House of Cards. Netflix

ABC managing director Mark Scott has suggested digital content companies such as Netflix, Apple and Google pay a percentage of their revenue into a fund to pay for Australian content.

While Australians are avid consumers of US-generated shows such as House of Cards and Orange is the Black, both commissioned by Netflix, Scott argued that Australia is at a crossroads for local content during the inaugural Brian Johns lecture at Macquarie University last night.

He warned that while Facebook and Apple helped generate new audiences for content, it “comes at a high price for news businesses because it also takes audiences away from websites and apps on which those organisations have banked their digital future”.

Scott says “new competitive and financial pressures are going to make it even harder for the commercial television operators to finance the telling of Australian stories”.

And when it comes to imported versus local content, the cost differences are stark.

Scott said he can import the British show Antique Roadshow for 4% of the cost of producing an hour of the Australian equivalent, The Collectors.

“The inevitable push will come for lifting of the current regulatory requirements around Australian content,” Scott said.

The one exception, the ABC boss argues, is pay TV provider Foxtel, which changed its approach and increased Australian content as a point of difference, but he says the audiences remain small for the subscription service because not everyone can afford it.

And sport dominates for local content.

“Look at the Foxtel numbers: 49 of their top 100 programs last year were NRL games or shows and another 35 AFL games or shows: nearly 85% of the top rating programs from just two sporting codes,” Scott said, adding that “reality franchises and premium sport make more sense than the risky investment in drama and comedy”, which costs around $1 million for every 30 minutes to produce.

“Funding local productions of drama, documentary and narrative comedy is a persistent challenge and one that has become even harder as a result of cuts over time in funding to the national broadcasters, Screen Australia and state-funded bodies,” he said.

And the gap between Australian content from traditional media players and the new entrants is stark.

“Already we can see the percentage of Australian content on free-to-air multi-channels, on Pay-TV and on SVOD services is dramatically lower than when we only had a handful of single channel free-to-air operators,” Scott said.

One way Australian politicians “might ensure desired cultural outcomes” he suggests is “a digital content fund, requiring new digital content companies, many of which dwarf their Australian competitors, to contribute a percentage of revenue to support local content requirements has been proposed”.

He points to the Netflix tax being introduced by Joe Hockey, which is expected to generate around $3.2 billion in revenue over a decade.

“This is indicative of revenue that might be available from new players whose presence makes it harder for local competitors who have inherited responsibilities to sustain Australian content,” Scott says.

“Because the Netflix business model is based on content with international appeal, ammortising the cost of producing that content across hundreds of markets, Australian content will struggle to remain just that, uniquely Australian”.

Mark Scott doesn’t believe local content rules are the solution.

“Some will argue that Netflix and others should simply be required to spend a certain amount of local revenue on local content.

“But ‘Force Netflix’ might be a bit like ‘Tax Google’: a simple two-word policy statement that sounds good in theory but is far harder to implement in practice.

“Some may call for most standardized local content requirements across all providers: pay, free-to-air or SVOD. That will redistribute the current burden, but most likely see less quality Australian content on free-to-air TV”.

The ABC managing director, who steps down from the role after 10 years in June next year, says his preferred option is to increase the producer rebate for TV production to 40% to match the film industry as an incentive for more Australian content.

You can read the full speech here.

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