STATEMENT OF REASONS FOR PRELIMINARY DECISION TO MAKE ANEXEMPTION ORDER FOR FETCH TVPTY LTD IN RESPECT OF THE SUBSCRIPTION TELEVISION SERVICE BABY TV

  1. PRELIMINARY DECISION

For the reasons set out below, the Australian Communications and Media Authority (the ACMA) has made the preliminary decision to make anexemption order for Fetch TV Pty Ltd (the Applicant) in respect of the subscription television service Baby TV (the Service), for the specified eligible period of 1 July 2012 to 30 June 2014 (the Order).

  1. LEGISLATION

2.1Subsection 130ZV(1) of the Broadcasting Services Act 1992 (BSA) provides that each subscription television licensee (licensee) must comply with captioning requirements by meeting annual captioning targets that will increase over time in respect of particular categories of subscription television services that are required to be captioned.

2.2Subsection 130ZY(1) of the BSA provides that a licensee may apply to the ACMA for:

a)an order that exempts from subsection 130ZV(1) a specified subscription television service provided by the licensee in a specified eligible period; or

b)an order that :

  1. is expressed to relate to a specified subscription television service provided by the licensee in a specified eligible period; and
  2. for each financial year included in the eligible period, provides that a specified percentage is the reduced annual captioning target for the service for the financial year.

2.3Subsection 130ZY(3) of the BSA provides that, if an application under subsection (1) has been made for an exemption order, the ACMA must, after considering the application, either (by writing) make the exemption order, or refuse to make the exemption order.

2.4Subsection 130ZY(6) of the BSA provides that, before making an exemption order under subsection (3), the ACMA must,

a)within 50 days after receiving the application for an exemption order, publish on the ACMA website a notice:

  1. setting out the draft exemption order; and
  2. inviting persons to make submissions to the ACMA about the draft exemption order within 30 days after the notice is published; and

b)consider any submissions received within the 30-day period mentioned in subparagraph (a)(ii).

  1. BACKGROUND

3.1On 19 December 2012, the ACMA received an application from the Applicant in respect of the Service, seeking an exemption order under subsection 130ZY(1) (the Application).

3.2The Service is a channel specifically aimed at infants and toddlers (0-3/4).

  1. EVIDENCE AND REASONS FOR PRELIMINARY DECISION

4.1In making the preliminary decision to make the Order, the ACMA considered the matters specified in subsection 130ZY(5) of the BSA in light of the written representations made by the Applicant in the Application and the supporting evidence submitted with the Application.

4.2 The Applicant submitted that the nature of the detriment likely to be suffered if an exemption order were not granted by the ACMA, would be financial and operational in that the channel would be removed from the Applicant’s channel offerings due to excessive financial cost, resulting in:

  • subscribers being deprived of Baby TV programming;
  • the value and appeal of the Applicant being diminished; and
  • the relevant channel provider losing a platform for distribution of its channel.

The ACMA considers that the detriment of loss of the Service by the Applicant is realistic given the costs involved. The ACMA considers the associated consequences listed above would directly result from a failure to make the exemption order.

The channel provider NGC Network (Australia) Pty Limited has indicated to the Applicant that captioning for this channel is not required in the United Kingdom where it is produced, nor is it required within any other jurisdiction to which it is distributed. It advised further that to caption the Service,merely forthe Applicant in Australia, would be unjustifiable because of the comparative viewer numbers.

4.3As to the anticipated impact (of making an exemption order) for deaf and hearing impaired viewers, or potential viewers of the Service, the Applicant submitted there would be limited impact. With a niche channel like the Service, especially given its target audience, the ACMA accepts evidence provided in confidence about the number of subscribers viewing the service.However, it may also be possible that the audience size of the Service would increase if a captioning service is provided.
The Applicant advised that the majority of content on the Service is heavily visual with accompanying music and few spoken words. Communication is often delivered in ‘baby language’ or in baby ‘sounds’ and not intelligible English. The Applicant suggested that because of this content, the material would not lend itself readily to captioning. It also argued that the key targeted audience is at an age which lacks reading skills and captioning would therefore be redundant for the majority of viewers.

The channel provider NGC Network (Australia) Pty Limited submitted that given the lack of reading skill in the target audience (children aged 0-4), captions would add an element of distraction as opposed to an aid for comprehension.

The ACMA has considered the Applicant ’s (and its channel provider’s) submissions in the context of the number of the Applicant’s subscribers and actual viewer numbers of the Service andfindsallargumentsto be credible. The ACMA was however concerned for the deaf or hearing impaired members of the parental audience: perhaps not the target audience, but still a likely group of viewers. The Applicant addressed this question by stating that older deaf or hearing impaired viewers would be minimally disadvantaged in their ability to enjoy watching the channel with their children given that the Service’s programmingis heavily visual, largely non-verbal and filled with a large number of visual ‘cues’ in its content. The Applicant gave the example of repeated pictures of snowy scenes which accompanied the verbalisation of the word ‘snow’.

4.4 From examination of detailed financial information provided by the Applicant and channel provider, the ACMA is satisfied that failure to make an exemption order for the Service would cause unjustifiable hardship to the extent that the channel would need to be withdrawn.

Current financial statements of the Applicant’s parent company, Media Innovations Pty Ltd (MIPL), were submitted as evidence.

The channel provider NGC Network (Australia) Pty Limitedsubmitted financial and operational information for the ACMA’s consideration in light of the Applicant’s application for an exemption order for theService.

4.5The Applicant advised that unless captioning comes from the channel provider “at source” there is no way for theApplicant to caption the channel unless it obtains live captioning services for the Service. Evidence was provided of the cost involved by way of a quote for the establishment and ongoing provision of live captioning.

A one off establishment cost (infrastructure such as encoders, network routers and switches at the play out centre, the installation of fibre connection and other hardware required) was estimated at $1,140,000 (whether one or 35 channels are to provide captioning) plus recurring annual costs of $10,200 per channel.

To live caption the Service (being a General Entertainment channel and therefore required to caption 40% of its transmission in order to meet the 2012-2013 captioning target) was estimated at $968,500 for the 2012-2013 year.

The Applicant advised that it was unaware of how many hours of work are required in providing one hour’s broadcast of captioning as it is technically unable to produce pre-prepared / offline captioning or process / prepare purchased captions for a pass through channels.

The channel provider NGC Network (Australia) Pty Limited advised that the cost (AUD$215,000 per year) involved in providing captions was not economical given the reach and viewership of the channel. It explained that captions would have to be created, processed and inserted abroad, where the feed originates. It emphasised that the cost distribution was unequal in that no other territory requires captions for this channel, therefore the full amount spent on captioning would be allocated only to the Australian business. The money spent on captioning on the Applicant in Australia would not be allocated across multiple territories that have no need for captions.

The channel provider submitted further that the Service does not have any live/online captioning nor can the captions be purchased and that its content is created specifically for the channel, so captions would have to be created from scratch and inserted into each show. 91% of the cost estimated (AUD$215,000 per year) is the cost of creating the captions, including head count. The remaining nine percent is additional costs at play out. It advised that eight hours is required to produce captioning for one broadcast hour with an additional two hours required to source, process, and make the video proxy file, carry out quality control and deliver the caption file for one broadcast hour.

4.6The Applicant advised that currently no captioned programs are transmitted on the Service. The Applicant advised, however, that captioning is provided by the channel providers on 13 of the 35 channels including its most popular and most watched channels. The Applicant relies on information received from channel providers to identify the times at which captioned programs are shown. An average of 15% or 833.73 hours per week were captioned in the last six months – all of which was provided by the channel providers.

4.7As to the likely impact on the quantity and quality of television programs transmitted on the Service, the Applicant indicated that if the ACMA does not make the exemption order applied for, that would result in the Service no longer being provided to subscribers. The ACMA accepts the Applicant’s claim. The ACMA will also need to consider claims made by persons making submissions under subsection 130ZY(6) in response to this draft exemption order.

4.8The Applicant has applied for 21 exemption orders and one target reduction order for 22 channels including Baby TV, Fashion TV, Nat Geo Adventure (target reduction), Ovation, Travel Channel, BBC World News, CNBC, Al Jazeera, Bloomberg, CCTV News , DW-TV, Fox Sports News, Euronews, France 24, NDTV 24x7, ESPN 2, Australian Christian Channel, Chelsea TV, Manchester City Club Channel, Real Madrid TV, MUTV and Setanta Sports.

4.9Evidence provided by the Applicant supports its claim that the provision of captioning services would impose unjustifiable hardship on the Applicant as:

  • there is currently no captioning infrastructure in place at Fetch TV.
  • the provision of captioning would impose significant financial costs and would likely result in the removal of the Service.

The Applicant is a recent starter in the home entertainment industry, still in an early developmental stage of establishment. To impose significant additional costs would therefore impose unjustifiable financial hardship on the applicant in a vulnerable time of building its business.

Having regard to all the above considerations, the ACMA is satisfied that it would impose unjustifiable hardship on the Applicant if it were to refuse the Order.

  1. PRELIMINARY DECISION

5.1Following consideration of the material referred to in paragraph 4.1 above, on 17January 2013, the ACMA made the preliminary decision, under subsection 130ZY(3) of the BSA, to make the Order for the Applicant in respect of the Service, for the specified eligible period of 1 July2012 to 30 June 2014.

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