What you need to know:

• Nine boss Mike Sneesby says linear-streaming tipping point for audiences and revenues circa five years away.
• Free to air networks pushing Federal government hard to drive through legislation that stops their apps being pushed off TV screen home-pages as internet-based TV supplants aerial-delivered programmes.
• Google, streamers and Foxtel lobbying against regulation.
• TV networks claim deals between TV manufacturers and platforms make their apps hard to install and find, while self-preferencing paid TV and Youtube.
• They argue that poses an existential threat to public broadcasting and local content – in the same way as platforms became “gate-keepers” of the internet.
• Broadcasters also warn that smart TV makers and their operating system providers are already taking a clip of ad revenues for distribution. They fear dominant platforms will ultimately hike “bounty” tax with impunity if not reined-in.
• UK, Germany and Canada have implemented or developing similar rules with fines for non-compliance.
• Announcement on legislative plan expected imminently.

Controlling behaviour

The battle to control access to what people watch is reaching its end game, with Canberra this month expected to set out new rules governing connected TV makers and big tech companies attempting to become content gatekeepers while taking a fatter share of video ad budgets – and a 15-30 per cent clip of TV network’s own advertising income.

“We’re in the midst of an operating system war,” according to one TV network exec, with the likes of Google, Roku, Samsung, Sony and LG, the exec claimed, “aiming to control access to every TV screen in the house”.

He said TV manufacturers and platform providers were pushing free TV apps off the home screen and making them hard to find and install on smart TVs, self-preferencing paid subscription content or their own services while charging a “bounty” to TV networks for showing their ads, posing an existential threat to free-to-air TV's ability to fund original local shows and eroding consumer choice.

The network exec drew parallels with the challenges faced by news publishers when disintermediated by Google and Facebook, which effectively became “gatekeepers” while simultaneously monetising news audiences through search or social media feeds. That led to the News Media Bargaining code, which effectively forced Google and Meta to pay compensation for monetising publisher content via search links and social feeds. Meta subsequently pulled out of news as governments around the world lifted the ACCC’s regulatory template.

“We’re seeing those same problems coming our way, the difference being that the transition to a new TV or TV operating system is slower” because people replace their TVs less frequently, he said.  

But with connected TVs now in circa 60 per cent of Australian households, “that bait and switch is happening”, he said, enabling operating system owners to ultimate make money both from ads and/or any prominence deals they can strike, then hiking prices "after reaching [operating system] scale.

“We’re not afraid of competition from SVOD players [streamers], that is not going to go away. We’re afraid of being gate-kept,” per the exec.

“This is not about Australia’s free-to-air networks being given preference, it’s about consumers not being given a choice via a level playing field. Do we really want to get to a situation when all they can [readily] access is TV content they have to pay for, or Youtube?”

Late show

Ahead of details on the new legislation, expected imminently from communications minister Michelle Rowland, TV and video rivals are making last-minute lobbying counteroffensives.

The escalation for dominance of audience viewing – or minimising viewing declines – on connected TVs comes as Nine CEO Mike Sneesby acknowledged in an annual results media briefing that free-to-air broadcasting would hit the tipping point in which digital delivery of viewing would be bigger than linear feeds via an aerial, which started in Australia in 1956.   

"Naturally, mathematically BVOD [broadcast video on demand] continues to grow and free-to-air is in structural decline," Sneesby said in response to a question from Mi3. "So there will be a point, it probably does come at some point in that [five year] horizon, maybe a little bit beyond that."

However, Sneesby said the Olympics, for which Nine stumped up $305m in rights acquisition ,will likely "accelerate that tipping point ... where you have a faster period of viewing experience in the streaming world versus free to air" both in terms of revenue and audience. But he acknowledged there were factors that may alter that cadence. "[Precisely] where that tipping point comes, it's really hard to say at this stage."

Either way, the near-term flip from free-to-air transmission to digital feeds underscores why the street fight is escalating around "prominence" of home screen real estate apps on connected TVs. It will likely influence the viewing patterns and choice of millions of homes.   

Foxtel has aligned with the platforms against Seven, Nine, Ten, SBS and the ABC. Subscription TV lobby Astra, backed by Foxtel, last week launched anti-legislation ads following long-running criticism from Foxtel CEO Patrick Delany accusing the government of “commercial protection and consumer deception”. Foxtel last month outlined plans for its own streaming hub, Hubbl via a plug in ‘puck’ and eventually its own TV. It also went public on its intent to create a new streaming video and TV audience measurement system, a direct challenge to the OzTam/Voz system owned by the three main commercial broadcasters.

At the same time, the large streaming platforms, Netflix, Amazon Prime and Disney+ are all locally pushing into advertising supported streaming services, which would benefit significantly from being more prominently featured on TVs than internet-delivered TV apps from Australia’s major broadcasters.

Prominence or bust?

So-called ‘prominence’ legislation aims to ensure TV makers don’t bury free to air apps in favour of those from streamers, Youtube, or their own connected TV channels. At present, most ‘smart’ TV makers have agreements in place with tech firms to use their operating systems and with big video streaming firms to feature their apps and content prominently.

While TV manufacturers have insisted that they do not charge for prominent positioning, they can be incentivised to preference large apps.

For example, a global streaming platform might tell a TV manufacturer that its services will not play on its devices unless it is featured prominently on the home screen and/or on the remote. “If you're building televisions for 40-plus markets within the APAC region and a Netflix, Prime or Disney will not allow you to have an application on a device without featuring prominently… you can’t have a [viable] TV without those apps,” said the TV network exec.

Those agreements result in free-to-air TV apps and content being pushed down the pecking order, with TV networks’ apps much harder to find and install in the first place than, for example, Netflix, Youtube or Amazon Prime.

Even when viewers can locate those apps and work out how to put them on the TV home screen, content recommendations tend to push them towards either paid services, Youtube or the manufacturer’s free ad supported TV (FAST) channels of which Samsung, for example, has upwards of 100 in Australia.

Governments globally have recognised the potential for competition and consumer harms posed by those arrangements. Germany already has prominence legislation, with provisions under EU bloc laws for member states to adopt similar approaches, while the UK Media Bill, approved last week, will now pass through parliament with new powers to fine those who game prominence. Canada is also working on reforms.

Foxtel pushback

Bridget Fair, CEO of free-to-air broadcaster lobby FreeTV, is confident the Labor government will take a similar approach.

“This is going to be standard – Australia won’t be an outlier,” she said. “This is about choice. Streaming viewing is growing rapidly,” she said pointing to record BVOD figures for both the AFL Grand Final and the Matildas’ world cup run.

“Most people when they go and buy a TV expect to be able to access their local free television services … If someone wants to watch through the aerial, that’s great, it’s obviously highly reliable. If someone wants to watch through streaming, they should be able to do either.”

Fair hit back at Foxtel/Astra claims that the government is telling people what to watch and limiting choice. Astra's stance is that "Government could take control of what and how these Australians watch their TVs" by legislating prominence. It argues free to air networks are seeking preference over prominence and that altering search results and recommendations undermines choice. Per a spokesperson it "has a responsibility to protect Australia’s right to decide how they watch their content and that the shows and apps they love and subscribe to remain accessible to them. This campaign intends to raise awareness of this issue and galvanise Australians who love their TVs and the content they pay for to act now.”

Fair gave that line short shrift.

“That argument is completely spurious. Because what they're saying is that what people have now is choice. They don't – what people are being given now is a subset of services that are dictated by commercial arrangements between TV manufacturers, big tech operating systems, and global players like Netflix, Prime, and Disney,” said Fair. “What we’re saying is that choice is when you can access all the available services and choose which ones you want to watch.”

Fair expects an announcement “in weeks” with legislation to follow next year.

“The government made an election commitment before the 2022 election that they would implement a prominence framework, and we're expecting to see one in the very near future. They've made repeated statements about the importance of people being able to access their universal free television services, so we're very hopeful.”

If government does legislate, does Fair expect free to air TV providers will then see an increase in audiences, given claims prominence is already an issue?

“No, I think what it will do is just ensure that people can still choose to watch what they're currently watching. So we're not expecting an uplift, we're expecting people to be able to continue to do what they already like to do.”

Over to Canberra.