Regional television set for a shake-up as Nine partners Southern Cross Austereo

The recent announcement by the Nine Network to dump its affiliation with WIN in favour for a five year deal with Southern Cross Austereo (SCA) raises more questions than it answers for Australian television.

Currently, WIN carries the Nine signal into regional areas of all states and territories, excluding the Northern Territory. Southern Cross is partnered with Network Ten, and broadcasts in Tasmania, Darwin and central Australia.

The deal will see SCA pay 50% of its advertising revenue to Nine in return for broadcasting Nine’s programmes to regional Queensland, Southern NSW and regional Victoria.

This is far more than the reported 34% SCA had paid to Network Ten.

This is also an increase over the 39% that WIN paid during its affiliation with Nine. According to media reports, Nine wanted to lift this to 55% during recent negotiations with WIN, which resulted in an impasse.

There was a last minute affiliation extension of six months between WIN and Nine in December last year, but this did not result in any further dealings. The two have been partnered since the 1980s.

Tensions between the two organisations have also been exacerbated this year. WIN took legal action against Nine in an attempt to prevent it from live streaming over the internet in areas licensed by WIN.

In recent days this case has been dismissed in a NSW Supreme Court. Justice Hammerschlag stated:

I have concluded that live streaming is not broadcasting within the meaning of the program supply agreement, and that Nine is under no express or implied obligation not to do it

This decision to allow for a television broadcaster to live stream its content to arguably all Australians further puts into question Australia’s 20th century media ownership laws, in particular the 75% reach of the population rule.

With free-to-air TV audiences in decline, affiliation swaps and video-on-demand services further reshaping the media landscape, there are a number of questions about the future of television in Australia.

Mergers on the horizon

The affiliation breakdown of WIN and Nine is being framed around the organisations not agreeing on revenue share. But there is another perspective: the potential of a merger between a regional and metro broadcaster.

This could be a strategic move by Nine to link with the weaker of the two regional broadcasters.

If changes to the media ownership laws are passed, therefore removing the 75% reach rule, this will open merger opportunities for the metro and regional broadcasters. However, they are yet to acknowledge this as a definite future option.

SCA has been reported to have struggled for profits, last year stating:

The full year FY 2015 results reflect a weaker television advertising market and a reduced, but stabilised metro radio market share.

Grant Blackley, chief executive of Southern Cross Austereo, was asked about a potential merger during March of this year. He stated:

At this point in time we have no visibility as to what the Seven, Nine or Ten networks' intentions are. But, you know, we will be openly looking to see how we can improve services for regional viewers.

After the announcement of the affiliation, Blackley stated that he believed it “will provide a substantial uplift in audience and revenue opportunity, which will be far more advantageous for the company and shareholders”.

Whilst both SCA and Nine are rejecting the idea of a merger, when asked about merger discussions with SCA, Nine CEO Hugh Marks stated: “We’ve had no recent talks about a merger.”

If media ownership changes were to go ahead, it could see Nine and SCA “embark on a A$1.7 billion merger”. This would result in what is defined in the proposed media ownership laws as a “trigger event”, which would lift the required hours of “local content”.

Who is broadcasting who

Regional viewers as of July 1 will see the Southern Cross television brand replaced with Nine’s branding, which is an interesting move in itself.

In areas serviced by Nine’s own regional broadcast company, NBN Television, SCA will “maintain its affiliation with Ten for programming”.

It is also believed that SCA will continue to broadcast Seven’s programmes and continue its affiliation with the Seven Network in Tasmania, Darwin and central/remote Australia. WIN is also expected to continue to broadcast Nine content in Tasmania and regional Western Australia.

The affiliation changes and interlinking of the metro and regional broadcasters raise further questions for the future of regional broadcasters and what the future of regional television in Australia will be; particularly local content.

Nine and SCA’s affiliation switch leaves both WIN and Ten without an affiliation partner. The obvious solution will be for two broadcasters to form an agreement, but this will see WIN now associated with the third ranking commercial television broadcaster.

It is likely that Ten will pitch to WIN its improvements in ratings over the past 18 months, which is due to programs such as The Bachelor, I’m a Celebrity, Get Me Out of Here, Masterchef and the Big Bash League cricket tournament.

Coming up next

While there is a clear argument to review our media ownership laws, which are far outdated and do not include any discussion of the internet, we need to be cautious of the changes made and the flow-on impact.

Regional areas will be the hardest to be hit by these affiliation changes, and those that may follow from media ownership changes. It is unclear how big of an impact these changes will have on local content, in particular local news.

Producing content is expensive and the increase of percentage revenue from the metro broadcasters onto the regional is only taking away funds that could be used for local programming.

The first Australian regional television licenses were granted to those with interest in the region. If a metro broadcasters was to purchase a regional broadcaster, this would see a change in the broadcasters “local interest” and therefore the way in which they approach “local content”.

It is the definition of “local content” that must be interwoven within the debate prior to a trigger event occurring. If this is not done then locals in regional areas are set to lose out, when a merger of a metro and regional broadcaster occurs.