Free TV on SBS ads: “We're being asked to compete with our hands tied.”

By Rosie Baker and Nicola Riches | 26 February 2015

Trade body Free TV Australia has once again slammed SBS for issuing revenue projections which lack “credibility”, on the back of government’s renewed legislation push which would allow the broadcaster to increase its prime time ad limits.

SBS earlier this week gave evidence to a senate committee commenting on the calculations made by Free TV.

Free TV is lobbying hard against the proposed changes – which could arrive as early as June this year if the legislation passes the senate.

The Abbott government is on the verge of entering into another round of  difficult negotiations to enable SBS double the number of ad minutes on the network from five per hour to 10 per hour in some instances - closer to the 13 minutes allowed on its commercial rivals.

The proposed legislation is expected to go in front of the senate in the next three to four weeks, at which point Free TV will likely make another submission to try to block it. It will then go to another senate committee for review and, if passed, could mean that by June SBS's advertising time is doubled in some timeslots with the network free to sell 10 minutes of advertising time per hour instead of five minutes.

Currently the 13 minute cap that free TV networks are bound by includes in-house promos for programs and branding idents. However, on SBS this is not the case. SBS can run promos and idents above and beyond its existing five minute advertising cap. If it were to add another five minutes of advertising time, plus the channel promos it runs “it starts to look a lot like a commercial network” says Free TV CEO Julie Flynn.

According to Free TV Australia SBS's figures “are not credible” adding that “independent analysis demonstrates that SBS will have the potential to earn an additional $148 million over four years.”

SBS claims that the figure is significantly lower and will only equate to $28.5 million over four years. In a statement issued today, SBS reveals it would not necessarily add the five additional minutes allowance to prime time programming – so the calculations by Free TV are inaccurate.

The analysis conducted for Free TV by Anomaly, a specialist market research and intelligence company, is according to the trade body “robust” and “has not been disputed by SBS,” although the broadcaster stands by its own projections.

Free TV remains firmly opposed to the changes in legislation which would allow the publicly-funded broadcaster to compete directly with commercial free-to-air broadcasters for a larger slice of what it calls “a finite advertising pie”.

It states that such changes will result in “forcing private companies to subsidise SBS funding”.

The majority, currently around 70% or 80%, of TV networks revenue is thought to be earned in prime time programming. The suggestion is that SBS is downplaying the potential earnings it could make through additional advertising allowances.

“This isn't about SBS. It's about the government decision to prop up a government-funded network. If SBS can only make an additional $28.5m over four years – that's just $7 million a year – if you were doing your job efficiently, you could get it out of the existing five minutes – it's just not believable,” said Flynn.

“There is a finite advertising pie and it's already under pressure – it's not reasonable that a government funded network should be able to compete with privately-owned commercial networks.” 

SBS, however, says bolting those minutes into prime time would not be in its interest.

An SBS spokesperson told AdNews: “Free TV assumes that SBS would put an incremental five minutes an hour in prime time and SBS does not believe that it is practical or desirable for the network to be operating at those maximum levels…and considers that such an increase would need to be offset by a decrease in minutes in other times of the day.”

“It is important to note that SBS’s total TV ad revenue currently makes up under 2% of the total market annually,” they added.

The TV landscape is changing fast and commercial TV networks are under increasing pressure from digital and streaming. As a result, there were renewed calls earlier this week to reduce the licence fee.

The three commercial TV networks have additional obligations to develop Australian content that SBS isn’t beholden to – neither do challengers such as Telstra, Foxel and the likes of Netflix - and those costs are increasing. Up to 79% of all content aired is now Australian-produced, including news and current affairs, sport and drama.

Down the line, increased advertising revenue could also give SBS the potential to compete with the free-to-air networks on sports rights and other premium content.

A statement given to AdNews by SBS this morning said: “In an environment where public broadcasting is under pressure and SBS is operating in a highly competitive media market, the ability to generate more of our own revenue would help us to secure the future sustainability of the organisation, without compromising our content.

“The Charter is at the heart of our organisation and should this legislation pass Parliament, SBS would only look at averaging our minutes in programs and timeslots where the advertising return could genuinely aid our ability to invest in more Australian content.”

Labor and the Greens are opposed to the changes, meaning that the government will have to convince six of the eight Senate crossbenchers to make the proposed changes. It is believed that extending the ad limit will help soften the blow of $54 million in SBS budget cuts.

Speaking with AdNews when the proposal was announced late last year, media buyers displayed caution about the broadcaster increasing the number of ads available, saying SBS's appeal was in its premium offering.

“We'd certainly be a bit concerned if it immediately doubled its ad availability, as that would chase away viewers,” Carat chief investment officer Paul Brooks said, “but we're sure they're going to think very hard about that balance.”

“It's all part of the changing media environment and we're just looking for a code and regulatory environment that allows us to compete against them. At the moment we're being asked to compete with our hands tied behind out backs and chains around our ankles,” concluded Flynn.

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