Industry Analysis of Free-to-Air Television in Australia
1. A Brief History of the Industry
The broadcasting of television in Australia had begun in the year 1956 with the industry of which had operated with the dual system of the broadcasting radio system and comprise of the private owned stations. In the year 1955 the two television licenses had been awarded in Melbourne and in Sydney and in 1957 they were Adelaide and Brisbane. In the year 1989, the commercial services are already available in the regional market and they increased as the government policy had implemented with the four states. In the year 1980, the Special Broadcasting Corporation had commenced which is a non-commercial Multicultural broadcasting of television and to other three markets after five years. In the year 1993, renewable of three years had been awarded to the two groups of community based for its operation as broadcasting of non-commercial. The last free-to-air channel in must be available in most parts of Australia as recommended by the Australian Broadcasting Authority in the year 1997. In 1998, the introduction of digital television was agreed. In 2001, the five free-to-air televisions were started the metropolitan and regional markets with the eight year period. The firsts airing of the digital services had carried the ten networks and it was issued in the year 2002 for the Tasmanian state and Hobart in 2003. Reviews also made by the Minister for Communication Information technology and Arts which cover for the additional programming, new commercial television, under service market televisions, and allocation for the spectrum. The government of Australia responded for the given regulations and consulted for the widespread process with the participation of the industry (Australian Film Commission, 2008).
2. Dominant Economic Feature of the Industry
The Television of free-to-air is the second for the newspaper for having the share in the total expenditure in the entire Australia and accounted for the greater that 34 percent or costing (.2 billion) in its total advertising in the year 2005. This is also the medium priority for the national advertiser which accounted for 49 percent to all of its advertisement (Cunningham and Turner, 2002, p. 17). According to the Australian Communication and Media Authority, the estimated revenues in the several sources of the free-to-air services of the television for the financial year of 2005, the revenue of the industry had been estimated for having ,876 million that represents 76% of the 10 year-period increase. This had been the result because the advertising is considered to be the main source for the commercial stations’ revenue and the main source of the revenue of the SBS and ABC are the appropriation of the government directly. For its operating cost, the whole industry allows to spend the estimated ,089 million dollars and the interest charges were all excluded in the financial year of 2005 according to the Australian Communication and Media Authority. The other advertising cost of revenue related includes the agency commission and the other license fees and sales commission. The employee and the programming are the largest categories. In the mid 1980 most of the commercial television had experience the ownership changes and case abnormal losses in 1990s. In the late 1990s it built up and recorded for having the healthy profitability of its level though it declined in the fist half of the current decade due to the volatility of the expenditures of the growth of advertising (Australian Film Commission, 2008).
3. The Industry’s Products, Functions, and Markets
There are total of 23 separate commercial market of television in Australia for year 2005 and 54 individual stations of televisions for the same year. The free-to-air television also dominates the ratings for the television for having the product of high budgeted mini-series of NES and the festival cinema. The other common forms of televisions were the news and current affairs which accounted for 25 percent of the programming. The children programs also made it to the record as accounted for having 12 percent. The sports, drama, movies/mini-series and light entertainment are accounted for having 11 percent. The other programs that the industry offered are the sports, sports variety, the informative, documentaries, comedy, games, music variety and others. The free-to-air television started to be most popular medium and the main sours of Australia’s current affairs, news and entertainment for most of the households. The 94 percent of the total population of Australia are receiving the digital terrestrial signal and 25 percent of the total household can access the free-to-air services digitally. In the year 2005, there were about 820,000 households that represent the 11 percent for all of the Australian homes had free-to-view box of digital set up which can enabled them to access and receive the full free-to-view digital signals of televisions. In the same time, there are limited numbers of the current digital terrestrial services of television which are available to 1.07 million households in the subscription of the services and consist of greater than 70 percent of the subscribers of Foxtel. The activities of the industry also includes the free to air services for the public or for the government, for commercial and for community (O’Regan, 1996, p.80-81)
4. Major Changes of the Industry
There are certain changes that come out with free-to-air television licenses which needs to broadcast for only 55 percent of the content of Australia and it is between 6 am and until midnight. This means that the pay TV station needs to pay for about 10 percent of the total programs in the expenditure on Australia. The main attractions for the specific television viewer are the quality of the picture, the superior reception, the improved sounds, ability in receiving the additional channels, widescreen format or pictures and other enhancements. In order to meet these demand, certain changes and additions as the only digital television channels as operates for about 20 hours everyday for the ABC’s ABS2. This can also offers the time and new shifted programming of ABC including the regional arts, children, social commentary, public policy, regional arts, information, music, and the international news. There are also new datacasting services in Sydney that features the six information services as news, sports, real-time traffic, weather, community information and the coast watch (Weihart, 2006, p. 7-8).
The government of Australia also made a new media framework that covers the free-to-air television and its betterment for its services in the area. There are permissions in the stations of free-to-air televisions in broadcasting one standard definition multichannel starting 2009 in allowing multi channels not before the switchover of the digital time. There are also removal of the simulcast of the requirements in the definition of the programming of the television and delete the genre restriction for the multichannel. These changes can come up most emerging digital technologies of media for structuring the businesses in the global competitive companies (Genix Infocom Co. Ltd., 2006).
5. The Major Trends of the Industry
The penetration of television in Australia remains to be impressive. Viewing through the conventional metrics, the free-to-air television made to hove the best move in the year 2004 as compared to the decade ago. This can be justified to the amount of viewing everyday in the year 2004 through the user of the average metropolitan users and without any access to any television subscription is only 5 minutes and less that to the average viewer way back 1994. There is also 34.76 percent for the revenues of the main media which attracted the commercial free-to-air television had not change for 1994. The sector of commercial television had 15.9 percent profit margin before tax in the year 2004 and it is similar for the 16 percent margin decade earlier. Nevertheless, through the keen review to be don on the free-to-air television and its performance determined that it dominates the relative position to the other media which is under the threat due to the growing trend of the broadcasting in the mass audiences and to its broadening the small audience. Most of the factors behind the particular way are continues development of the technology and that it continues for the creation of the platform distribution for the entertainment and information content as in the production of the digital format for the minimization of the distribution and replication. The industry also challenges for the emerges of the distribution platforms in which includes the online services, the pay television, computers, DVDs, mobile phones and the games which recorded for having the strong growth in the market (Miller, 2003, P. 102).
6. The Driving Forces of the Industry
The driving forces of the industry to remain competitive is because of continues number of viewers in entire Australia whereas every Australian household do have the television set 67 percent of it had have tow or more sets. Accessing in the subscription to the television made an average of hours and seven minutes for the television every day and one third of the people are still viewing the television in between 6pm and to 10 pm. The 60 percent of the total households are also turned in during the peak of the prime evening that views for about 7pm and 9pm. The homes also had been captured by the access of the television in with accounted for about 59 percent of the primetime was viewed and capture for the free-to-air television channels in the year 2004. In the broad aspects if the command audiences in the long period of time can have the ability for the commercial television in capturing the share for the advertising revenues which is extremely influential. For so many years, the industry of free-to-air television in Australia made to be profitable due to the imposition of entry of government barriers in the few competitors. On the other hand, because of emerging of the high technology access and competitors, the free-to-air television is in its tension. This means that the adoption of the industry for the change must also occur so that it can remain to be globally competitive. Additionally, to remain competitive in real world, the management of the free-to-air television networks made the decisions of generating the performance of operations in the entire 1990s amidst the challenges that includes the pay television introduction, the increase of the competition in attending the younger viewer for the DVDs, computer games, and the online services, and the budgetary constraints that must imposed for the national broadcaster (Australian Film Commission, 2008).
7. Extent of Forward and Backward Integration of the Industry
Most of the Australian prefers to watch the free-to-air as compared to the pay cable stations. From the transition of the television Australia as in analogue and went to digital can also be part of the wider transitions of the free services that can be funded by the government or advertising. In the year 1998, the introduction of the digital television had been enacted for the broadcasting services in the digital modes. The reliability of the infrastructure of the telecommunication company is becoming critical for the government communication as well as citizens and agencies are becoming more of conversation and archives. There are also complications on the pats policies and obligations of the institutions as ABC and Telstra (Given, 2003, p.261).
For the betterment of the signal and services of the free-to-air televisions, the government decided to have the channel planning for the Digital Terrestrial Television Broadcast that can prioritize the decisions with regards to the datacasting channels and it does not compromise the services of the free-to-air televisions. Some of the changes that the government is planning were the re-designs of the feeders and the combination of the antenna and combiners of the system and the installation of the new combiner and filter for the interface of new channels in the broadcast antenna. The proposed commercial channels were also guaranteed to be other multiplexes. The treatment for the TPMs with their respective circumvention under the law can be the protection for industry (Ibid).
8. Market Analysis of the Industry
The financials of the television services had been finance by the government and it also provides for the funding of the two major network of free-to-air television in Australia. The other factors that make up the sector of free-to-air television were the advertisers, community channels and the commercial broadcasters. For the direct subscription of the relationship by the service provider and consumers which are existing for the payment and subscription of the services of television. The advertisers were one of the sources of the funding of the industry and this is the reason for the advertiser to choose the most watched station to gain more audience for its products. The football codes also dominate the shows in the free-to-air television channels (Turner and Cunningham, 2000, p.37-39).
The advertising in the television plays a major role in the revenue per capita of the metropolitan market that can be accounted for having most of the double in the regional market and to the market that had aggregated. The table below shows the market share of the industry in the year 2005.
Ad. revenues ($m)
Population (’000s)
Ad. revenue
Ownership1 based on
per capita ($)
network affiliation
Seven
Nine
Ten
Metropolitan markets (5 markets and 15 stations)
Sydney
1,016
4,335
234
SEV
PBL
TEN
Melbourne
798
4,078
196
SEV
PBL
TEN
Brisbane
458
2,617
175
SEV
PBL
TEN
Perth
282
1,612
175
SEV
STV
TEN
Adelaide
226
1,318
171
SEV
SCB
TEN
Total metropolitan
2,780
13,960
199
Aggregated regional markets including Tasmania (5 markets and 15 stations)
Northern NSW
178
1,907
93
PRT
SOT4
SCB
Queensland
166
1,523
109
SEV
WIN
SCB
Southern NSW
149
1,333
112
PRT
WIN
SCB
Victoria
139
1,094
127
PRT
WIN
SCB
Tasmania
52
491
106
SCB
WIN
SCB
Total aggregated regional
684
6,348
108
Other regional markets (13 markets and 24 stations)
Total other regional
98
1,442
68
3
3
3
All markets
3,562
21,750
164
Source: Australian Communication and Media Authority
9. Nature of Competition and Competitive Forces
First and foremost, the advancement of the technology was the first to determine the significance of its competition of the industry by the emergence of the internet that allows television watch and the pay television stations. The new platforms of distribution which includes the pay services as well as online one can destroy the industry of the free-to-air television and its existing mass audiences. This means of communication and broadcasting which seemingly small for the number of the viewers as of now has the potential to increase and develop its services and it influences to the market. These channels also will have to be narrowcaster and cannot compete directly to the free-to-air television in the market industry as well as to advertising market but competition can occur in the number of audiences. The channels only the cartoons, arts, and documentary are not the interest of the most of the advertisers who are looking for the appeal. There are also impacts for the pay television o the side of the free-to-air television in Australia which brought it much competition. The industry of pay TV has the strategy of slowly but surely in its increase number of subscribers, households’ rates of penetrations, and channel offerings. In the same scenario, it also is reducing gradually in its aggregate free-to-air time of viewing and television revenues advertising. According to the OzTAM, the pay television has the greater offerings which is the reason for the subscription spends of the television households that are watching everyday. In the increase of the more television subscribers, the movement to the digital platform will also move. This will also resulted to the wider offering of the channel offerings and increase it even further which can suddenly lead to the subscription of the of the television households (Australian Film Commission, 2008).
10. Strongest or Weakest Position of the Company
There are actually five free-to-air networks of televisions in Australia. The network includes the three commercial networks as the Nine Networks, Seven Networks, and the Ten Networks. The other kinds of public networks are the Special Broadcasting Services (SBS) and Australian Broadcasting network (Axtew AGL, 2003). Albeit of the fact that the share of the commercial broadcasters declined in the year 2007, the commercial stations still has the ability to attract the viewing of free-to-air market television. The seven of these made to gain the highest share for 29.1 percent that surpasses the nine in the year 1983. For the year 2007, there are about 3 commercial networks which accounted for 77.9 percent in the entire viewing of the whole metropolitan markets which is the slight increase from its previous year of 78.2 percent. One of the ways in order to determine the weakest and the strongest among the company is through the aide of ratings. These are being collected by the three major organizations which are the OzTAM, the TAM, and the Nielsen Media Research Australia. The table shows the ratings of the networks for the past years.
Network
2003
2004
2005
2006
2007
ABC1
15.60%
16.90%
15.70%
15.40%
16.30%
Seven
25.60%
24.90%
27.10%
27.80%
29.00%
Nine
31.20%
29.90%
29.20%
29.10%
27.40%
Ten
23.20%
23.80%
21.90%
22.30%
21.60%
SBS
4.50%
4.60%
6.10%
5.40%
5.60%
Source: Australian Television Ratings
This implies that the Nine Network makes it on top for the past four years and the SBS is the lowest when it comes to ratings. Additionally, according to the survey made by the OzTAM, nine networks has made to have the large commercial share of an average of 26.9 in the five market for the year 2007 and the SBS ranked the last with only 5.5 for its average market share (OzTAM, 2008)
11. Rivals’ Strategies in the Future
The rivals of the free-to-air televisions in Australia can have the future plans which can encourage fro the viewers to shift their chosen television network. This can have the superior digital and technical quality of the television just like its pictures and its sounds which are provided by the DVDs and the High Definition TV (HDTV) that can also feel the senses of reality with the resolution of high images, standard audio and video, and the wide screen. The new technologies can also dominate to the powerful society and to the government. One of the most complicated issues that can arise in the growth of the communication and information is the media literacy. According to the PricewaterhouseCoopers’ the Pay TV will continue to evolve which are from the luxury and go to households and it will progress faster for the next five years. The subscription for the TV will increase its force in the entertainment of Australia through personalizing the services that it offers with the variety and digital recorders of video. Together with the outdoor advertising and the internet, all of the will have the share of annual rate of 5.1 percent in the year 2011. The innovation and the more high tech for their service are also expected for these industries. Additionally, the internet can offer much entertainment to the public and expected to come develop for the few period of time (AsiaMedia, 2007).
12. The Competitive Advantage of the Industry
The free-to-air television has the advantageous compared to the analogue of broadcasting in Australia. In free-to-air television, it can offer and provide the sharper pictures. This also offers a format of wide screen with its flexibility in offering the new services which includes the videos. In the business context, the Pay TV is different from the free-to-air TV. The free-to-air televisions in Australia are reaching the broadest possible audience in its broadcasting. The television of free-to-air is generally popular and had been part for all Australian everyday life. On the contrary the pay TV requires the payment subscription in receiving the programming (Shilbury, et.al., 2004, p.198). The digital free-to-air television is also offering the clear and perfect picture in all of the channels, has the access to the new free-to-air digital channels and the fewer receptions problems which are being introduced. This kind of television will also allow for the commercial players that include the independent producers, broadcasters, retailers and the receiver of the manufacturers in developing viable models of businesses. It is evident also that the free-to-air television is the major medium of communication for advertising. This also creates memorable campaigns while building the relationship with the consumers. According to the survey also, most of the subscribers of the free-to-air televisions are remaining to be high in numbers due to the provision of the range of not only information and entertainment but also the universal conversation wherein 95 percent of the respondents answered that free-to-air remains to be free. The television commercial also the first ad that came into their minds that followed by the other medium of communication as newspapers, internet, etc. (Kelly, 2002).
13. Sustainability of the Major Players’ Competitive Advantage
For the past years, the free-to-air industry in Australia made a great impact in the households and to all Australian. For the company leaders in the industry as in Nine Network and Ten, they are doing innovations in their services and they are offering the updated and more developed programs to their viewers. One of the developments of Nine in its programming is the launching of the Weatherscape XT which has clear and simple as well as accurate system for weather report. The “nine network” also used the Microsoft SQL.Server and the Microsoft.Net Framework 2000-based so which made the improvement for the efficiency and productivity of the network’ services. This can also alleviate the cost while allowing the future expansions in the business areas (Metra, 2006). This movement had resulted for the increase in the advertising and sales revenues, better operations, improved the business and reporting intelligence, and more effective workforce. For the business engineering and for the technology transformation, the 9Vision program had been developed in the Nine Network of Australia. The storage of all programs in one system can have the more accurate and faster availability of lookup. These new systems also make the users for making the most integrated workplace with the improved performance and greater availability (Case Study: Nine Network, n.d.). The Ten Network also is fighting on the issues regarding the quality of programming and made the movement for the campaign reforms laws of foreign ownership and cross media. The network also continues its agenda in investigating the opportunities in regional and domestic media.
14. Attractiveness of the Industry and its Future Prospects
The free-to-air networks are doing marketing strategies and product integration for its attractiveness. They are also bent for the marketer’s demand in the television opportunities. Dealing with the advertisers and their integration results for the add-on clients, strategic thinking, and beyond the spot of TV ads. The free-to-air television will act as the forum for the industry which can work together through the development of the platform of digital television. This more developed digital services; it can have the speedy delivery of the services of digital TV while receiving in the Australia market. The industry also commits itself in achieving for its goals in going through the flow of digital age through the digital TV. For the future aspects of the industry, it will have to ensure the availability and rollout the services of digital in all of the homes in Australia. One of it commitment also is the assurance and availability of the digital TV in viewing of the Australian Homes. The other commitment of the industry is the provision of platforms that are based on the standards of the digital TV that includes the enhancement of services and interactive (Free TV Australia, 2005). Part of the growing digital TV can provide its audience the quality of DVD pictures, clearer receptions, high definition of the pictures, and the new channels which are not available to other broadcasters. Part of the future plans of the network on free-to-air is offering of the more choices with the quality of greatest broadcast as possible and that’s for free. The other future plans are the services of digital video recorder for the access an electronic guide of the program and 15 free digital TV. In general, the industry is also coping in the development of the technology which updates faster (Sydney Mourning Herald, 2008).
15. Regulations within the Industry
According to the media critic Lachlan Murdoch, the over-regulations that charged in the televisions of Australia had remained to be protected and rich. The regulation of anti-siphoning is considered to be harshest in the whole world. This anti-siphoning that regulates in Australia is the always available in the primary sporting events to the free-to-air broadcasters and not to providers of pay-TV. This over-regulation can also stifle the industry of pay-TV and can focus to the battle of next reform of broadcasting (Hiscock, 2003).
The Australian Broadcasting Authority had created in order to regulate the radio and television in the year 1992. The whole commercial television services need to comply with the Standard of the Content which has the mechanism of annual transmission of the quotas for the children shows, documentaries, and drama. The commercials are being shown for 15 minutes every hour and there are permissions of advertising. Through these regulations, the recognition for these implemented controls can regulate and support the industry in its evolutionary ways and can retain its social roles that had been offered by the country. On the other hand, if these scheme are not been applied precisely, then, it can play negligible for the viewers (Young Media, 2007).
16. Critical Success Factors of the Industry
Behind the success of free-to-air television industry in Australia, there are certain factors that come out. The first one is the capability of the industry to urge for having the competence in the competitive market. It keeps its services updated. The other factors are the capabilities for the households in receiving the channels of free-to-air and recorded of 6.4 million of them. There are also 9.2% of the television households that penetrates. The availability of the digital equipment had also rapidly diversifying for the past two years while the prices of the High Definition and SD are falling. The industry had also invested in upgrading their production on television as well as the transmission of the facilities for the new technology and the digital TV is expected for having billion dollar revenue as completed. It provides the 27/7 programming while meeting its quotas. Through the consumer campaign digitally, the industry can promote the transition air trough. It also established the DBA or the Digital Broadcasting Australia for the exchange of information of manufacturers, retailers, broadcasters, and installers that can be assistance for the public’s retail education. The industry built the management of interference scheme for ensuring the emergence of digital with less disruption from the reception of analogue. It is also against the existence of license for new commercial television in the market of Australia (Free TV Australia Limited, 2005).
17. Options for the Future
Through the going with the flow of the fast and changing technology, the free-to-air television in Australia also has its own options for its betterment in services for its viewers. Part of the options are the struggling for the appeal of digital-only content thru the network of fourth commercial or the multi-channel increase. There must also be the mandatory tuners digitally for the new receivers of TV and switch off for the analogue and to commence in 2010. These are only some of the options and these can also be change upon the technology advancement.
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