expand. What are your plans as the NBN becomes ubiquitous? I guess that, within your three- or four-year budget forecasts, you are going to get a lot of traffic and people are going to be demanding a lot of data. What are your plans for the online presentation of your programming?

Mr Brown: I think you can expect that it will form one of the considerations in our triennial funding proposals, which come forward later this year. It has been a theme, to one degree or another, I think in the last three triennium bids. So we would be seeking to ensure that our online service is properly funded. I think you know it is an area that has never received any funding. It is one of the areas that exist as a consequence of the commercial activities that SBS has undertaken.

Senator LUDLAM: Do not get me started on those so early in the evening. You said that you are noticing the existence of the commercial multichannels is already a threat. I would like to draw you out a little more on why that is the case. How are you going to compete? If you are having difficulty competing with the commercial multichannels already with the expansion in digital broadcasting, how are you planning on competing or even existing at all when you are competing with the rest of the planet for people's attention span?

Mr Brown: Maybe I will deal with the first part.

Senator LUDLAM: Deal with the easy one first.

Mr Brown: The challenge that we face, I think, is that it has happened quite quickly. The emergence of the six multichannels now from the commercial networks has, of course, multiplied by 200 per cent the volume of commercial inventories in the market. So the position of SBS as being potentially an important part of any mix of media buying has been eroded by that. A consequence of this dramatic additional supply of commercial inventory is that prices are heavily discounted. That impacts SBS as well.

Senator LUDLAM: You mean advertising prices? What you can sell advertising time for?

Mr Brown: That is the discounting of those rate card prices. That is an inevitable consequence of additional supply. Furthermore, it is difficult, in answer to you, to know what you do to respond to that challenge, because SBS operates its commercial agenda as a secondary function; its primary function is to deliver the charter. So we cannot pursue a commercial agenda in the same way that commercial broadcasters can. SBS has no intention ofdoing that. It tries to monetise the audience that it attains by virtue of pursuing its charter, so you cannot turn that equation on its head and simply pursue the dollars.

Senator LUDLAM: Have you noticed a hit on your advertising revenues or have you had to change the way that you brand the station or the way that you promote the station to advertisers already as a result of the existence of the new multichannels?

Mr Brown: We have noticed a hit on our revenue. We will be forecasting. We take to the board a budget for next year in a few weeks. That will be forecasting commercial revenue below the levels that we had built into our five-year plan. In terms of how we adjust our performance, yes, we are constantly seeking ways in which we can improve internal processes to make it easier for clients to place ads with us. But, once again, there is a limit to how one can and should respond to that challenge. The fact is that SBS is both a multicultural and multilingual broadcaster. Advertisers do not find multilingual content as attractive as, say, what is on offer in the commercial sector. But that should in no way dissuade us from being committed to running a full range of multilingual services.

Senator LUDLAM: So you are caught in something of a tight spot, then, because your options would appear to be to just face eroding revenues; to increase the amount of airtime that you are offering up to advertisers, which dilutes its value; or to go back to the Commonwealth government in your third triennial funding round seeking a substantial increase. What strategies do you intend to pursue given that you have identified this as a threat?

Mr Brown: The first one you have identified-additional commercial inventory requiring a change in legislation-SBS has not sought. Indeed, my initial view on that would be that it would not be particularly helpful anyway, because, if there is this massive additional supply, simply adding to it is not really going to shift the needle in our favour. But, as I said earlier, the whole funding situation that SBS faces will be a matter for the board and the new managing director to work their way through and use as part of their case to submit to government.

Senator LUDLAM: Would you be able to make an estimate for us-just within an order of magnitude, I guess-of how far your revenues have come off compared with what you what you are estimating?

Mr Brown: I think that, when I last spoke to you, you asked me a question about what would happen if we moved our advertising from within programs to between programs.

Senator LUDLAM: Can I ask you about that again.

Mr Brown: I think I talked to you about expectations of around $60 million, and said that that would shrink to about $20 million-I think that is correct. I would say that now our estimates are that that would be $50 million in the current situation.

Senator LUDLAM: A $50 million shortfall?

Mr Brown: No, a $50 million revenue.

Senator Conroy: $60 million down to $50 million.

Mr Brown: Yes, $60 million down to $60 million. I would also say that the $20 million which I calculated as being possibly obtained between programs would now, in my view, be more like $10 million. I think that, with the supply of all this additional inventory and the opportunities for advertisers elsewhere, I can see no way in which we will be able to secure any meaningful advertising between programs. So that is about a $10 million reduction, roughly, against when we talked last time.

Senator LUDLAM: Since you mention it, I just want to dwell on that very briefly-I think it was last October I asked this. You calculated an estimated $36 million shortfall if you removed the in-program advertising in the current financial year and backed it off into the top of the hour or the half-hour. I am interested to know what kinds of assumptions you used and whether you would care to explain for us what assumptions and what evidence you could provide to support that figure, because it is substantial.

Mr Brown: The new numbers that I have given you are not the result of a specific analysis in this area. As to the assumptions that are made, the first number is a calculation on what our revenue is currently expected to be, and the germane number is what it might be if we had ads between programs. I think that, when I talked to you about $20 million being a possible base, that reflected the fact that when we moved ads to inside programs we were receiving about $26 million or $27 million, and both our view and the view of the external consultants who did some work for us was that that would be an amount of money that would gradually diminish because the advertising industry had no appetite for that particular model.

I am now saying to you, when I adjust that number down to $10 million, that my observation would be that there is even less appetite for that now and that some of the tension that exists for SBS in the market is that it is ahighly commoditised market now, and the idea of having a premium because you are in a good environment or are associated with a distinctive programme is very hard, if not impossible, to secure now. Most of the buying is done on a highly computerised model operated by quite junior people who are making decisions on where to place ads simply on the basis of what the numbers tell them, and our numbers between programs would be appalling.

Senator LUDLAM: I do not want to lag here too long, but are you able to table any kind of methodology or the basis on which those were arrived at? I am not disputing them; I am just wondering if you could provide that for us.

Mr Brown: Certainly.

Senator LUDLAM: What proportion of advertising funding do you receive from the government itself? Does the Commonwealth government or do any state governments run advertising on SBS and provide any fraction of your revenue stream?

Mr Brown: They do place advertising on SBS. I would have to take notice what current commitments there are in that area.

Senator LUDLAM: I would greatly appreciate that. That might be a way for SBS's funding to lift-if the fraction were shifted. I wonder, Minister, if I could ask you if that is something you have contemplated before? I know this is a whole-of-government question and I will get referred off to all sorts of other ministers and so on. But that is one way, without increasing the total spend of the Commonwealth budget, that advertising purchasing could be shifted across to this public broadcaster and perhaps even to community broadcasters. Could I ask if you could take on notice whether that has been contemplated or whether that might be a great idea.

Senator Conroy: I am happy to take that on notice.

Senator BIRMINGHAM: Do the Greens advertise on SBS?

Senator LUDLAM: I think we do. I think we have done. We will look at shifting a greater fraction of our-anyway-can you tell us the-

Senator Conroy: What is to advertising regularly?

Senator LUDLAM: I will move on. Can you tell us where we can find average-

Senator Conroy: That was the largest political donation-individual-in history, wasn't it?

Senator LUDLAM: Chair, can you bring the minister into line?

CHAIR: Senator Ludlam, he has been very sedate. You should just ignore them because it will not get any better.

Senator LUDLAM: It only encourages him. I am interested Mr Brown in where I can find accurate data on your viewing audience, the size of it, how much you know about it and whether it is going up, down or sideways over the last couple of years.

Mr Brown: That data is public. Primarily we deal in 'share'; although we deal in absolute numbers as well. Our share is currently tracking at around 5.7 or 5.8, which is very much in line with our target and our previous performance, when you remove special events. To equalise it, we take out events like the World Cup, which is once every four years, so that we have a more common targeting of audience.

Senator LUDLAM: Can you point me to where I can find an accurate summary of your audience. Is it published in your annual report? Is it that easy?

Mr Brown: Yes. It is in our annual report on an annual basis. Many newspapers carry the same data from OzTAM on a weekly basis.

Senator BIRMINGHAM: In the media section of the newspaper that the minister dare not mention.

Senator LUDLAM: I was not going to go there either. The last thing I want to do is pick you up on one of the things you mentioned in your opening comments, which is whether or not SBS's job is done. In an age when someone speaking English as a second or third language here in Australia can just pipe in satellite television from home, nearly anywhere in the world-

Senator Conroy: Exactly.

Senator LUDLAM: Would you care to give us your thoughts on the role of a local ethnic broadcaster here in Australia?

Mr Brown: I think that was the point I was trying to make. In a world where access to home country services is greatly enhanced and freely available, the position that SBS rightly adopts is that it should reflect the Australian experience. Our charter requires us to inform, educate and entertain and in so doing reflect Australia's multicultural society. It does it in two ways. It talks to all Australians about multicultural Australia-and most of those programs that I mentioned to you were programs targeted at all Australians but spoke about multicultural experience. The second tranche of work is to provide services specifically for ethnic and language communities, and that part of the charter which requires us to contribute to the communication needs of ethnic and Indigenous audiences is served by that. I do not believe that we are discharging our responsibilities by simply relaying content from overseas. In fact, I think the reverse is the case: the emergence of what you might term 'digital ghettos', where communities, although living in Australia, are trapped, possibly by choice, into a diet of media content that is sourced entirely from their home country. That is not, in my view, contributing to social inclusion, cohesion and harmony. I know that in particular communities there are significant challenges in persuading some audiences to forsake that service in favour of accessing Australia's mainstream media. We are a means of doing that, a useful stepping stone into that experience. When I say this I think I also speak on behalf of many community leaders who hold similar concerns about this. You will recall that we did some research some time ago on this issue, on how at times of stress communities reverted to home country news. The Hindi-speaking population, during the time of attacks on students, got most of their information about what the Australian federal and state governments and police authorities were doing about this through popular media out of Delhi who not only failed to accurately report it but probably helped inflame the situation.

Senator LUDLAM: I think that is an extremely powerful example. I wish you well in your application for funding in the next triennium to get you out of the jam that all this digital television appears to have got you into.

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