Commercial TV licence fees are holding back Seven, says Kerry Stokes

The chairman of Seven West Media, Kerry Stokes, address TV licence fees, success of the company and investment overseas.

The chairman of Seven West Media, Kerry Stokes, spoke to a room of clients, advertisers and media at the company’s annual general meeting this week.

Below is a transcript of his address to the crowd.

There is no doubt that it has been a challenging twelve months for all media companies. These challenges also deliver us some significant opportunities.

Under Tim Worner’s leadership, his team has maintained our market-leading presence across our media businesses in broadcast television, publishing and online and new forms of content delivery. These new forms of content delivery are now the cornerstones of our future, and it is changing our business.

We are focused on how we create content, and deliver that content. And do so, more efficiently. Much has been undertaken over the past 12 months in changing how we do business: in particular building our creative content, managing our costs and driving greater synergies across our media businesses.

Over the past 12 months, we have led in the delivery of our television content beyond the television screen. Our objective is simple: we will engage with all Australians and connect our audiences with our advertising and marketing partners across all screens.

The Olympics torch for Rio 2016

The Olympic torch for Rio 2016

The success of our Olympic Games coverage – which set new benchmarks – underlines this approach and provides a clear indication of our company’s future.

Our Olympic Games partnership, our forthcoming coverage of the Rugby League World Cup and the Commonwealth Games, and our new agreement with the Australian Football League, will play clear and defining roles in our future development.

We are also making significant progress in taking our leadership in the creation and production of television programs for international markets with the formation of 7 Wonder and 7 Beyond and our new strategic shareholding in Slim Film and Television in the United Kingdom.

My Kitchen Rules judges Manu Feildel and Pete Evans

My Kitchen Rules judges Manu Feildel and Pete Evans

My Kitchen Rules – a Seven creation – has secured significant international agreements with Seven producing local versions in many markets, including the United Kingdom and the United States.

The success of these international developments will see us continuing to expand our presence in the production of new television content in international markets over the coming 12 months.

It is interesting to note that the UK Government acted in 2011 to dramatically reduce television licence fees to almost zero. They also adjusted local production incentives. As a result the television industry and production industry are thriving and growing. In fact, they are one of the best-performing sectors in the UK economy. This is one of the reasons why Seven is investing in production in the UK.

Australian commercial television licence fees are holding back our company and the industry from the opportunity for achieving growth as has been experienced in the UK. Our licence fees are 15 times higher than those levied in the UK and more than 100 times higher than both the UK and the US. In both the US and the UK spectrum available is of a similar size but the licence fees are so much less.

We urgently need the issue of licence fees and production incentives to be addressed as the most important of media changes.

Much has been made about the entry in the Australian market of Netflix. One of the programs they have just made in the UK is reportedly the most expensive television drama ever produced.

No question they commission ultra-expensive blockbusters in the UK and the US but those blockbusters do not create a whole industry. The industry is created by the total demand primarily of the major free-to-air broadcasters. In Australia, 6 out of every 10 dollars spent on film and television production comes from commercial television.

Netflix-World

Netflix is reported to have spent around $5 billion on content in the last year. Not much of that money is being spent in Australia.

Australian taxpayer dollars are now contributing to the Netflix business model by way of the ABC. The Government will need to test whether that is an appropriate expenditure of public funds.

Perhaps we should not be too surprised, since neither the ABC nor Netflix are likely to pay Australian taxes. Their model will certainly ensure less tax paid in Australia by traditional companies, as we compete against those who have advantages not available to us.

Our Government has highlighted jobs and growth as a key focus for our economy. The UK example shows that commercial television has a key role to play in contributing to that goal. But the Government needs to play its part by getting the regulatory settings right to encourage growth and innovation.

If we do not do this, the free television services that Australians love are at risk. And even worse, our Australian economy is missing out on the jobs and growth that this industry can deliver.

the-sunday-times-and-perth-now

The recent acquisition of the Sunday Times and Perth Now online site together with the integration of Channel 7 Perth establishes a framework for these businesses in Western Australia to help meet the challenge of a fragmenting market.

Pacific Magazines is also redefining its business model and continues to innovate and deliver a strong performance in a competitive and tough market, creating its future into new digital applications for its market-leading brands.

We are focused on leadership. We are focused on financial performance and achieving this through continued control of costs while developing entertaining and creative content. Your board and management are committed to building shareholder value and ensuring the future growth of the company. On behalf of the board and our people, I thank you, our shareholders, for your commitment to the company.

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