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Words. Stuart Cunningham

Broadband penetration in Australia has improved overall recently, and the amount of time the average Australian spends online has tripled in the past decade. Yet expectations of performance, stability and availability, particularly driven by ever-greater transparency to global good practice, increase at an even greater pace.

Here’s a vox pop from a colleague who is an intensive broadband user and early adopter: ‘Aussie broadband sucks. I have Telstra Big Pond cable and still get some buffering at night streaming video. I’m told it is a combo of web congestion and distance from the exchange. I buy that excuse for ADSL, but for cable - give me a break. When I had Foxtel’s premium package I NEVER got buffering – only occasionally momentary pixelisation. We are being conned and ripped off…’

Without entering the minefield that is the debate over broadband rollout models, it remains the case that reliable, fast broadband coverage is extremely uneven, and its cost can be a significant barrier for many households. This isn’t just a matter of regionalism or remoteness – if you happen to live in many peri-urban or outer suburban areas, your service options may be a whole lot poorer than those in regional cities and towns that have already benefited from the NBN rollout.

So that’s infrastructure – point one.

There’s also the ‘Australia tax’ – point two. The pricing of IT and entertainment goods and services in Australia was the subject of a parliamentary inquiry, which released its findings in the middle of this year. In making a series of strong, if quixotic, findings about the significant mark-ups experienced by Australian consumers, it took the extraordinary steps of recommending that ‘the Australian Government amend the Copyright Act’s section 10(1) anti-circumvention provisions to clarify and secure consumers’ rights to circumvent technological protection measures that control geographic market segmentation’ and that ‘the Australian Government investigate options to educate Australian consumers and businesses as to: the extent to which they may circumvent geoblocking mechanisms in order to access cheaper legitimate goods; the tools and techniques which they may use to do so; and the way in which their rights under the Australian Consumer Law may be affected should they choose to do so’.

Reasons advanced by the vendors included the cost structures of doing business in Australia. However, the inquiry was being conducted during a period when the Australian dollar was higher than it had been for almost 20 years. Australia will likely remain a premium market for price gouging because of its capacity to pay, its less competitive legal software and video markets, and the degree of protection afforded local pricing structures by parallel import restrictions.

And point three – despite being a rich, lucrative market per capita, which for most of the history of Hollywood and US television has ‘punched above its weight’ as a source of revenue for the global suppliers, Australia lags significantly behind North America, Europe, Japan and even South America in the digital offer in mainstream screen entertainment. The new players in digital distribution –Yahoo!, Netflix, Hulu, Amazon – have either avoided rolling out an Australia-based offer, or in Apple’s case, their Australian iTunes offer is markedly thinner than what might be available elsewhere. And, of course, remembering point two above, what is on offer can be unacceptably high-priced.

Basic perusal research on the Aussie staples – the Apple iTunes offer, or the Big Pond Movies, QuickFlix or Fetch offers – shows that they don’t compare to the mainstream entertainment range available elsewhere. Of course, the underlying cause is the spaghetti soup of legacy pre-sales and distribution contracts, whose provenance and rationale date back to distribution and jurisdictional haggles from the early days of ‘states rights’ in the pre-Hollywood era. The solution, which is being eked out, usually case-by-case but sometimes much more dramatically (think Netflix’s House of Cards and Kevin Spacey’s Edinburgh speech), is day and date release globally. This would result in huge savings via simultaneous, real-time marketing campaigns, but of course it would undermine Hollywood’s premium skimming strategy and windowing distribution strategy that optimises revenues across markets, across platforms and across audiences.

But this doesn’t fully explain why Hulu might expand into Japan, and Netflix moves into Scandinavia and numerous South and Central American countries including Mexico, bypassing Australia. The Scandinavian countries are, like Australia, small but rich markets, but – remember point one – they have a better broadband infrastructure. The Central and South American markets show a great hunger for digital innovation - for example, the highly innovative Rain exhibition/distribution phenomenon in Brazil.

The stakes have been raised much higher by the move by Google/YouTube into commissioned and acquired content, bringing advertising-based free content that is vastly more diverse and abundant than any of the subscription-based packages mentioned so far. But in accessing such content on YouTube the user still faces the same issues - for example, Battlestar Galactica Blood and Chrome premiered exclusively and for free on Machinima Prime on Youtube in the US, but was geoblocked in Australia and only available legally, after the usual wait, at a commercial price point on Bluray/DVD.

Internet media content has afforded much benefit and convenience to the Australian public: the Boston Consulting Group (commissioned by Google) found an eye-opening $24 billion consumer surplus (the ‘value that consumers place on an activity or a product that is over and above the price they pay for it’). But the fact is that Australia has seen little innovation and experimentation in the online space for commercial video content on demand. This has had effects on the producer or content supply side of the equation, as well as the consumption side. Australian online content creation is reasonably robust – the same Boston Consulting Group report even argued that ‘Australia has a trade surplus in online video, exporting more than it imports. Twice as much Australian online video is consumed in the US than is consumed in Australia’. But when it comes to commercially-driven, professional online creative production, we are a long way off the pace when the range, quality and, in many cases, success of commissioned online content for YouTube, Yahoo!, Netflix, Amazon is considered.

Distinguished Professor Stuart CunninghamDirector ARC Centre of Excellence for Creative Industries and Innovation

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