Budget 2016: Licence fees cut by 25 per cent to counter Netflix effect

Commercial TV networks and radio broadcasters have had their prayers partially answered by the Turnbull government with a 25 per cut to licence fees.

Generic photo of a family watching television / tv. Picture: iStock

Commercial TV networks and radio broadcasters have had their prayers partially answered by the Turnbull government with a 25 per cut to licence fees to counter digital disruption.

The first reduction will apply to the 2015-16 financial year in an early reprieve from a low-earnings environment. The government has raised the possibility of another cut later this year.

Currently, fees are levied as a sliding percentage of revenue — at a top rate of 4.5 per cent for commercial television licensees who earn $100 million or more, and 3.25 per cent for commercial radio licensees who earn $11.5 million or more.

A cut to licence fees will lift the collective earnings of the three main broadcasters by an estimated $150 million, and is likely to see Seven West Media, Nine Entertainment Company and Ten Network re-rated by stock market investors.

In the last financial year, Seven’s revenues amounted to $1.7 billion, with Nine and Ten generating $1.2 billion and $654 million respectively.

A statement by Communications Minister Mitch Fifield said fees will be reduced to enable a “more competitive environment” as traditional media providers come under siege from new forms of viewing and a generation of video streaming services.

“The Government’s decision to reduce the fees recognises that the Australian media market has changed significantly since broadcasting licence fees were first introduced, with the move to online and on-demand content fragmenting the market for media services and increasing competition for audiences and advertising dollars,” the statement said.

“In turn, this is placing increasing financial pressure on Australia’s commercial broadcasters whose main competitors, including online operators such as Netflix and Apple, pay no licence fees.”

The government will consider further reductions in broadcasting licence fees later in 2016 as part of a broader package of reforms that will include consideration of the pricing of broadcasting spectrum.

“This will build on the Government’s first tranche of media reforms which will repeal redundant media control rules and enhance local content obligations on regional commercial television broadcasters,” the statement added.

“As a whole, these reforms will ensure our media laws keep pace with changes in technology and media consumption habits, and give our traditional media companies the flexibility to compete and adapt in the changing media landscape.”

The move brings the fees paid by Australian commercial networks more in line with overseas markets where free-to-air broadcasters pay a tiny percentage of gross revenues although they still remain the highest in the world.