e.tv in the South African regulatory context

Policy Objectives

Broadcasting policy – 1994 to date

• Establishment of IBA in 1994

• Triple Inquiry Report:– Community radio– Ownership and control of broadcast media– Public broadcasting: integrity & viability

• Recommendations to Parliament

BronwynK:

Refer page 3 and 4 of submission

BronwynK:

Refer page 3 and 4 of submission

Regulatory imperatives

• Focus on radio (community empowerment)– Licensing temporary community radio stations

• Community of interest

• Geographically-defined communities

– Privatising SABC regional radio services– Issuing new commercial radio licences

• Introduction of licence conditions for M-Net and Open Window

• Signal distribution licences

Private television

• Feasibility study into introduction of private commercial television– Based on assessment of TV market– SABC as public broadcaster but relying heavily

on ad revenue

• Public hearings into television policy

Position Paper on Introduction of First Private Free-to-Air TV Channel

• Policy took account of:– Availability of adspend– Competitive environment– Viability of SABC – 3 x PBS channels– Frequency availability– Minimum conditions for licence applicants– Conditions applying to 3 SABC services– Provision for Promise of Performance

BronwynK:

Refer pages 6 to 8 of submission

BronwynK:

Refer pages 6 to 8 of submission

TV licence hearings - 1997

• e.tv preferred applicant owing to:– Black empowerment shareholding – trade

unions– Promise of performance on programming– Promise of performance on staff quotas and

training– Proposals concerning news

Broadcasting Act 1999• White Paper on Broadcasting Policy 1998

– Initiated by government– Regulatory objectives for SA broadcasting

system – Structure & functions of public broadcasting

system

• Broadcasting Act – Division of SABC into PBS and CBS– Public service objectives of SABC

• Local content regs consequently amended

BronwynK:

Refer P10 of submission

BronwynK:

Refer P10 of submission

e.tv: Summary of Licence

e.tv’s Promise of Performance

• 45% local content in performance period• 4 hours prime time drama per week• 16 hours children’s programming per week

– 20% local– 20% languages

• 19 hours information programming per week (2 in prime time)

• Minimum weekly language obligations

e.tv’s Promise of Performance

• 40% African staff• 35% female staff• 5% disabled staff• Management majority historically disadvantaged• Training commitment – 11% of salary bill• All local programming other than news & current

affairs commissioned from independent sector• Licence compliance measured on annual basis

e.tv’s Promise of Performance

• Promise of Performance made in context of policy statements on SABC in Triple Inquiry, Position Paper, Broadcasting Act, local content regulations

• Local content requirement of SABC at the time was 50% - all three channels

• Commercialisation of one channel not envisaged

e.tv: Business Overview

e.tv timeline

• Six-hour service launched in October 1998• News service launched in January 1999• 24-hour service launched in February 1999• Management shake-up: June 1999• Rand crash: December 2001• Additional investment requiring licence

amendment: 2001/2002• e.tv becomes 2nd largest channel in SA: 2002• Break-even: March 2004

Cost of Broadcasting

• Set-up, infrastructure & technology

• Signal distribution

• Local programming (R per minute)

• News

• International programming ($ per hour)

• Staff

• Operational

e.tv Investment

• Projected: R500m over three years

• Actual: R1.5bn over five years (requiring new shareholder investment)

• 1st profit of R30m at end of fifth year

• Profit potential limited by unfair competitive broadcasting environment

Principles governing commercial broadcasting

Advertising

Audiences Programming

Principles governing commercial broadcasting

• Commercial TV is a business – overriding objective is to make a profit

• Primary purpose is to raise advertising by drawing audiences attractive to advertisers

• To attract audiences, the broadcaster must offer them programming which interests them

• Tension between regulation and commercial imperative of commercial media

Most popular programming

e.tv• Wrestling• Movies• Local (Backstage)

General• Local• Movies

Regulation for a competitive environment

Revenue sources

• e.tv:- Advertising (limited to 12 mins per hour)

• SABC:- Advertising (no limits)- Licence fees- State funding

• M-Net– Advertising (open window: added benefit)– Subscription fees

Why regulate commercial media?

• Public service philosophy:– TV frequencies are a scarce resource and must

therefore be allocated to ensure diversity and public benefit

– May change with new technology

• Competitive market philosophy– Ensure a vibrant media market by placing

restrictions on media to allow plurality and diversity (e.g. radio licence formats)

Why regulate public media?

• PBS is funded by public money & advertising• In other parts of the world, PBS is not regulated

by independent regulator – governed by publicly appointed board (same as SABC) accountable to Parliament

• What is the difference in SA?• Why must the SABC be regulated by the

independent regulator?

Current regulatory issues

SABC amendment application

• SABC presently has no specific licence conditions

• Broadcasting Act requires SABC to apply for amendment to its licence to reflect:– Reorganisation– To impose appropriate licence conditions

SABC amendment application

• SABC legal argument:– Provisions of Broadcasting Act are sufficient

licence conditions– Imposition of specific licence conditions entails

infringement of freedom of expression– SABC accountability is to Parliament through

publicly appointed board – SABC itself must determine licence conditions

through policies & ICASA must monitor compliance with these policies

SABC amendment application

• SABC market argument:– Provision of public service programming is

expensive – therefore important to maximise ad revenue

– SABC serves a greater lower-income audience unattractive to advertisers

– e.tv has eroded SABC’s audience and market share

– Continued growth by e.tv will have devastating effect on SABC

– Therefore light-touch regulation should apply

e.tv submission (legal)

• Broadcasting Act sets out general statements of principle – not licence conditions

• Licence conditions must be measurable and quantifiable to be enforced

• Licence conditions determine quotas and not content – therefore no BoR infringement

• Proper regulation of SABC key to ensuring fair competitive environment in SA (s2 objectives in IBA Act & Broadcasting Act)

• e.tv licence conditions more onerous than SABC• SABC CBS must have same licence as e.tv

e.tv submission (market)

• e.tv growth has stagnated from early 2004 owing to commercialisation of SABC

• e.tv serves a higher low-income market than any SABC channel other than S1 (Nielsen)

• SABC is a virtual monopoly– Three TV channels & 19 radio stations– Cross-promotion– Counter-scheduling (competition in

acquisitions)– Cross-selling (anti-competitive discounting)

e.tv proposals: licence conditions

• P.O.D: – (1) SABC serves public, not audience (prime

time as imp. in PBS TV as commercial TV)– (2) SABC benefits from multiple outlets with

multiple revenue streams

• PBS proposals – specific & measurable public service obligations

in prime time– Limit on no. of advertising minutes per hour

• CBS proposals – same conditions as e.tv

e.tv proposals: licence conditions

• Proper separation of PBS and CBS• No cross-promotion between CBS and PBS• Repeat programmes aired on other channels

not counted towards local quota • Airtime sales of PBS and CBS to be

separated• Programme acquisitions of PBS and CBS to

be separated

Future regulation

• SABC application to be heard in September

• New public regional services to be licensed

• M-Net Open Window to be closed

• Introduction of digital transmission