19 November 2009 - ABC

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19 Nov 2009 ... SCREEN PRODUCERS ASSOCIATION OF AUSTRALIA. NATIONAL CONFERENCE. PLENARY ADDRESS. Kim Dalton. Director of Television.
SCREEN PRODUCERS ASSOCIATION OF AUSTRALIA NATIONAL CONFERENCE PLENARY ADDRESS Kim Dalton Director of Television ABC 19 November 2009 Introduction Three years ago I spoke at SPAA after I had been at the ABC for 9 months. At the time ABC TV was just that – a single channel delivering programs across a single platform to a single device. ABC2 existed, but it was elsewhere in the organisation, as was the ABC’s online output. We were substantially an analogue broadcaster and this was also reflected in our approach to the production of our programs. A mixed production model but with the focus and strategic settings very much on our internal capacity with limited attention paid to our position and role in regard to the broader film and television production sector. My focus back then was on the relationship between ABC TV and the independent production sector and how that relationship was at times dysfunctional. I asked the question: is the relationship more like Mother and Son or Kath and Kim? Since then I am confident things have moved on somewhat. And I am not just talking about Kath and Kim moving to the Seven network. I also spoke about the emergence of new distribution platforms and the apparently inevitable fragmentation of television audiences and how this would strain the existing television business models. I spoke about the impact 1

of technological change on the way television is viewed and produced but also on how the very idea of television is perceived. And once again things have moved on. My last speech at SPAA was an opportunity to articulate an agenda and a vision around ABC TV as a modern public broadcaster with a commitment to this new digital environment but doing so in an active, constructive and contemporary partnership with the independent sector. Three years on its worth revisiting that agenda and assessing our progress. Delivering a report card of sorts. While that agenda is ongoing and our efforts to produce diverse and innovative Australian content remain the central plank of our content strategy there is another that has emerged. Equally as pressing and equally requiring a joint effort. The new distribution platforms and new content propositions we are seeing today are just the beginning of a transformation in the way that television content is created, distributed and consumed. The advent of the National Broadband Network (NBN) and the implications of a high speed, open access, wholesale delivery platform for the television industry and Australian culture more generally also need to be squarely assessed and debated. I still believe that our common interest is in creating and delivering diverse and high quality Australian content to Australian audiences and in the sustainability of the industry that produces that content. Today this speech offers me the opportunity to assess our progress and to look at the emerging issues that will impact on the sustainability of both the production and broadcasting industries.

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Performance over the last three years In terms of a report card there are four main areas that I would like to revisit: Funding and how the ABC managed the $30m funding increase that was announced in the 2006 Federal Budget The ABC’s relationship with the independent production sector The triennial funding bid outcome; and The ABC’s strategic positioning as a multi-channel and multi platform provider Funding When I spoke here last ABC TV had just received a funding boost of $30 million across three financial years. It was our intention at that time to take that $30 million and leverage total production budgets of $90 million. This was part of our continued commitment to working with the independent production sector to produce high quality Australian content. Over the last three years the total ABC TV commitment towards independently produced documentaries, dramas and children’s projects was $84m resulting in $257m of total production with the independent sector. This equates to an overall gearing ratio of 3 to 1 for each dollar of production spend. The additional $30 million received from the Federal Government across 2006/7 to 2008/9 is included in this total and was levered into production budgets of $110m.

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The additional $30m provided by the Howard Government was provided as special one-off funding. However, one of the important elements of the Rudd Government’s Triennial funding announcement in May 2009, was that this additional funding would be continued and would form part of the ABC’s base funding for drama, children’s and documentary production – quarantined for commissioning programs from the independent sector. We fully expect that the production sector will continue to significantly lever this funding through the Producer Offset, international pre-sale and distribution arrangements and state and federal funding bodies. In total the ABC’s commitment to independent production, across all genres including the $30m provided by the Howard Government in the past triennium was $144m. This contributed to production budgets of $318m, delivering 698 hours of Australian content to Australian audiences.

Relationship with independent sector As I have said before both here and in other forums the ABC recognises the independent sector as a key player in the Australian media environment. The ABC is interested in promoting, and is reliant upon, the health and prosperity of the independent production sector. It is in the ABC’s best interests for independent producers to operate successful and sustainable businesses. This approach will generate a rich and diverse tapestry of Australian content, available to all ABC audiences. A number of initiatives at the ABC reflect our interest in engaging positively with the sector as a part of the same industry. In particular, developing terms of trade with SPAA has been a significant step forward in growing a more 4

constructive and open relationship. We are on the edge of signing a final agreement. The Terms of Trade will cover off such things as licensed rights, holdbacks, copyright, clearances, the producer offset and some clear parameters around distribution arrangements and ABC Commercial. The Terms of Trade will set out a clear and transparent framework for future contracts between the ABC and independent producers while still allowing ample flexibility in terms of licence fees and other commercial deal points. One of the contentious issues over the years has been that of rights creep. That is the ABC acquiring more rights without appropriately remunerating producers. Getting that balance right is, in my view, essential to a healthy relationship. On the one hand, it has been important to recognise that the ABC’s primary rights must extend beyond a simple runs over years formula. This approach was appropriate to the analogue era but fails to appropriately recognise audiences’ viewing habits in the multi channel, multi platform and multi device digital era. However, clear parameters have been discussed which on the one hand recognise the ABC’s and its audiences’ needs whilst also recognising producers’ rights to monetise their content beyond a defined broadcast window. The ABC and SPAA hope to announce the finalisation of the Terms of Trade shortly. Importantly, the ABC has also recognised the longer term interests producers have in retaining copyright in their programs. Going forwards, where the ABC has an equity interest in a program, it will only require a 1% share of copyright. We have to recognise that ABC TV is operating in the digital age, delivering its content across multi channels and devices, on iView and for video on demand

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and that is where most of the work has been done. It is my feeling we have come a great distance in addressing these issues with producers. In addition the ABC Legal Department has worked hard with the independent sector to develop standard term sheets and contracts. This is all part of a push to introduce transparency and certainty into our dealings with independent producers. Successful triennial funding bid outcome.

In May of this year the Government announced the biggest increase in ABC funding since its corporatisation - a $167 million dollar package. For ABC Television this funding boost has been particularly important bringing with it two significant outcomes: $67 million over three years for a new dedicated children’s channel – ABC3; and $70 million in new funding for local drama production. This boost in funding is, of course, very welcome. It will allow the ABC to deliver on key content objectives. Our expectation over the 3 years of the Triennium, if we include both our base and new funding, is for: ABC Children’s TV to spend a total of $48.2 million on the production of Australian Content, of which almost $40 million represents licence fees to be paid to independent producers generating 455 hours of content.

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o This expenditure by ABC Children’s TV will generate a total of $104 million of Australian production value, of which $95 million represents production by independent producers. ABC Drama to spend a total of $82 million on the production of Australian Content, generating 133 Hours of content. o This expenditure by Drama will generate a total of $130.0 million of Australian production value. ABC Comedy to spend a total of $26 million on the production of Australian Content, generating 43 hours of content o This expenditure by Comedy will generate a total of $35.0 million of Australian production value. In the areas of Documentaries, Entertainment, Factual and Arts the ABC expects to spend a total of $90 million on the production of Australian Content, this will generate 405 hours of content o This expenditure by Documentaries, Entertainment, Factual and Arts will generate a total of $150 million of Australian production value. In total, the ABC is committing $238 million across the next three years, generating production budgets of over $400 million and commissioning over 1000 hours of new Australian content. Children’s programming is a central plank of this new round of content investment. When I spoke at SPAA three years ago I mentioned a proposition to establish a digital free-to-air children’s channel. What was then just a 7

proposition is now a reality. ABC 3 will launch nationally on 4 December and will broadcast from 6am to 9pm daily. It will be aimed at school age children and will deliver over 40 percent innovative, entertaining and interactive Australian content. Bringing this new channel to life by securing Government support and funding has been a great achievement. The Australian Children’s Television Foundation had the idea and the ABC worked closely with the ACTF throughout the effort to make ABC 3 a reality. But really this was a group effort with input and help from community, parent and educational groups, from Federal politicians from all sides of politics, from State Governments, from SPAA, the MEAA and in general from the independent film and television production sector. What we have achieved with ABC 3, indeed what we have achieved with this triennial funding outcome, demonstrates how effective we can be when the industry shares an agenda and delivers a single and coherent message to Canberra. Development of ABC as a multi channel and multi platform broadcaster Another part of our strategy for ABC Television has been, and still is, to embrace the emerging multi-channel, multi-platform environment to ensure our content is available to Australians no matter what platform, device or technology they use to access it. In the last three years we have relaunched ABC1 and ABC 2. We have developed and launched a high quality video player – iView. We launched ABCforKids on 2 and soon we will be launching ABC3. Our services are available on subscription TV platforms and through a number of portals on the web – including most recently the ABC Arts Portal. You can view the ABC on 8

your desk top, your laptop and your mobile device. You will soon even be able to watch the ABC through your gaming console. ABC 2, our first digital multichannel, has performed consistently well trending upwards in prime time fee to air share since launch. ABC 2 is achieving an average 1.4 % share and just last week achieved an impressive 2.5 million reach figure. It is important to note at this point I think the way in which we have brought ABC 2 to life as it reflects on some of the points I will try to make in a moment about local content. Unlike ABC 3 where there is new money and accordingly at start up 40% local content building to 50% in twelve months, ABC 2 has been funded out of the ABC’s existing appropriation – there is no new money for ABC 2. As a consequence the only way we have been able to fill a schedule for ABC2, outside of our morning News block, has been largely to run repeats of programs from ABC 1 and by acquiring cheap foreign content. It is difficult to draw a comparison with ABC 1 due to the different transmission hours but if we look at the total first release Australian content on ABC1 between 6am and midnight compared to the total first release on ABC 2 you see there is approximately 50 per cent less first release local content on ABC2. The launch and subsequent performance of digital multi channels has been one of the stand-out success stories this year for the free to air platform. However, the impact of these channels on the creation of new local content has been minimal and as far as the local production sector is concerned, there has been little to celebrate. Another great development at the ABC has been iView. iView has also consistently grown its audience month on month. In the twelve months to 9

October iView more than doubled the number of visitors to the service and more than quadrupled the number of visits. October saw iView’s highest visitor figures to date with over 285,000 individual users of the service and over 1 million visits. For the year to date iView has recorded a monthly average of 610,000 visits up 140% compared to the 2008 monthly average of 255,000. In terms of delivering a multi-platform and multi-channel strategy I think we have made good progress so far. However the implications of moving from a single point of aggregation to multiple platforms and channels both linear and time shifted have yet to really become apparent. These implications will become clearer over time especially as the commercials’ new multi channels develop. GO! in particular has performed extremely well in the multi channel context. And moving forward with developments in both broadband distribution and intelligent set top boxes there will be a range of new challenges to both the broadcasting and production industries. It is to these challenges that we must now turn our attention. Broadband

As I said at the start of this speech I am interested in doing two things today, reviewing our performance against the issues flagged in 2006 and looking at the new and emerging issues for both broadcasting and production that have the potential to fundamentally change our industries.

Specifically with regard to the latter I want to look at how technological change may impact the success of the broadcasting and production industries and the place of regulatory intervention for cultural purposes in the new digital era. I 10

spoke about this last year at SPAA and some of you may have heard me banging on about it a number of times since – most recently at a broadband forum in New Zealand two weeks ago. So to those people I apologise for sounding repetitive but I believe that this is an issue that has the potential to significantly change the nature of the business we work in and I think we need to start talking about it today.

As you may know I am both the Director for Television at the ABC and the Chair of Freeview. Freeview is a recognition that in the digital world we need to actively and strategically establish, brand and promote the free-to-air digital terrestrial television platform. I am not here today representing Freeview. However, the ABC is a part of the broadcasting industry, it is increasingly involved in broad partnerships with the commercial networks and of course it participates in the same broad policy discussion that shapes and supports the television and content creation sectors. And at the end of the day, our business is the same as theirs – aggregating content and delivering it to audiences. So inevitably talking about the health of the production industry means talking about the free to air broadcasters.

In Australia today we are experiencing a communications revolution. Digital production, digital transmission, set top boxes with significant data storage capacity, clever EPGs, mobile smartphones and faster broadband. All of these developments are happening now, within the space of a couple of years, but it is the last I think that will serve as the most significant disruptor to the traditional television business model.

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Over the next eight years the Government will invest up to $43 billion to build a national fibre to the home network bringing 100 megabits per second capacity to approximately 90 per cent of the population. It will be open access and it will sell wholesale services exclusively. The National Broadband Network is going to change the nature of competition in the fixed telecommunications market. It is also going to provide the basic infrastructure to fundamentally change the nature of competition in the content market. But even more than that it is going to bring the two together as part of a single proposition.

The provision of open access to wholesale services on the NBN will allow almost any prospective service provider to purchase capacity and use it as they will. The opportunities for the delivery of new and expanded media services are significant. Because it will be open access, television providers of any stripe can purchase wholesale broadband access and use it to deliver television services (be they IPTV or something else) directly to the home at a quality of service and speed not possible over the open internet today. These will not be internet TV offerings but subscription type offerings over closed virtual networks carried on the NBN. Ultimately the NBN will provide the basic delivery platform to significantly change the television industry by opening the door to as many new TV providers as the market can support. Importantly the NBN spells the beginning of a new chapter in the convergence journey that we have been on for some time now. The question is: what do these developments mean for the television broadcasting industry, the production industry and importantly for the objectives enshrined in our cultural policies?

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There has been a spirited debate about the NBN that has focused mainly on technology, access regimes and the structural arrangement applying mainly to Telstra. What is missing from the debate is a discussion about the nature and range of local content that will be available as opposed to the platform by which it is delivered.

And where content is missing from the debate about such a landscape changing technological development the implications for the producers of that content can be quite significant.

Telecommunications companies globally recognise that their bread and butter, in terms of revenue, come from voice and data. Where the infrastructure to provide those services is open, and retail competition healthy, a differentiator such as a premium content service bundled in with voice and data becomes an attractive acquisition and retention tool.

So let us imagine a product that offers customers access to high speed broadband, along with a land line and with a mobile contract bundled in. On top of that it offers access to movies on demand, a range of subscription television services via a closed network on the NBN and access to a suite of “free” television services either via the NBN or off the air. To the viewer it makes no difference where the signal comes from. The free services could include traditional free to air services as well as other niche genre services. These television services are overlayed with an intelligent EPG which allows time shifted viewing and perhaps even some kind of skip functionality. And all of this of course comes in one box and is charged through one bill. The key in this scenario I think is that the core revenue for telecommunications 13

companies is going to come from voice and data. The content services are a premium acquisition tool and as such would be priced cheaply enough, or even be for free, in order to entice customers into the bundled offering.

But in order to sell cheap content you have to buy cheap content and in Australia that means getting access to mainly foreign channel packages.

So with the NBN comes a range of potential new television services, a new type of converged service and potentially a greater incentive to acquire cheap content from off shore. We already see this with subscription TV today but the difference here is that the content could be priced cheaply (as a loss leading part of a bundle) and the penetration of the service into the market (being one part of a telecommunications bundle) could potentially well outstrip the 30% penetration we see in the subscription TV sector today. Of course the existing regulatory requirements on the free to airs will remain, in theory, so that any retransmission of those services continues to include local content. And the requirements on subscription based drama will remain. But the point I am trying to make is that these services will potentially be only one small part of a much broader range of channels or content available on demand. And consequently the viability of those traditional sources of local content may come under threat and their ability to deliver local content into Australian homes may be reduced.

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But this is only one part of the picture, another part, of course, is audience fragmentation and the impact of that on the traditional business models for commercial free to air TV. When you add the digital switchover into the mix what you have is an ever increasing array of content available on multiple channels and multiple platforms which audiences can choose to watch when they want and where or how they want. It is perhaps stating the obvious but in order for there to be a healthy local production industry there needs to be a demand for its products. And in order for there to be demand there needs to be, at least today, a healthy television broadcasting industry. We need commercial broadcasters who are viable and national broadcasters who are adequately funded. We can’t have one or the other. We need both. We also need rules around local content because without them the commercial reality is that, when broadcasters begin to feel the pinch, the first thing to go will be expensive to produce local content. Experience tells us of course that this applies as much to the ABC as it does to the commercial broadcasters. While I firmly believe that television will continue to aggregate large audiences as no other medium can for many years to come, the strains on traditional business models of increased competition and audience fragmentation will undoubtedly place pressure on certain regulatory interventions as well. In terms of policy the disconnect, for me, is between where the technology is taking the business models and where our cultural policy interventions are targeted. Policy

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Television, broadcasting and the screen content industries more generally are fundamental elements of our culture and our society and all governments exercise some level of control in order to achieve certain outcomes. However, in the digital era, in Australia, as in many other parts of the world, while the policy objectives remain similar, the mechanisms by which to achieve them are under increasing challenge. As the technology and commercial models change the regulatory regime, understandably, lags behind What is important to remember is that television is more than just a commercial product or business model. TV, and particularly free to air TV, plays a significant role in reflecting and shaping our national identity, our values and our culture. Without television, specifically free to air television, where would we be? Particularly in Australia where even with its small market and the absence of a language barrier over 50% of the content is locally produced across a diverse range of genres: I think it is fair to say we would be significantly poorer culturally. And it is this cultural dividend that comes out of television, as well as new opportunities presented by a range of other cultural institutions, that needs to be highlighted, that needs to given a priority in the context of the broadband evolution that we are experiencing today. We need to ask: What can we do to ensure that adequate levels of Australian content can be viewed by Australian audiences no matter what platform, what device or what technology is used to distribute it?

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First off, as I have already said, we need to look at the domestic production industry and ensure continued demand for its products. The lion’s share of that demand comes from the free to air broadcasters. One part of maintaining that demand is to address the commercial and regulatory underpinnings that support that sector’s continued ability to commission local content. The fact is local content is expensive to make. These are commercial businesses and as they feel the pressure, so too will the regulatory measures that cost them the most. However what is also important to consider is demand from the new types of television broadcasters.

No matter if you’re watching television content on a TV in your home delivered wirelessly or via broadband, or if you’re watching television content on your mobile phone or if you’re watching television content on your computer and regardless of whether it is advertiser supported, subscription or a public broadcast service – you are still watching television content. And television content is a powerful cultural asset. As telecommunications providers become part of the television landscape so too does television become part of the telco product offering. An obvious question to ask is whether there is any scope for harmonisation of regulation across platforms, between sectors or within sectors. Or even whether or not harmonisation would help to achieve our cultural policy objectives. The fact is ours is a small market. It is an unfortunate reality of having a small market that in the absence of regulatory intervention to achieve cultural outcomes, such as local content, there is less local content.

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I don’t pretend for a minute that there are not significant problems with trying to impose new and costly content requirements on emerging or even existing providers. Not least is the impact it might have on the viability of their businesses.

There are also considerations such as existing Free Trade

Agreement obligations, the existing regulatory relief provided to some sectors and not others and the inherent difficulties of regulatory intervention in a fast evolving technological landscape.

In part this is why we have the 2000

Ministerial Determination stipulating specifically what broadcasting is NOT. That is, it is not “a service that makes available television programs or radio using the internet.”

But in the NBN world we won’t necessarily be talking

about TV over the internet. We might be talking about dedicated networks or closed networks and in those instances opportunities for harmonisation may exist. I do not have the answers. However I am not one of those people who says that simply because it is difficult, because it is complicated, that we should throw up our hands and walk away. The implications of these changes are too great for the local production industry and ultimately for our culture. What we need to do is consider the balance between the regulatory burdens on existing players, and the impact of that on their viability, along with potential new regulation of emerging providers within the overarching cultural and social policy outcomes we want to see. Aside from regulatory intervention what other options might we consider? One is direct funding. As I have already outlined ABC TV had a very positive outcome at the last federal budget in May of this year: an additional $137m over three years. So we are not complaining. But more broadly if we want to 18

continue to see locally produced content, and television networks begin to feel the strain of new competition through broadband platforms, then one idea might be to transfer wealth between two parts of the communications sector. Just as spectrum is moved from one industry to another some of the proceeds from that sale could be used to support local content production on new platforms – both wireless and wired. So while a healthy free to air sector and the maintenance of quotas can be used to drive demand, a direct funding transfer from one part of the communications sector to another can be used to help support supply. Quite specifically, the digital dividend could also help to deliver a content or cultural dividend by establishing a local content fund. There are other funding options that could support the extension of traditional content industries into the telecommunications environment. The movement of wealth between industry participants to satisfy social objectives is not new. It happens today with mechanisms like the Universal Service Obligation and levy. As the lines between communications and media models become blurred there may be scope to extend such measures to ensure other social objectives – such as local content – continue to be met. And in the same context there are tax support measures in place today for the content production sector. The taxation measures we have in place today have definitely assisted the production industry. But we cannot look at them in isolation. Some of that taxation benefit has been offset by other factors such as reductions in production investment from Screen Australia. With I suspect more to come. Also it is my belief that the offset is not high enough for television. At 20%, for the most part it does not allow producers to work

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directly with broadcasters without some kind of direct subsidy, and as I have just said, that subsidy which was already very limited has been reduced. We also need to consider the focus of the support – should the TV rebate be half the size of the features rebate? Should the rebate extend to other genres? Given the focus in this conference on children’s content, the question needs to be asked why it is that the rebate can be used to support the production of adult or C quota drama yet the restrictions around budget levels and episode length effectively exclude the support of pre-school animation. Should the rebate extend to content created for other platforms? Australia is now one of the few western countries where there is virtually no funding, direct or indirect, for the creation of local content for online and interactive platforms. What we need to develop is a holistic framework for continuing to meet our social and cultural policy objectives. And this framework needs to be broad enough to encompass all of the artistic or content creation streams, it needs to support and encourage the participation in the digital space of as many of our cultural institutions as possible, and it needs to address the supply and demand issues across all delivery platforms. Ultimately, in parallel with the development of our broadband infrastructure and the associated access and competition policy framework, we need to also focus squarely on cultural policy and the cultural infrastructure that will support it across the new broadband platforms. Conclusion In concluding I would just like to recap on some of the major themes I have covered off today. 20

The ABC’s relationship with the independent production sector is still a work in progress but I believe it is in far better shape than it was 3 years ago. In order to promote the health and prosperity of the sector as well as the best interests of the ABC we have worked to foster transparency and cooperation. We have focused on partnerships and on leveraging the best possible outcomes from the resources available. Working together we have achieved some great outcomes in terms of the volume, diversity and quality of programs. The ABC has had a significant funding boost from its triennial funding bid including more drama funding and importantly a new children’s service. We relaunched ABC 1 and 2 and have seen real success with iView. We have worked on our strategy to position the ABC as a multi-platform, multi-channel broadcaster in order to provide all Australians with as much access to our content as possible and will continue to take advantage of opportunities as they arise. With regard to emerging digital technologies and in particular the impact on our sector of a national, open access, wholesale broadband network, I believe it is time to focus, not only on the technology infrastructure we want to build, but also the cultural infrastructure we want to build. We need to consider the broad cultural objectives we want to achieve. We need to consider the mechanisms which might be necessary to support demand for our content products – whether that be through measures to support the viability of our main acquirers of local content or by extending the regulatory umbrella to achieve the same cultural objectives through new content services. 21

We need to look at whether there is any scope for regulatory harmonisation and the possibility of transferring wealth within the communications sector to support cultural objectives. The important conversations we need to have today are about the place of our cultural products, in particular our screen products, in a digital era where channels, platforms and devices are plentiful and the line between distribution technologies is invisible to the end user. We need to start developing a forward looking policy framework that will work for the digital age and that balances economic and cultural priorities. These discussions are already happening – the Minister for the Arts, Peter Garrett, is running a cultural policy consultation right now and the ALP’s New Directions for the Arts policy, developed for the last election, mentions specifically the importance of new technologies to the creative industries. It also proposes the development of a Strategic Digital Industry Plan and importantly a Strategic Film and Television Industry Plan along with a review of the viability of the independent production sector. As we have seen in the recent past a concerted effort from our industry and a receptive Government, can result in significant change. So too a concerted effort from our industry can start the dialogue that needs to happen about our long term cultural policy objectives and the long term prosperity of the production industry.

Discussions about technology, about competition policy, about broadband infrastructure also need to be discussions about content, about social policy outcomes and about building Australia’s cultural infrastructure. And it is to 22

those basic building blocks of cultural policy and Australian screen content in the new digital era that we now need to turn our attention. Thank you.

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