Abc and sbs efficiency Study

1. Introduction

At a high level, the broadcasters provide a wide range of services from government funding. For example, with $1.1 billion per annum (p.a.), excluding transmission, the ABC operates multiple television, radio, online and mobile services which are detailed in the 'ABC and SBS at a glance' table in section 2.2 below, as well as:

broadcasting approximately 180,560 hours across television and radio annually

commissioning more than 2,550 hours of content and broadcasting more than 890 hours of first-release Australian TV prime time content on ABC1

producing the iview catch up service with an average of 18 million plays per month

delivering ABC News online accessed by 7.6 million visitors

broadcasting the Australia Network into 46 nations in Asia, the Pacific and the Indian subcontinent

operating 52 retail outlets and the ABC Shop Online

supporting digital television transmission at over 400 towers and 33 television and radio services on the Viewer Access Satellite Television (VAST)

Similarly, the SBS with $286.9 million p.a., excluding transmission, delivers:

approximately 2,840 hours of subtitled programs across SBS ONE and SBS 2

approximately 3,769 hours in a language other than English (LOTE) on SBS ONE

over 80 hours of commissioned content

an average of 12.5 million viewers each month on SBS ONE

digital radio to six metro regions

273 digital terrestrial transmitters and 190 retransmission services

seven VAST direct-to-home satellite services

advertising revenue of approximately $50 million p.a.

This can be compared with the annual operating budget of TEN Network Holdings of $637.5 million in 2013² which has three TV channels and five metro markets (Sydney, Melbourne, Adelaide,

Brisbane, and Perth) or Southern Cross Austereo which provides 104 TV channels and 78 commercial radio licences for around $431.6 million in 2013.³

In recent years, including in the context of triennial funding reviews, debates have tended to focus on the 'adequacy' of national broadcaster funding without the necessary detailed data to determine how the broadcasters allocate funding, the flexibility of resources between different categories of expenditure and different priorities, and/or the scope to do things better to achieve the same output. The result is that assessments of 'adequacy' become ill informed discussions about whether the broadcaster should receive additional funding for some new activity or whether the broadcasters have enough funding for capital.

The objectives of this study are to clarify the costs of providing national broadcasting services, provide options for more efficient delivery of services and identify risks and impediments to change. The study also considered the budgeting and decision-making structures of the broadcasters and mechanisms to improve transparency of their operations.

The study is focused on improving the value of how a service is provided and not about the service itself. The study considers other ways by which those services can be provided and Charter obligations can be met, which may involve moving away from the historical or traditional way the national broadcasters have provided their services.

1.1 Parameters of the study

the ABC and SBS Charters, legislated obligations, editorial and operational independence from government

ratings, audience reach and other relevant audience measures for ABC and SBS programming

changing audience demand, particularly increasing use of catch up and online services

the role of ABC and SBS in the provision of emergency services information

the geographic spread of services and infrastructure, their importance to communities compared to the costs of maintaining services

the relative importance/performance of the ABC and SBS compared to other broadcasting services in local markets.

The study was not limited to a consideration of these activities separately, but also considered outputs on a cross-platform basis, for example, delivery of news and current affairs across TV, radio and digital, where useful.

The study has focused primarily on cost of inputs that is the 'back of office', day-to-day, operational and financial operations, structures and processes applied to delivering ABC and SBS programs, products and services. However, a simple focus on, for example, the cost of routine administrative activities such as human resources administration or information technology is unlikely of itself to deliver substantial changes to the cost basis of the national broadcasters or implement long term structural change which would embed these efficiencies. Hence the review has also looked at a range of more complex and potentially controversial issues such as whether (or the extent to which) services should be on different transmission platforms, whether the organisations should share accommodation at least at some level, and whether the organisations can purchase the supply of services which are intrinsic to the production of content (for example, studio space or studio equipment) on the market rather than owning or undertaking these themselves.

Thus a broad definition of efficiency has been adopted, encompassing traditional definitions of efficiency (the same output with less input, or more output with the same input) but also options which involve increased revenue generation, or which could involve re-allocation of resources between priorities to ensure that the existing cost base is able to respond to the changing economic, market or technological landscape without escalating demands on public funding. For example, variabilising their cost bases by using a higher proportion of resources to buy services rather than depreciable assets in order to ensure an ability to adjust to changing economic environments, could achieve fiscal efficiency without reducing specific costs. A reduction in the duplication of service delivery is not considered a reduction in services when a service is provided on multiple platforms.

Both the ABC and SBS are complex business operations with different internal structures, management processes and reporting mechanisms. This made it challenging to obtain detailed breakdown of resources and activities in the form required for the study to enable comparison of activities between the two organisations. This analysis of information has itself been a valuable activity in terms of greater transparency of the organisations. However, the study has not conducted a detailed and comprehensive 'audit' of activities within the organisations and has not been able to undertake a detailed cost analysis of every aspect of the national broadcasters or form a definitive view on every area of activity. As a result, the study has focussed on more tactical elements rather than a deeper structural review.

Many efficiencies fall into two broad categories: those that could be relatively simply implemented, resulting in readily identifiable changes to costs, and those which are longer term, potentially more costly to implement, and which are likely to require considerable ongoing work, but whose long-term benefits make them worthy of consideration by the management of the national broadcasters. It should be recognised that some efficiencies identified raise complex policy issues for Government or have significant long term structural, cultural, financial and industrial relations issues for the broadcasters. However, the study took the view that while implementation challenges must be acknowledged, this should not prevent the efficiencies being raised for consideration.

The study has not commenced from a perception of efficiency inherent in either the ABC or SBS. The study is aware of operational differences between the two national broadcasters which are not necessarily based on economies of scale. For example, the study has not assumed that SBS must be a more efficient organisation than the ABC simply because it is the smaller of the two. On some measures, SBS is not more efficient than the ABC, which is demonstrated by Section 2.5 on audience. In addition, to achieve some of the efficiencies discussed in this study, the ABC and SBS will need to work together and manage the risk that combined activities will tend towards using the larger broadcaster's operational practices regardless of efficiency.

The following areas were considered outside the scope of this study:

the national broadcasters' primary transmission costs, which are subject to a separate review by the Department

any changes to the ABC and SBS Charters

editorial policies

advertising on the ABC

an assessment or commentary on the quality of programs or products delivered by the broadcasters.

The Terms of Reference for the study are at Appendix A.

In undertaking this study, the Department notes that Government has the responsibility to ensure the ABC and SBS use public funds as efficiently as possible. At present there are limits on the transparency to the public, Parliament and the Government of the itemisation of costs of delivering the ABC and SBS Charter responsibilities and whether these could be more efficiently delivered by the national broadcasters.