The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Sunday, June 24, 2012

Australians currently spend $1.2 billion pa subsidising media

The decision by Fairfax and News Limited to re-engineer their business models to more profitably operate in today's highly competitive media climate has compelled some stakeholders to claim that taxpayers are not doing enough to support the publication of objective media. This is grossly misleading.

Australia is serviced by two very large, and taxpayer-funded, media entities: the ABC and the SBS. Both publish comprehensive news, entertainment, and current affairs products across the television, radio, and Internet mediums. Print news is the one, increasingly less relevant, channel that they leave exclusively to private companies.

In the last financial year, the ABC and SBS collectively received about $1.2 billion in taxpayer money. More specifically, taxpayers gave $973 million to the ABC and a further $228 million to SBS. 

The ABC and the SBS employ over 6,300 Australians. That means taxpayers are investing about $191,000 per employee every year to underwrite their employers. That sounds like a substantial investment to me. 

What are the ABC and the SBS actually meant to do? 

The ABC offers this characerisation: "As Australia’s primary public broadcaster, the ABC strives to provide high-quality programming, independent news and information, and content that enriches Australian communities." 

The SBS's mandate is to promote multi-cultural media in spaces not occupied by the ABC. In its own words: "The principal function of the SBS is to provide multilingual and multicultural radio and television services that inform, educate and entertain all Australians and, in doing so, reflect Australia’s multicultural society."

So the argument that taxpayers are not directly funding the practice of independent journalism and media more generally is simply wrong. 

Could we do more? Possibly, but the case should be aggressively interrogated by an independent authority in order to understand what private market failures taxpayers would be addressing.

With the emergence of the revolutionary global connectiveness afforded by the Internet, Australia has never, in its history, been better served with more inexpensive and diverse sources of journalism produced both domestically and overseas. That is, competition in the Australian media market has never been more fierce.

Unsurprisingly, heightened competition has had far-reaching commercial consequences. Most obviously, old media business models that have failed to adapt to the new sources of information, and much more cost-effective delivery platforms, are not nearly as profitable as they used to be. 

In the debate that has arisen following the restructurings announced by Fairfax and News Limited,  participants neglect to mention that the advent of the Internet has been a massive welfare boon for consumers: the speedy acquisition of high quality information has never been easier or cheaper. 

What we have witnessed is a shift in economic value away from the once-protected duopoly operated by private media proprietors to their newly empowered audiences.

Given the presence of two proficient national broadcasters with clear public charters, which I have long argued are a sine qua non for our democracy, taxpayer bailouts of specific private media interests do not seem warranted.

It is, rather, incumbent on the owners of these businesses to foster changes that yield more commercially durable models, which is exactly what Fairfax and News Limited look to be doing.

The Internet has had a similar effect on the private media duopoly as the impact the reduction in trade barriers had on industry. Competition is difficult to deal with when you have been protected from it for so long. Resisting these far-reaching technological changes will likely only benefit a minority to the detriment of the wider community.