Margaret Simons
Can SBS and the ABC be combined?

Ever since the Special Broadcasting Service was established by the Fraser government in 1978, some people have been arguing for it to be merged with its larger sibling, the Australian Broadcasting Corporation. Now a merger is again being discussed as the government pursues its mission to cut costs.

The efficiency review of the ABC and SBS, conducted by the Department of Communications with former Channel Seven chief financial officer Peter Lewis, has issued a draft report. It has not been released but word is it canvasses combining and perhaps outsourcing the broadcasters’ back-office functions such as payroll and administration.

So can SBS and the ABC be combined – and should they be?

The fact that Australia is the only country in the world to have two public broadcasters is an accident of history. Fraser originally wanted the ABC to take on multicultural broadcasting. SBS was established as a separate organisation only after he became convinced ABC management didn’t have its heart in the job. 

Since then, SBS has had a tentative existence, always financially challenged. It broadcasts a miraculous diversity of content but is also wobbly, shifting in focus, sometimes seeming to move away from its charter in search of prime-time audiences. Meanwhile, the ABC is the white-bread broadcaster, the faces on its screens failing to reflect Australia’s diversity.

The Hawke government considered combining the two, and the issue has come up repeatedly since. As recently as 2009 the ABC, much to the fury of SBS, quietly commissioned private consultants to look at the cost savings that could be achieved by a merger. The answer was $11 million to $45 million, depending on the extent of merging, from back office only to the whole shebang.

The Lewis report is apparently not prescriptive. It is meant to serve as a guide for discussions between the minister for communications, Malcolm Turnbull, and the public broadcasters. But as departmental staff told senate estimates late last month, the “broad takeout” is that there are efficiencies to be made that would not affect programs. 

The pressure is on. Turnbull has declared that the 1 per cent cut imposed on the ABC and SBS in the budget is a “down payment” on further cuts to come. Not unreasonably, the ABC wants to know the total of the bill on which it is considered to have made this down payment. Nobody is saying. 

Meanwhile, Turnbull, the merchant banker turned minister, is in search of his own figure – an amount that can be carved from the public broadcasters without affecting programs. ABC managing director Mark Scott claims there is no such figure. The back end cannot be isolated from programming outcomes, he told senate estimates. He even raised the possible demise of Peppa Pig if more cuts were made.

With all this going on, and Peppa supposedly vulnerable, most people might be surprised to know that a giant one-fifth of the money taxpayers fork out for public broadcasting goes directly to a monopoly company owned by a Canadian superannuation fund. This is the legacy of the last ideologically driven push to trust in the private market when it comes to communication.

Once, Australia’s broadcast transmission infrastructure was in government hands, meaning that the contracts with the national broadcasters were negotiated together, and were transparent to government. But in what has since looked like a very silly decision, the National Transmission Network was sold by the Howard government in 1999. It was acquired by Macquarie Bank in 2002, and rebranded Broadcast Australia, before being sold to the Canada Pension Plan Investment Board.

Since the privatisation, there has been what the Department of Finance has described euphemistically as a lack of competitive tension as the public broadcasters negotiate for transmission services. The ABC and SBS are captive clients. 

Total public funding to SBS and the ABC is $1.4 billion. Of this, $280 million disappears straight into the pockets of the Broadcast Australia monopoly. To put the amount in perspective, the total operating cost of the ABC News24 television channel is about $15.6 million. The recently axed Australia Network cost $223 million over 10 years. In other words, if a fraction of the money now going to Broadcast Australia was returned to the public broadcasters, it could be used to make significantly more programming. If it was returned to consolidated revenue, it might satisfy Turnbull’s push for cuts that won’t affect programming. 

Quietly and out of the public view, the government has been taking advice on these transmission costs. A report by the consulting firm LEK has been received, but not made public. Questions about it in senate estimates last month were diverted. The secretary of the Department of Communications, Drew Clarke, highlighted that “it all relates to one supplier” and said: “I would rather not speculate or comment on the outcomes of the review. But the fact that it is being done is, I think, quite proper.” In other words, the government has had enough, and has some plans.

Apparently the LEK report attempts to slice and dice the transmission contracts in search of savings. But why would Broadcast Australia negotiate when the clients have nowhere else to go?

New technology raises some options, both for prising back the money and for the future of how SBS and the ABC bring content to the public. The success of the ABC’s iView on-demand service shows that traditional broadcasting is not the only way of delivering content. It can be streamed. The public broadcasters are experimenting. Recently, Chris Lilley’s new show, Jonah from Tonga, was released in a “binge viewing” format, the complete series available on iView ahead of its screening on conventional television.

There are complications to this. Conventional transmission is a fixed cost, whether one person or a million are watching. Internet dissemination, on the other hand, costs more when more people use it – and the broadcasters are not funded for bandwidth.

Nevertheless, in five years the Canadian pensioners could be feeling a very chill wind. Whole channels might move online. And all this is, ultimately, to do with whether our two public broadcasters might become closer.

Consider this. Digital broadcasting means that if the government decided there was need for another special kind of public broadcasting, nobody would suggest a new organisation. Instead, it would be established as a series of digital multichannels. The ABC might run them, or they might be put out to contract. 

And some niche content – foreign language radio, for example, or programs such as the ABC’s Good Game – might reach the viewers only via the internet. For the viewer, it wouldn’t matter, so long as internet speeds were good. Smart TVs make the differences between internet television and conventional broadcasting seamless to the viewer.

Some of the money going to Broadcast Australia would be saved, but at the same time the broadcasters would have to be funded for internet dissemination. And that money would presumably end up back in public hands, through the National Broadband Network. The infrastructure privatisation of the Howard government would be unwound, and Turnbull would have his savings.

But these dull “back-end” issues are unlikely to attract headlines, or the attention of Peppa Pig lobby groups. Instead, there are fears that any merger will be a Trojan horse under which the SBS hybrid model, including advertising, will be introduced to the ABC.

Things could be worse for the public broadcasters. The National Committee of Audit – the ideologically driven review that informed the last budget – clearly started its job with a strong slant against public broadcasting.

Buried in the appendices of the report is a section on the efficiency of public broadcasting that states baldly and without discussion that much of the justification for taxpayer dollars being spent on the ABC and SBS has now disappeared thanks to the internet and digital broadcasting technology. 

Even more worrying for SBS, the report said its future financial viability was in doubt. Advertising revenues are down, and SBS has sought additional funding in the past two budgets to avoid going broke. Yet, the review tartly observed, the broadcaster had continued to expand its services instead of making cuts. Naughty, naughty.

Things were looking grim. The commission was apparently willing to recommend an SBS-ABC merger. This, insiders say, is one reason why Turnbull established the Lewis review as a separate process, to effectively take the job of reviewing the public broadcasters out of the commission of audit’s hands and deliver more nuanced advice.

As a result a complete merger in the short term is unlikely. There are too many cultural and political difficulties, and the savings from back office alone are unlikely to be worth it. Rolling a small, lean bureaucracy into a larger one is a doubtful big cost saver.

But in media nothing stands still. The technology, and that huge one-fifth of taxpayer money going to Canadian pensioners mean that publicly funded media are in any case going to change. The SBS and ABC, almost inevitably, will have to do more together.

The trick will be using technology to increase diversity, rather than sacrifice it.

This article was first published in the print edition of The Saturday Paper on June 7, 2014 as "Funding channels".

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Margaret Simons is a Walkley Award-winning journalist and author.

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