Elysse Morgan reported this story on Wednesday, August 28, 2013 18:35:00

DAVID MARK: The ABC's iview website - which allows people to watch programs that have already aired on TV - has become a victim of its own success.



ABC management says the site costs millions of dollars to run. Now the broadcaster faces a conundrum: should it continue to fund iview at the expense of producing new content? One option is charging viewers a subscription fee for the service.



Finance reporter Elysse Morgan has the story.



ELYSSE MORGAN: The catch-up television service was launched in 2009, allowing people to watch shows already aired on the television again at their convenience.



Its popularity has grown beyond the broadcaster's expectations, averaging 3.2 million monthly visits in the last financial year.



Director of ABC television Richard Finlayson.



RICHARD FINLAYSON: It's doubling roughly every 18 months at the moment. There's just such a rapid take-up, not only of faster broadband, but also the richness of the content.



ELYSSE MORGAN: According to a report by Neilson, 48 per cent of all Australians aged 16 years and over with access to the internet watched content on iview. But Richard Finlayson says that success comes at a cost.



RICHARD FINLAYSON: We have to pay a charge every time a video is initiated, we have to use a content distribution network, and that's in the millions of dollars a year at the moment for the ABC. So it's something that we've really got to keep an eye on.



ELYSSE MORGAN: What do you mean by that?



RICHARD FINLAYSON: Well you know, I think, it's a spiralling cost of delivery of online videos, and you know every dollar we spend on that sort of stuff means... is a dollar that we can't spend on content going onto the screen.



ELYSSE MORGAN: In its infancy in 2009 and 2010, iview cost the ABC around three million dollars to run - and that cost is estimated to be much higher now that demand for content has exponentially increased.



In the last budget the Government announced $30 million in special funding for the ABC to maintain and expand its online services, which of course includes iview. But it's not enough according to professor Stuart Cunningham from Queensland's University of Technology



STUART CUNNINGHAM: This amount is really a stop-gap I would have thought. I don't see that in the long term that's going to be sufficient; basically $10 million a year for three years to provide support for all online services.



ELYSSE MORGAN: He has just finished a book - The King Kongs of Online - in which he's looked at the cannibalisation effect that online content can have on media companies.



STUART CUNNINGHAM: In some ways it's a victim of its own success. iview's take-up has been such that the costs of servicing that demand has become a real issue.



ELYSSE MORGAN: And with the Coalition likely to win power come September 7, professor Cunningham believes it may well have to look elsewhere for funds.



STUART CUNNINGHAM: I would expect, like many publicly funded enterprises, organisations, sectors in Australia, it'll come under increased scrutiny by a Coalition government - and I wouldn't be surprised to see the ABC having parts of its funding cut.



ELYSSE MORGAN: He believes the future lies in the "freemium" model, charging for some premium content and offering the rest for free.



STUART CUNNINGHAM: If you want to go upscale, if you want the premium quality, then you should be paying for it. It's not unreasonable.



In general, whether the ABC as a public service broadcaster can bring that off politically is another question, but in principle I see nothing wrong with that. In fact I see it as one of the ways of the future for sustainable content provision in broadband.



ELYSSE MORGAN: So would the ABC consider subscription or a premium? It's not been ruled out according to Richard Finlayson.



RICHARD FINLAYSON: It might be that there's a model where you would provide access to that type of content on a pay-per-view or on a subscription basis, but you know it's not something that's on the drawing board right at the moment as far as I'm aware.



ELYSSE MORGAN: Either way, due to recent changes to the ABC charter it is now obligated to provide online services - which Professor Cunningham says it should help it keep some of its online funding, which would be a huge win for the whole communications industry.



STUART CUNNINGHAM: It is an innovation engine for the broadcasting system as a whole. That is a fundamental reason that it might be justifiable for taxpayer funds to be expended on a service such as this - and I for one would argue that, without the ABC, the broadcasting system in Australia would be massively impoverished.



DAVID MARK: Professor Stuart Cunningham of Queensland's University of Technology ending that report from Elysse Morgan.