Project Timeline 2005–2010

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The list of those attending is at Appendix One.

The first draft scenario will follow in a few weeks.

This and the first Report now form the basis of the ARC application which leads to the main research phase. Taking these reports as a solid base, the main phase will involve researchers and participants in:

Andy Lloyd James
8th September 2005

Part 1: Summary of Forum

Of the thirteen issues contained in the Preliminary Report, ten were discussed on considerable detail at the Forum:

From those discussions and from the focussed second session 16 key issues have been extracted which will be critical influences on television between now and 2015. They were:

Those issues have been incorporated, along with my own interpretations into the attached MindMap 1 which includes the separate heading of Debate and Understanding.

The following headings descriptions are intend only as a brief encapsulation of the discussions surrounding each:

Consumer

Consumer incorporates three separate elements: the consumer as a member of society, the consumer as content and the consumer as creator of content. A clear need was identified to discover as much as possible about the changing nature of Australia’s demographics and what those changes imply for individual ways of life.

The second and third categories have been separated out to include research into the ways in which consumers do and will interact with audio-visual technology; into the formative nature of new technologies on younger generations (a lifelong impact) and into the central question of active/passive participation in audio-visual content.

Finally, this heading also explores the changing nature of broadcaster/consumer relationships as a response to the direct relationships which digitised distribution imply.

Consumers as Content

Consumers as Content signals the growth of interactivity and the role of consumers in contributing to programs (eg by audio/visual feedback, voting, forums) whilst not being the authors of the content. Both this and Consumers as Creators include the notion of “Peer Communities”.

Consumers as Creators

Consumers as Creators opens the whole area of new forms of production from blogging to unmediated long-form digital production and distribution. Inter alia this is a natural extension of the notion of formative experience contained in the first Consumer heading. It will also include the likelihood of commoditisation of consumer creation.

Connectivity and Capacity

Connectivity and Capacity includes two central questions: capacity to provide sufficient bandwidth/compression for an on-demand world in an equitable manner and
the ability to provide microbilling to service the exploitation of that world. It also includes:

Two further issues have been added here: the implications of transformative effects of new technology being as important as the development of other new technologies; and the potential for artificial intelligence to devise new uses for the technological world from which it itself is spawned.

Advertising

Advertising goes to the central issue for Television of the sustainability of the current FTA advertising model. Will the premium for mass remain or will demographic focus dominate, how will opt-in/opt-out play and push-v-pull? What role will the EPG and Search engines play in this? Where will the revenues flow in a fragmented market? How can these new flows be incorporated in new business models for content producers?

Government

Government covers the development of policy and regulation in a densely complex environment, exploring the central questions of desired policy outcomes and the underlying purpose of any proposed regulation. Both of these are likely to undergo great change as global media leaps national boundaries. It also includes the issue of debate and understanding of the policy implications for all of those engaged in its development. Who informs those who make them and how can an increasingly media-savvy public express its views? Training and education is another core issue included under Government: without serious focus on both for existing and new media, Australia has little chance of playing a meaningful role internationally.

Ownership

This is both a global and a domestic issue which focuses on the concentration of media ownership and the preservation of diversity. The current Australian focus of this issue may well have been decided before the finalisation of Outside the Box and the next focus of course will be on implementation. Who will be the new players (if any) and what are the ramifications for competition, diversity, Australian content, and the development of new business plans. It also presages potential issues of market failure. This section includes, of course, Ownership of Telcos, ISPs and so on.

Global Network / Australian Content

Global Network/Australian Content will explore the tensions and opportunities that surround a national industry in a global market. There are clear threats culturally and economically but there are also significant opportunities both geographically and creatively. This heading will also explore the ramifications of new policy and regulation and the reality that bad or ineffective domestic policy will lead consumers to seek global solutions.

The Future of Australian Content

The Future of Australian Content not surprisingly drew the most attention at the forum. The key aspects for exploration include the necessity for:

This heading also includes the role of Public Service Broadcasting and the potential for regional production to develop more fully.

New Business Models

New Business Models has been kept as a separate heading because it was clearly identified as a critical issue. Informed by the content of almost every other heading, this will include investment, development, production, distribution, export and structural issues.

Intellectual Property

Intellectual Property remains a critical issue in terms of identification, and the effectiveness of DRM and enforcement regimes. Core issues include the growing complexity in cross-territory licensing, increasing transaction costs in rights management and expansion of copyright coverage and controls affecting third party access to content development components There is a also a significant tension between those who see IP/DRM as a means restriction and those who see it as a means to accessibility.

Debate and Understanding

Debate and Understanding is also a critical issue, identified in a number of ways. There are significant issues of public interest bound up in the whole potential for Television 2015, including education, career development, personal development, economy, privacy, and so on. There is however no independently inspired public debate on any of these issues and little instinct for the current key power groups to start one. There is significant potential for UTS and ATN to play a significant role here.

Wild Cards

Wild Cards was not really touched on at the forum but remains key to the development of any scenarios.

Part 2: Drawing it Together

The purpose of this second section is to sort the identified issues into groups that will allow for writing stories: in this case a single trial scenario. For the main stage there will be four. The proposed groupings are one approach only and for the Seeding Phase have been done without consultation with the participants.

In the main phase, participants and researchers will join forces to construct the headings and the scenarios which flow from them. These scenarios need to be coherent and logically-derived pictures of the world as it may be by 2015 (or ten years from the start of the main phase).

Their strength lies in the fact that they are not based on prediction but logical pathways. Their key purpose will be to eliminate surprise to the greatest degree possible and to provide a powerful strategic and research tool for practitioners and academics.

In this section there are a number of notes and references included under each heading. They are not definitive, they are simply first pointers to some of the areas which will need to be considered in thinking about the future as a reality.

So this section is a guide only, a reference to the main project.

The proposed headings and their issues groups are:

A. The World Around Us

Ownership / Global Network / Trade / Economy / Connectivity and Capacity.
Given that globalisation has appeared as a force in so many issues within the project, it’s logical to start with a picture of the world and then, step by step, home in on domestic concerns. Apart from other considerations it’s a salient reminder of the consequences of Australia sitting well back amongst those nations which are influencing media and communications changes.

The Digital Content industry is emerging as an area of significant global opportunity, valued at over $172 billion in 2001 and forecast to grow to more than $434 billion by 2006 – an average annual growth rate of almost 29%.

— Strategy for a Digital Content Industry in Ireland: Forfas

But the issues for Australia are sobering:

In its most recent report published in January 2004, the UK’s Broadband
Stakeholder Group rated Australia 10th of the 11 countries it tracks against six criteria for broadband exploitation.

If, compared with our international peers, Australia has lower productivity, a massive imbalance of intellectual property trade with the rest of the world and loss of digital content creators i.e. talent emigration and loss of remote higher education to foreign institutions; then there will be very real, negative consequences for the economy.

Furthermore, given Australia’s unique geographic challenges, population dispersion and structure of the economy, it is arguable that we are even more vulnerable than our peers to the consequences of any longterm under-performance associated with broadband.

– KPMG Leaders or Laggards 2004

Communications

One of the underpinnings for scenario development in Outside the Box will be an understanding of development in the Communications Industry.

During the Seeding Phase, communications technology was identified as a key issue but, for reasons of time and resources, exploration of its implications has been reserved for the main project.

Beneficially to the project, the ACA (before it amalgamated with the ABA into ACMA) carried out a full scenario analysis of Australia’s communications future. Their 2004 Report includes the following useful observation:

In overall terms, the drivers of change for the communications sector have been identified as digitalisation, pervasive computing, seamless connectivity and globalisation.

The implications of moving away from a universal, voice-centric approach to communications access; the decoupling of content from carriage; and networks that are interconnected, decentralised, that distribute network intelligence and are spectrum efficient—are all examined in this report.

– ACA (2004). Vision 20.20: Future Scenarios for the Communications Industry.

These two paragraphs encapsulate concisely the communications basis on which audio-visual Media will move forwards over the next ten years. They immediately raise the question of what is meant by globalisation, a word which has appeared in discussion of many of the issues in this project.

There are different views as to what globalisation actually means. So, in the interests of understanding the potential ramifications of globalisation over the next ten years, the following comments by Professor Anthony Giddens, Director of the London School of Economics offer a description that is directly relevant to our research:

The second phase of the Great Globalisation Debate is no longer about whether or not globalisation exists, it is a debate about the consequences of globalisation. It is a very immediate and practical, and as we’ve seen, to some extent, violent debate, carried out in the political arena, not just in the ivory tower of the academy.

However, I would say globalisation is not solely and primarily economic, that is not the way to understand the phenomenon. Globalisation is not a single phenomenon. Indeed it does not have a single course and it does not have a single consequence. But if you wanted to pick a driving force more important than the others, I would say the prime driving force of globalisation is the communications revolution, or put more precisely, that kind of marriage between communications and computerisation which began some 30 or so years ago……..

Once you have instantaneous electronic communication, so many things in the world change. I don’t think myself it’s too grandiose to say that without the communications revolution, without the expansion of media and communications, no Velvet Revolution in Czechoslovakia, no peaceful ending of apartheid in South Africa, no Tienanmen Square in China, because you had, as it were, a kind of global dialogue about democratisation going on there. And when people today, knowing about the media as so many people in the West at the moment do, should remember that the media have a double impact on democracy. The media may in some respects indeed threaten Western democracy, but the expansion of media and communications is deeply bound up with the fact that there is something like three times as many democratic countries in the world today, even by narrow criteria, than there were 30 or so years ago

– ABC Media Report 19.9.2002.

Whether or not Professor Giddens is absolutely right about democracies, his comments underpin the real importance of researching the influences which will shape Television by 2015 and the need for real public and professional understanding of their ramifications.

Here, questions of economics, culture and society all merge. He goes on to say:

In sum, if you want to define what globalisation is, there is a simple definition and there is a more demanding sociological definition. In its simplest definition, globalisation just means increasing inter-dependence, we just are more inter-dependent with others across the world than any previous generation has been, and we had better make the most of this, because this will not go away, short of a cataclysm, this will not go away.

More profoundly however, I would suggest as a sociologist you should even think of dropping the term ‘globalisation’ because it has become so vague and general. What we’re talking about sociologically, is a transformation of time and space, we’re talking about a restructuring of all our basic institutions. Globalisation is like a code-word standing for the reconstruction of our social institutions, going all the way through from the family, gender, sexuality (because after all the changing position of women is surely a global phenomenon as much as any other one) through the economy, the restructuring of business organisations, a restructuring of the nation and government, through the restructuring of international organisations. There’s something like a seismic institutional shift going on here, which we’re all struggling quite rightly to come to terms with.

This project, even in its Seeding Phase, has already hinted at some of these impacts in looking at consumer demographics/needs and wants, at debate and understanding and at government and industry structures. It will clearly be a rich vein for exploration because audio-visual media and communications technology not only manifest the implications of globalisation, they are driving it.

This description of globalism is also a useful reminder that digitalisation itself is far greater than simply a change in format or production method. It calls for a new way of conceiving audio-visual activities.

As noted above, the drivers for this change include seamless connectivity and with that goes capacity.

Capacity

Capacity is growing at a rapid rate at the same time as digitalisation and “seamless connectivity”. Despite a very low start-up (Australia is currently 21st in the list of countries with Broadband takeup) estimates suggest that more than 50% of Australian households will be broadband-connected by 2009 and the much greater bandwidth offered will in principle enable the effective commercial realisation of IPTV by the same date.

Of all of the technological influences on Television by 2015, IPTV and the advent of mobile technology are probably the most important.

Industry experts predict that the global IP TV market will grow from over 500,000 today to nearly 20 million by 2010e. This is impressive growth. However commercial mass-market deployment of IP TV will vary by region despite the significant improvements in the technology and economics3. For example in some markets IPTV has already been rolled out on a commercial basis (Hong Kong, Italy, Sweden and UK).

– Smith Barney

IPTV is much more than just another way of transmitting television signals: it opens consumers to the full power of interactivity which includes expanding content into non-television areas. The illustration below  gives an idea of how just the television aspects if this can work:

– Utheza, H. (2001). Foundations of an iTV business, Liberate Technologies.

Even with multichannelling, free to air Television is a finite resource for generating revenue and this kind of model, even though it is not new, does indicate how production/distribution entities can deploy the potential of IPTV to build new business plans. The illustration also serves to underpin the impact of the separation of Content from Time and Platform.

This is all also a reminder of the degree to which we have come to rely on the internet which itself will face capacity and communications problems as use grows.

Mobile TV, DVBH, will have a significant impact on Television as well (and very likely a positive one), if only because mobile voice has already plateau-ed in penetration at around 90% in this country which is virtually everyone over the age of 12. Voice is the killer application for mobile but growth will have to come from other kinds of content also playing their own roles in the illustration above. The value of the mobile content by 2009, half way through the OTB cycle, is estimated here at $1 billion.

The illustration also confirms the reality that OTB research must explore the transformative effects of consumers on technologies that already exist (such as mobile, IPTV etc) and not over-concentrate on the emergence of new technologies and Wild Cards. And research also needs to watch the development of Artificial Intelligence which itself may make significant communications and media innovations:

One lesson …… is that at least many parts of the computing and networking landscape in 2015 will seem familiar, consisting of enhanced versions of current utilities or ideas. But another lesson of the past couple decades — the surprising efficacy of brute force computing (Arms, 2000)—suggests there will also be some unexpectedly powerful applications, beyond easy anticipation.

“Moore’s Law” is the phenomenological observation that computer circuit density, hence computing power, doubles roughly every 1.5 years. If that trend continues, it will mean an increase in computing speed by a factor of 400 times in the next 13 years……

Simple algorithms plus immense computing power applied to large datasets can outperform human intelligence on many useful tasks, and this substitution for human intelligence can be achieved without having to realize the original objectives of the Artificial Intelligence program.

Deep Blue’s programmers, for example, did not have to understand or emulate Kasparov’s thought processor analytic abilities to win their chess competition.

– Ginsparg Depts of Physics and Computing & Information Science, Cornell University.

The challenge of the multiplicity of technologies which face us is the challenge of the forest and the trees. Commentators and researchers often become fixated on individual technologies and their potential killer applications. But connectivity is always the key.

Ownership

Never have so many been held incommunicado by so few.

– Eduardo Galeano

As far as audio-visual media are concerned, over the past decades we have watched a gradual concentration of power in the hands of a few very significant organisations. The following graph from The New Media Majority by Ben Bagdikian 2004, though specific to the USA, is a salutary reminder of the progress of this concentration.

From 50 to five in 21 years. The five Corporations are Time Warner, Disney, News Corporation, Bertelsmann of Germany, and Viacom (formerly CBS).

The outcomes of mooted changes to Media Ownership legislation in this country may see a greater concentration or a greater diversity but one thing is certain: the transformative effects of connectivity will challenge the grasp of those corporations and of our local variants in the key forms of PBL, News Ltd and others. Some of the ramifications of declining diversity are detailed in sections 3 and 4 below.

These transformative effects represent a valuable opportunity for nations, corporations, media professionals and individuals to rebalance their information and entertainment outlets and sources.

These transformative effects also offer potential for Australian content Producers to engage in new markets, particularly in Asia, in both cooperative and export ventures. (See below)

Ownership issues are, of course, not limited to Media but also to the Telcos, ISPs, Search Engines and new aggregators which will drive the media’s future as they open new paradigms. The old issues of content and carriage become more pressing in the digital age and one of the keys to future diversity will be the content roles taken up by ISPs, Telcos and Search Engines…and their capacity not only to control gateways but as content owners to have the capacity to limit competition in the marketplace. This comes within the purview of the ACCC:

… it is our job to ensure that existing players not be allowed to use their market power to close down new forms of competition, and that, as far as possible, it be left to consumers to decide what form this revolution takes and what services and content they wish to access.

– ACCC 2005.

The ACCC is not, of course the sole regulator and one of the conundrums facing Government will be to devise a clear policy and regulatory pathway for Communications and Media participants so that they are not faced with conflicting or mutually confusing requirements by different agencies. Government is as capable of shutting down competition as are the players themselves.

Trade and Economy

Australian audiovisual production is supported by cultural policies that stress the representation and preservation of Australian culture, character and identity. Yet the production industry is integrated into a commercially weighted broadcasting and media sector that is increasingly networked into the global economy.

– S.Maher.

There is a massive imbalance in Australia’s trade in television content which, though by no means exclusive to this country, has a particular impact here given that we start from a very low level of only 55% Australian Television content in the first place. The following figures are reported by the AFC as part of their backgrounding of issues for the US-Australia FTA.

Australian television exports hit a 10-year low in 2001/02 [$80m] while imports continued to rise, creating a deficit of $647 million, the highest since the survey began in 1987/88.

Over the past five years, US television programs have averaged 69 per cent of Australia’s total TV imports; UK programs have averaged 16 per cent.

As noted above the problem is not unique to Australia. In 2002 UK TV exports rose by 2% to a new high, but exports jumped by 23% to a record deficit of over half a billion pounds sterling. That being said, UK exports are worth some 650 Million pounds sterling as opposed to Australia’s $A80 million.

The size of that UK export figure is in part the result of major Government interventions to expand the world market for UK audio-visual content. Again, as with the EU interventions, OTB research should explore similar potentials in the Asia Pacific region specifically.

PWC’s Entertainment and Media Outlook 2005-2009 forecasts an increase over the next five years in the worldwide Entertainment and Media Industries at a compound rate of 7.3% per annum and in the Asia Pacific region growth at a rate of 11.6 per cent annually, with China growing at some 25% per annum. One of the keys to Australian capacity to engage with these markets will be the presence of development funds to conceive and implement audio-visual content appropriate to future markets.

There are many issues wrapped up in these figures but amongst the most important for 2015 are the ways in which regulation and new business opportunities can assist in developing completely new business models for Australian content Producers. OTB research can usefully explore the potentials for redefining production and distribution and redefining ways of expressing content value.

One of the most consistent concerns surrounding the current content regulation for FreeTV is that production costs for domestic production are massively higher than acquisition costs of local rights for overseas content, even though the original cost of those overseas productions is probably far higher than here. Over the next ten years we are very likely to see new ways of valuing these kinds of formulae, driven in part by the reality that the major broadcasters will not have the same tight grip on distribution that they now have.

The looming paradox of policy is that the guarantee of Australian content regulation as a cornerstone of cultural policy- the protection of incumbent broadcasters from new sources of competition – may lead to the stagnation of the sector, whereas dynamism in the Australian audiovisual industry may arise out of policies that risk the viability of the sector, by opening it up further to the forces of globalisation and competition.

– Stuart Cunningham.

B. Who We Are

Consumer/Debate and understanding

It was Peter Costello who said Demography is Destiny and the demographic reality for Australia is as follows:

Australia’s population is ageing. One of the major causes of this is that people born in the baby boom (1947-61) will move into the older age groups (55 years and over). Due to the relatively low fertility of the 1970s, 80s and 90s there are relatively fewer people taking their place in younger age groups. In 1998, 21% of the population were aged 55 or over; by 2016, this is projected to increase to 29%. Increasing life expectancy will also contribute slightly to the ageing of the population. 

There are similar numbers of people entering the labor force compared to the recent past, and there are no demographic forces likely to change this in the next 2 decades. However, with the ageing of the ‘baby boomers’, there is likely to be significant growth in the number of people leaving the labor force.

–Demographic projections ABS.

The ABS goes on to say:

The number of people living alone is projected to increase from 1.8 million in 2001 to between 2.8 million and 3.7 million in 2026 – an increase of between 57% and 105%.

Over the same period the proportion of Australians living in a couple or a family with children is projected to decrease from 52% to between 46% and 35%.

The key issue for OTB is what these will mean to the way people live and use audio-visual media half way through this projection cycle.

To these bald figures should also be added the fact that a whole generation is growing up to whom audio-visual multi-tasking is already a commonplace. One of the impacts has been the oft-noted fall in the number of young men watching free-to-air television. Another has been the almost total lack of newspaper readership amongst young people of both genders.

Free to Air Television has to date enjoyed vast mass audiences because it was the best and most accessible audio-visual entertainment and information source available, and you could watch it at home.

Unwittingly we all put up with the one-way relationship because that was what we knew. There is no reason to expect younger generations necessarily to act in the same way because the same basis is not (or will shortly not be) true. It will be critical, then, for the full OTB research project to explore the ramifications of our whole demographic change but in particular, the change amongst young people. Again, they not only manifest the change, they are driving it. A simple example is their enormous enthusiasm for voting people off air! And consider, for example, the world of human relationships where audience as both creators and content clearly signal the way in which transformative effects can produce remarkable results.

It is not hard to understand the development of a site like Friendster as a reasonably secure meeting place:

With more than 16 million members, Friendster is the best way to stay in touch with your friends and it’s the fastest way to discover the people and things that matter to you most.

Nor indeed is the whole idea of walled gardens hard to grasp. But without a real understanding of what makes young people tick, it would be much harder to foresee the development of a site like South Korea’s Cyworld, a site where subscribers furnish and equip their own virtual living room and fill it with virtual projections of themselves and others (avatars) in order to entice other subscribers to come as visitors:

“sers get their own page, a virtual living room called a minihompy (that is: mini home page) where they can create diaries, publish images, network, host legal background music and more.

Members personalize their minihompy with virtual objects they purchase from Cyworld, and enhance it with up to 10 tracks of background music they can buy and play for visitors. Universal Music International sells 100,000 tracks a day though Cyworld.

Owned by South Korea’s SK Communications, Cyworld is a cyberphenomenon. According to the service, Cyworld jumped from 10 million to 13 million users in 2004. A quarter of the country’s 48.2 million people have signed up, including 90 percent of the 24- to 29-year-old age group.

This not only raises also the broader notion of both Consumers as content and consumers as creators but shows how quickly and comprehensively consumers as either or both can start completely new kinds of production. It is hard not to assume that such potentials will lead to some real influences on Television by 2015 and (considering Big Brother and Cyworld) may well provide broadcasters with new means of maintaining mass audience. As one participant put it:

New media if taken as the fusion of the web with broadcast, creates possibilities for interaction, audience engagement and new narrative frameworks that will impact upon how material is captured, played back, shared, marketed and consumed. The importance of this cannot and should not be underestimated. When this gaming generation grows and runs the workforce the changes in social values and approaches to even basic decision making will be inevitably coloured by the interactive gaming experience and the mental constructs that it creates and supports.

One of the most interesting population indicators is that which talks about the increase in people living on their own. How will they make their living environments come alive, what will form the bases of socialising, what will it mean to their neighbourhoods? Research should look here at the development of informal peer communities (NOT walled gardens) and the ways in which global ownerships have led to n increase in local identity and content (see EU research). This increase in local response and identity may well become reflected in the ways in which Australians develop their neighbourhoods, both virtual and real.

Other issues that flow under this heading “Who We Are”” include privacy, security and protection from being stalked by unwanted media. This is likely to form a key element in the shaping of new means of advertising on both traditional and new media, hence on revenues to specific sectors. And all the fundamental issues of physical and mental growth and development will need to be explored.

Finally under this heading sits the need for debate and understanding.

As new forms of production, interaction, distribution and marketing grow (in what may often be a viral manner) Governments and agencies will find it impossible to regulate in the ways which have been possible in a much simpler environment. Traditionally many of the key decisions surrounding the communications and media industries have been political decisions often made in a less than open manner. There are good examples of how ineffective this is already proving (datacasting and the insistence on HD as a standard) including the aforementioned slow start in broadband uptake and the notable lack of interest in digital television.

But the potential for negative side effects (piracy, privacy, security etc) from rapid and random growth is very real. If Governments will not be able to cast a regulatory net over a diaspora of innovations (and in many ways it’s unreasonable to expect them to do so), society will have to have some understanding of the whole. No group would be better able to assist in this process than the industry and research group that has come together for this Seeding Phase and, as elements of a potential network, this could well be one enduring benefit of OTB.

C. Where we Fit

Ozcontentfuture / Funding / TV Structure / PSB / Indies / Consumer production

The threat of audience fragmentation is the direct result of exploding demand for content and media in a growing variety of forms, creating a wealth of opportunities for companies that recognise the opportunities that are emerging.

Agile broadcasters, content providers and for that matter any other television company that can redefine the scope, shape and scale of the opportunity to capitalise on the changes will thrive. Those that remain in the past will not survive.

–Television Networks in the 21st Century, Deloitte.

This encapsulates neatly the core issue of how we may come to fit in the audio-visual world: the structures and future of Australian audio-visual commissioning, acquisition, development, production, distribution and marketing and the business models which will underpin them.

Scenario development will have first to look at the nature of government in Australia between now and 2015. The combination of international and domestic forces suggests that over the next ten years we are likely to see conservative governments (of whichever persuasion) in this country. Under such a regime, it is reasonable to assume that the tendency will be to regulate for a market rather than for specific national outcomes, that Public Service Broadcasting will be reviewed and its charters changed, and that media owners and carriers will have a close but less instinctive relationship with government.

Opportunities

The first way that we fit is in Trade, some of the details of which have been included above. But the business and financial potential that exists for Australian audio-visual providers is exemplified, given the realities of convergence and digital content production, by the size of the ICT Trade imbalance as a whole:

Australian ICT exports amounted to a significant $5.4 billion in 2004. The problem is that we also imported $24.4 billion of high tech hardware, software, components and services. Each year that gap grows wider.

and by estimates of the potential benefits from Broadband alone:

The Government’s own Broadband Advisory Group’s (BAG) report in 2003, stated that, “next generation broadband could produce economic benefits of $12-30 billion per annum to Australia.

These figures are a reminder that audio-visual content and production for television-type programming may over the next ten years come to be a minor part of the activities of successful production operations.

There is a wide spectrum of possibility for Australian production in general and Independent production in particular. At one end, it is entirely conceivable that the impacts of fragmentation, regulatory change, ownership interests and the lack of development capital will put an end to all but the largest Independent Production businesses. At the other end it is entirely conceivable that all of the elements of digitalisation will finally provide the basis for business models which will deliver a robust, diverse Independent industry playing a competitive role globally.

In its Creative Industries Cluster study of 2003 NOIE indicated some of the central issues here:

Digital content production is becoming a major driver of innovation across content industries and potentially in other industry sectors like education, entertainment and advertising more generally. A number of industry leaders commented on the importance of research and development for digital content and applications and its relationship to innovation for creative and content industries more generally. In this context, the cultural and not-for-profit sectors appear to have an important role in supporting the economic development of the creative industries.

Intellectual property issues are critical, with the growing complexity in cross-territory licensing, increasing transaction costs in rights management and expansion of copyright coverage and controls (affecting third party access to content development components). Crown copyright is also identified as problematic , particularly in the education sector, because it limits the ability of firms to commercialise intellectual property created in undertaking fee for service work and impedes the development of scale in operations

Training is identified as a critical issue, especially since the part played by a talented and experienced workforce is central to the development of these industries and to attracting investment funds.

In truth digital content production as a driver for innovation will spread far further than “education, entertainment and advertising”. Its impact will begin to pervade almost every area of our working lives as societies begin to exploit the seismic shift (that Prof Giddens referred to above) from a linear-based to an audio-visual based communications and media world. It includes games, sport, health, defence, aviation, finance, mining, law enforcement and so on. And they all present opportunities for Australian content producers, giving them the capacity to connect directly with consumers both locally and internationally.

That is one of the reasons why both training and development will need far closer focus than they have received so far from either industry or Government.

This in turn reinforces the many comments that there is a real need for a holistic view of the audio-visual industries’ path to the future (Debate and Understanding) and to replace what has been a piecemeal and fundamentally unstrategic view of industry development.

Network Television

During the forum discussions, frequent reference was made to the likely strategies of FreeTv and PSB broadcasters in the face of fragmentation of audience and, potentially, revenue.

Peter Chernin, the President of NewsCorp recently published “10 Rules for a Media Company’s Survival in the Digital Age”. As regards the future of network television he included these two rules:

Rule 5. Content is still king, but financing the kingdom is complicated. We need to effectively window our product. . . Take the epic miniseries, like ‘Roots.’ Why not premiere it on video on demand, then put it on the network, then put it on DVD. Or focus on less expensive niche programming. . . What’s going away is the middle, what characterized network television . . . broad inoffensive things. It’s too expensive to create [this sort of] mediocre programming.

Rule 6. If content is king, then marketing is the crown prince. We all dream of creating content that becomes a global phenomenon: [like] ‘Titanic’ or ‘Friends.’ [But people] aren’t watching promos [for programs anymore], they’re fast forwarding through. . . . [Media companies should be] launching contests, Internet games, 10 minute sneak previews of things. . . . If you are a broadcast or cable network, you must strive to create a tightly focused brand . . . like HBO, FX, or MTV. If you are a broad generic channel in that world [like ABC, CBS, or USA], you’re in trouble.

Many at the forum would not agree that content is still king, seeing the consumer as having taken that role. But right or wrong, the significant line in his comments is:

What’s going away is the middle, what characterized network television . . . broad inoffensive things.

That view, expressed in different ways, was reiterated at the forum. If it is true, it has significant ramifications for what is currently produced under the regulatory framework for Australian television, much of which may be described in exactly that way. At the same time, the trade imbalances referred to further above make little sense if left unattended in what is likely to be a market-driven environment.
Both issues imply change to the funding structures that are currently in place and, indeed, to the policies and principles which underpin them. One of the biggest influences on Television between now and 2015 will be the outcomes of such a change: what balance is struck between cultural and market imperatives and what platforms (including STV and web-based distribution) will have a role in implementing the balance (see section 4 below).
The outcome will not only influence what gets made. The pathway to it will change the current structure and nature of the Independent Production Industry and its representative entities. The outcome will also, of course, be influenced by the implementation of the Australia/US Free Trade Agreement and other nation-specific trade understandings.

Market Failures

The British Government’s Green Paper on Charter Renewal for the BBC raises one of the central flow-on questions from this change:

The market is delivering a vast array of choice to consumers . . . However,
commercial providers will not deliver everything we want from broadcasting as a society.

– Green Paper, para 2.8

The ramifications of this comment had previously been raised more broadly by Barry Cox, Visiting Professor of Broadcast Media at Oxford University:

I think there will be three different kinds of market failure, which will need different kinds of remedies and different kinds of public funding.

The first is geographical. Both British Telecom and the public service broadcasters currently have to make sure their networks reach almost everyone in the country, even though the cost of doing this for at least a million households in remote areas makes no commercial sense now, and may make even less in the digital and broadband future . . .

The second is a civic problem. We want the citizens of our democracy to have a decent chance of knowing what is going on in the world, if only to make an informed decision when it comes to electing governments . . .

The third and final form of market failure is likely to be cultural – that programmes and services that we would like to be available to all might only be provided to those who could afford them, or not even provided at all. Traditionally this list has included arts, religion, original (and non-cartoon) children’s programmes, documentaries, education, social action, minority appeal drama.

These three market failures are just as real for Australia and they raise the issue of the future of PSBroadcasting and particularly the role of the ABC. Considerable concern has been expressed about the apparent weakness of the ABC in terms of its relationships with and funding by Government, and the absence of any expressed incisive vision for the future by Board or Management. Traditionally the ABC has been seen as the structural guarantor of diversity and quality in Australian production (though almost everyone has an opinion on whether it has ever achieved those aims!). Those aims remain important socially and culturally and they also represent a vital element in the future of Australian production as a whole. It is unlikely that the ABC will be able to negotiate for itself a powerful role in the future of television (though Governments will pay lip service to the notion),and if they don’t the questions is who will and with what outcomes in mind? Debate and understanding are again the key to the outcome. (See also section 4 below)

New Business Models

One role which PSB could have played far more powerfully is in the development of cross-media production and business models for Independent Producers. This whole question of new business models drew considerable attention at the forum. Manifestly the development of business plans which deliver on the potential of new digital forms of production was seen as a key driver for the future but at the same time there was recognition that development as a whole is seriously underfunded (be it structural or content development).

It’s also worth noting that this is not just an economic question, it is also a political question, as indicated by Howard Rheingold in his book “Smart Mobs, the Next Social Revolution”:

Media cartels and government agencies are seeking to reimpose the regime of the broadcast era in which the customers of technology will be deprived of the power to create and left only with the power to consume. That power struggle is what the battles over file-sharing, copy-protection, regulation of the radio spectrum are about. Are the populations of tomorrow going to be users, like the PC owners and website creators who turned technology to widespread innovation? Or will they be consumers, constrained from innovation and locked into the technology and business models of the most powerful entrenched interests?

There has already been some serious work on new business models from the practical applications pursued by agencies such as the NSWFTO to the structural solutions implied in Creative Industries Clusters. Whatever new business models do evolve, it is critical that they not replicate the failures of existing models or drive Australian content into unmarketable concepts and formats.

D. How We Decide

Government / Funding / Ownership / Competition / Training and Skills Debate
This is the last of the headings and in many ways the area of greatest uncertainty. Uncertainty because of the interwoven complexity of the issues which Parliaments and the bureaucracy will have to understand and because of the relationships which exist between Government and different parts of the audio-visual environment. Uncertainty also because of the different levels of research and understanding by the many politicians and others involved in decision-making.

It is an interesting comment on the strength and weakness of the Australian Television Industries that so many issues come back to Government policy and/or political will.

One thing that is certain is that two major changes in Government/Broadcaster relationships will take place locally.

The first is that the next ten tears will see a generational shift in leadership. The current elder statesmen of politics and broadcasting, who have grown used to each other in a system which was notable for its stability over so many years, will no longer have power. It has been an almost symbiotic relationship, unique to this country but, along with its benefits to the consumer, it has restrained competition and innovation in some very unfortunate ways.

Given the increasing complexity of both media management and political survival for a new generation of participants, it is very hard to see these same relationships being replicated in 2015.

The second change is that whatever the outcome of the media ownership debate, the relationship between government and the industry will change radically thereafter. If media ownership is opened up, change will not be a once-only phenomenon, it will be the norm. Implementation will be the fierce focus.

The broad debate will not be revisited for a long time (though implementation detail will be a constant issue) and thus the atmosphere of expectation and implied promise/threat which has overshadowed the industry and the political process for so long will have been largely dispelled. The demands from all sides will be different and the long-standing stability referred to above replaced by ongoing change.

For the forum participants the key issues to be grouped under this heading were the future of the production industry particularly as regards funding mechanisms, skills and training, and the outcome of potential media ownership changes.

Artficial Segregation

Though specific to the world of Communications, the ACA Report (referred to above) noted the following:

Critical challenges for regulation include dealing with complex industry dynamics, and social and cultural value differences. They also include the need to design cooperative systems and processes that overcome competitive self-interest and satisfy social objectives while generating consumer trust and confidence.

Other challenges in the transition path include learning new skills and competencies. Regulatory process redesign over the next few years is likely to be as much of a challenge as keeping up with innovation, convergence, internationalisation and social and cultural change.

There is currently an artifical segregation of content producers which relates very specifically to that issue of “complex industry dynamics”.

The Independent Production Industry is overseen by the Minister for the Arts as junior Minister to the Minister for CITA. Broadcasting, on the other hand, is overseen directly by the Minister for CITA and she also oversees the Digital Content Industry Leaders Group. Whether or not this separation is a positive or a negative, it means that the Independent Production industry does not carry the same weight as the broadcasters; that it is separated from the interests of the Digital Content Industry; and this is exacerbated by the absence of a common voice for the industry.

Assuming that the Independent industry will come to include digital content Producers of many kinds (given that convergence will take place in content as much as technology) they will take a share in an industry

emerging as an area of significant global opportunity, valued at over $172 billion in 2001 and forecast to grow to more than $434 billion by 2006 – an average annual growth rate of almost 29%.

– Strategy for a Digital Content Industry in Ireland: Forfas

Australia already plays a significant role in the area of Games development and production.

Australia’s games production companies produce $100 million worth of games a year according to the GDAA. Analysts say this figure is growing bigger every year.

This is in the context of the fact that globally some $A40.9 billion dollars of interactive video games were sold in 2002 according to the Game Developers Association of Australia (GDAA). That’s more than the worldwide box office takings for the film industry in the same year.

In Australia the story is similar: Australians spent $825 million in 2002 on games software and hardware, and this figure is ramping up yearly.

– Australian Government Culture and Recreation website, Digital Games

That last figure is approximately one quarter of the revenues to FreeTV in Australia last year.

Importantly, given the placement of the Independent Production Industry in Government structure, the arts here are caught up in some very specific kinds of Government and bureaucratic thinking:

Current arguments for private and public investment in the arts emphasize the potential of the arts for serving broad social and economic goals. This emphasis is a fairly recent phenomenon. As late as the 1960s and 1970s, the value of the arts was still a given for the American public. By the early 1990s, however, the social and political pressures that culminated in what became known as the “culture wars” put pressure on arts advocates to articulate the public value of the arts. Their response was to emphasize the instrumental benefits of the arts: They said the arts promote important, measurable benefits, such as economic growth and student learning, and thus are of value to all Americans, not just those involved in the arts.

Such benefits are instrumental in that the arts are viewed as a means of achieving broad social and economic goals that have nothing to do with art per se. Policy advocates acknowledge that these are not the sole benefits stemming from the arts, that the arts also “enrich people’s lives.” But the main argument downplays these other, intrinsic benefits in aligning itself with an increasingly output-oriented, quantitative approach to public sector management. And underlying the argument is the belief that there is a clear distinction between private benefits, which accrue to individuals, and public benefits, which accrue to society as a whole.

– Gifts of the muse : reframing the debate about the benefits of the arts / Kevin F. McCarthy et al. Rand Corporation 2004

That is not a particularly healthy environment in which to grow an industry and particularly not one as vital as audio-visual content production. So the first issue (in this heading) for scenario development is how Government over the next ten year may change its overseeing and development of this increasingly strategic industry. Strategic both for its immense value and secondly for its socially transforming power summed up by Professor Giddens on page 10 of this paper.

This is not just an issue of placement, it’s an issue of conceiving the structure of an emerging industry and completely re-thinking industry investment.

The second issue will be the ramifications of changes to regulation of Australian content on Free and Subscription Television and of the development of means of regulating Television material distributed on the Web.

Two questions here. To what end will regulations be written: market or culture? And will they be written from the vantage point of a full well-informed overview of the entire industry? Much of the rhetoric is about diversity, access and equity. By definition those issues demand a public debate: it’s what they are about.

Direct Support

The third issue flows from the first and is the ramifications of new industry structures for Production development and funding.

There is no doubt that Governments of all persuasions (Federal and State) have invested significantly in the development of an Independent Production Industry and have used a variety of approaches to do so. It was to some extent the success of those initiatives which allowed both Free and PSBroadcasters to defray some of their local production costs by commissioning from Independents rather than producing in-house.

But these interventions have been piecemeal, made as responses to perceived cultural or market needs and made in different areas of State and Federal bureaucratic responsibility (see above). Made also with a variety of outcomes in mind.

The result is an Independent Production Industry which lacks any real robustness.

As the marketplace becomes more complex, but at the same time offers more potential, it’s critical that any Government intervention is focused on means of building the whole audio-visual production industry to a state of real viability. That will mean Australian Producers being able to share in the full exploitation of their work and not simply survive on the basis of fees and/or grants.

That will necessitate revisiting the meaning of Australian content and reconsidering appropriate points for intervention. It will bring with it change within the industry both in its structures, and in the way it relates to Government and the market. Part of the challenge for Government will be in helping the development of structural relationships for the industry across the Asia Pacific region. And it will mean, as above, a far greater focus on Training and Skills Development.

All of this within the ambits of current Australia’s Trade relations globally.

Public Service Broadcasting

Central to this industry vision will be Government’s thinking on the role of Public Service broadcasting in general and the ABC in particular. PSB is intended to play a structural role within the broadcasting industry, guaranteeing innovation, quality and equity. Increasingly over the years the ABC has been underfunded by Governments. In the next two to three years there will certainly be a review of the ABC’s role and purpose, brought about in part by the lack of funds; in part as a consequence of media ownership change; in part by the absence of any compelling vision of the future expressed by the ABC itself; in part as a response to changes wrought by digital production/distribution.

The BBC faces, inter alia, the same issues, with the exception that it has a very powerful and cogently argued vision for its future. It and the Government with which it is so often in conflict agree on one central issue:

However, the long-term prospects for the UK broadcasting market remain turbulent. Fragmentation of channels and audiences, pressures for economies of scale and scope and convergence of media will all tend to concentrate commercial power in the hands of players with few or no public service obligations.

Whatever the contribution of the commercial public service broadcasters in the short to medium term, the Government is right to identify the major challenge for the BBC as being to ensure that the traditional values which have underpinned public service broadcasting – universality, quality, originality and diversity – are preserved in the longer term.

– Review of the BBC’s Royal Carter: BBC’s response. 2005 p.10.

The UK Government is taking a sustained and very public look at the future and Ofcom has been encouraged to propose significant initiatives, not least the potential to fund a new PSB publisher.

How Government responds to the same issues in this country will profoundly affect the future for Independent production in this country. A strangled PSB system and an under-strategised approach to digital content development would not only revisit the problems of the past, it could close down the future.

Critically, all of this is already late. The progress of these considerations will have a profound impact: there is internationally a window of strategic opportunity for Australian content production and distribution. But it’s not a window that is permanently open.