What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
i
What are our stories worth?
Measuring the economic and cultural value
of Australia’s screen sector
ii
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Key ndings v
Executive summary 1
1. Introduction 7
2. Economic contribution analysis 12
3. Exports and tourism 23
4. Audience value 29
5. Cultural value 38
References 44
Appendix A – External stakeholders 47
Appendix B – Government support 48
Appendix C – Survey results 49
Appendix D – Consumer choice value
and time-use elasticity 50
Appendix E – Economic contribution studies 52
Limitation of our work 55
Contents
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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ABC Australian Broadcasting Corporation
ABS Australian Bureau of Statistics
ACMA Australian Communications and Media Authority
AHEDA Australian Home Entertainment Distributors Association
ASTRA Australian Subscription Television and Radio Association
CV Contingent Valuation
DVD Digital Versatile Disc
EBITDA Earnings Before Interest, Taxes, Depreciation and Amortisation
FTE Full-time equivalent
GDAA Game Developers’ Association of Australia
GDP Gross Domestic Product
GOS Gross Operating Surplus
IGEA Interactive Games & Entertainment Association
IMAX Image Maximum
IO Input Output
MEAA Media Entertainment & Arts Alliance
MPDAA Motion Picture Distributors Association of Australia
NAIDOC National Aboriginal and Islander Day Observance Committee
OECD Organisation for Economic Co-operation and Development
PC Personal computer
PDV Post, Digital and Visual Eects
SBS Special Broadcasting Service
SOCOG Sydney Organising Committee for the Olympic Games
SVOD Subscription Video on Demand
TRA Tourism Research Australia
TV Television
UK United Kingdom
US United States
VHS Video Home System
VOD Video on demand
Glossary
v
Key ndings
Audience value
2014 –15
$17.4 billion in total audience value of broad screen content
Cultural value
Option value
$511 million a year
Existence/
altruism value
$415 million a year
Public support value
$1.02 billion a year
Economic contribution
2014 –15
$3,072 million in value add
25,304 FTE jobs
Broad screen content
$3,072 million in value add
25,304 FTE jobs
Footloose production
$382 million in value add
4,093 FTE jobs
Digital games production
$123 million in value add
1,053 FTE jobs
Core screen content
$847 million in value add
7,650 FTE jobs
Exports and tourism
2014 –15
Exports
$252 million
in total export
earnings from core
screen content
Tourism
$725 million in
tourism expenditure
associated with
broad screen
content
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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The Australian screen sector plays a signicant role in the economy in terms of its contribution to GDP and to
national employment, as well as its economic contribution to downstream industries such as exhibition and
retail, and to ancillary sectors such as tourism. The Australian screen sector is also an enduring component
of Australia’s cultural identity. Indeed, screen content also stands apart from all other Australian cultural
products in its unparalleled ability to reach large audiences, both domestically and abroad.
The importance of its contributions in these areas are widely recognised by government, which is why the
sector is supported through funding and regulation. However, the nature and size of these contributions in
economic terms has never been fully recognised until now.
Screen Australia engaged Deloitte Access Economics to develop a framework capable of comprehensively
capturing the value generated by the Australian screen sector. The framework considered this value across a
number of dimensions – economic, audience and cultural.
Australian screen content is a signicant contributor to the nation in terms of gross domestic product
and jobs, and well-positioned to help grow Australia’s creative economy.
The Australian screen sector contributes signicantly to national gross domestic product and employment
(which are more traditional measures of a sector’s value to an economy). Content is created by the
production subsector, enters the distribution subsector and is purchased in the exhibition, free-to-air TV, pay
TV, retail, rental and online subsectors.
Australian TV content encompasses a wide range of production activity – it includes ctional or drama
production (such as mini-series, drama shows, comedy shows and children’s TV shows), as well as factual
documentaries. The remainder is allocated to content such as news, current aairs, light entertainment,
reality, and sport. Likewise, feature lm content in Australia covers a range of content – from ones with large
international releases to ones that have been domestic box oce and/or critical successes to more low-
budget lms and lms with limited local releases.
This study focussed in on the ‘Australian’ fabric of the wider screen industry, examining the value generated
by screen content developed under the creative control of Australians.
1
We note that this study is not a full
benet-cost analysis and doesn‘t look at potential costs associated with screen consumption.
Two denitions were employed. The rst denition, Broad Australian content, is screen content that is
made under the creative control of Australians, which includes feature lm, drama TV and documentaries
as well as other types of screen content. This includes (but is not limited to) news and current aairs, light
entertainment, reality shows, lifestyle/food/travel shows and televised sports content.
In 2014-15, the total economic contribution of the Australian screen sector for Broad Australian content is an
estimated $2.6 billion in value add and almost 20,160 in FTE jobs. This total value add is the equivalent
Executive summary
1 Previous studies have estimated the overall size of the screen size of screen sectors in Australia. For example, see Deloitte
Access Economics (2015a) “Economic contribution of the lm and television industry in Australia”, a prepared for the Australian
Screen Association; and “Economic contribution of screen production in South Australia”, reported prepared for the South
Australian Film Corporation Deloitte Access Economics (2015b).
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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of around 5% of Australia’s information media and telecommunications industry or 18% of its arts and
recreation services.
2
The second denition, Core Australian content, is screen content made under the creative control of
Australians and is scripted, narrative content, capturing feature lm, drama TV and documentaries only.
3
As such, Core screen content sits within the scope of Broad screen content.
In 2014-15, the total economic contribution of the Australian screen sector for Core Australian content is an
estimated $847 million in value add
4
and 7,650 in full-time equivalent (FTE) jobs. This total value add is
the equivalent of around 7% of Australia’s arts and recreation services industry. Free-to-air ($212 million) and
lm and television production ($153 million) were the largest contributing subsectors to estimated direct value
add, with the production subsector the greatest contributor to employment (2,683 in estimated FTE jobs).
International footloose productions hire skilled Australian workers
Additional to the contributions already identied are those generated for the Australian economy
through footloose productions – that is, television and lm production activity occurring in Australia
as a result of large budget, international-studio nanced productions choosing to lm in Australia
instead of elsewhere.
The total economic contribution of footloose productions in Australia for 2014-15 is estimated at $382
million in total value add and around 4,090 in FTE jobs. The benets of this activity are largely
derived through labour income paid to Australian creative talent (i.e. cast and crew) and indirectly
through the reach of supply chains into other sectors.
The 2014-15 year was an unusually large year for Australia (with $418 million in foreign spending across the
feature lm and TV drama slate), with the ve year average being $196 million from 2010-11 to 2014-15.
5
There are export opportunities for the content created locally by Australians
In 2014-15, total export earnings from Core Australian content were approximately $252 million
6
(approximately equivalent in size to Australia’s sugar and honey product exports or a tenth of medicinal
and pharmaceutical product exports in 2014-15). This comprises mainly international box oce earnings
that accrue to Australia, although international royalties was also a signicant export sources.
7
2 Information media and telecommunications incorporates publishing and broadcasting (including internet), motion picture
and sound recording, internet and data processing services, library and information services and telecommunication services.
Arts and recreation services incorporates heritage activities, creative and performing arts, sports and recreation services and
gambling services.
3 Core Australian content is a key focus of Screen Australia. This includes Australia’s feature lms (e.g. Mad Max: Fury Road, The
Dressmaker); documentary lms (e.g. That Sugar Film, Frackman); TV documentaries (e.g. First Contact, Go Back To Where You Came
From); TV drama, which encompasses a diverse range of content, such as mini-series (e.g. The Secret River, Deadline Gallipoli),
dramas (e.g. Jack Irish, Underbelly), comedy shows (e.g. Upper Middle Bogan, The Family Law) and children’s TV shows (e.g. Nowhere
Boys, Dance Academy).
4 Value add measures the value of output (i.e. goods and services) generated by the entity’s factors of production (i.e. labour
and capital) as measured by the income to those factors of production. The sum of value add across all entities in the economy
equals gross domestic product.
5 Screen Australia (2015a) Drama Report data on footloose production expenditure..
6 It should be noted that these export earnings are not additive with the economic contribution gures for Broad and Core, as
they are revenue to the sector that has already been counted in the contribution estimates.
7 The licence fee data used in this analysis only takes into account Screen Australia funded rst releases, meaning that the export
earnings gure here should be interpreted as a lower bound on export earnings. Exports of Core Australian content are likely to
be even higher than presented here.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Australian screen content also includes digital games content produced in Australia.
8
Game developers
in Australia are predominantly small to medium-sized independent studios and studios of international
publishers. The games they produce are primarily exported to the global market. In 2014-15, the total
economic contribution of digital game production in Australia was around $123 million in value add and
almost 1,055 in FTE jobs.
9
Taken together, the Broad screen sector, digital games production and footloose production contribute over
$3 billion in value add and around 25,300 in FTE jobs. This is in contrast to the modest funding the screen
sector receives from government sources.
The role of advertising
While not examined in terms of its economic contribution, the advertising industry also plays an
important role with regards to Australian screen sector activities. Advertising:
• Funds a signicant amount of Broad and Core screen content, such as through advertising revenue
earned by free-to-air TV broadcasts. According to ZenithOptimedia forecasts, Australia’s television
advertising revenue is expected to reach just under $4 billion in 2016 (Mason, 2016).
• Serves as an important adjacency to the production subsector, as cast and crew employed in the
Broad and Core screen sector also earn income from advertising work and many technical and
creative screen professionals that eventually end up in Australian lm and TV productions were initially
trained through working on advertisements.
Australian-produced content dominates in terms of free-to-air television ratings. According to
consolidated OzTam ratings data across ve metropolitan markets (Sydney, Melbourne, Brisbane,
Adelaide and Perth), the highest rated non-sports shows were the nal episodes of MasterChef, My
Kitchen Rules and The Block, with 2 million views and over (Knox, 2016a). In light of this, it is apparent
that Australian content is associated with a large amount of advertising revenue which accrues to the
commercial free-to-air television subsector.
The exposure of Australian content to international audiences is also powerful in strengthening the
brand value of Australia, assisting it to grow a compelling image as a destination for tourism.
The value of screen in drawing tourists to visit a particular destination is widely acknowledged.
10
This trend is
called “set-jetting”, where screen reaches the mass population, drawing them to a destination or attraction
specically to visit a location where a lm or TV program was shot. Screen can even drive tourist visitation
through its portrayal of the features and characteristics of the destination in which shoot itself takes place
(e.g. landscapes and attractions). Australian screen content, screen actors and practitioners with a strong
international prole can also help promote the Australian brand and bring attention to the country as a
potential location for tourism.
A survey commissioned by Deloitte Access Economics for this study reveals that around 230,000
international tourists are estimated to visit or extend their stay in Australia each year as a result of viewing
Australian lm and TV content. This represents around $725 million in estimated tourism expenditure in
Australia each year that may be associated with Australian screen content.
8 This includes content produced for mobile and tablet games (e.g. Flight Control, Real Racing, Fruit Ninja, Crossy Road) and PC
and console games (e.g. Don Bradman Cricket, Rugby League Live 3).
9 This gure relates to the production of digital games alone and does not include publishers/distributors and retail, rental or
online subsectors that are further along the value chain for the Australian games sector.
10 For example, see Olsberg SPI, 2015; Olsberg SPI & Nordicity, 2015; Noridicity, 2013; Beeton, 2006.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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This suggests that screen content as a driver of tourism is comparable to other iconic drivers and may be a
signicant driver of tourism to the country. For example, a Deloitte Access Economic (2013a) report on the
Sydney Opera House found that the Sydney Opera House could be responsible for around $640 million of
tourism expenditure in Sydney in 2012–13.
11
There is more to the value of Australian screen content than observable market transactions.
Domestic audiences also gain surplus value that far exceeds the economic contributions, exports and
tourism expenditure values.
The value of Australian screen content extends beyond the earnings it accrues from market transactions or
its value add and employment. Australian lm and TV content also generates signicant entertainment and
leisure value to domestic audiences. This value to audiences can be estimated as a monetary value.
The value of screen content to audiences can be measured in two ways. Firstly, it can be measured as a
combination of revenue from consumers to the screen sector, such as ticket sales, combined with any
‘consumer surplus’ benet above what people paid. Secondly, it can be measured by the value of time
spent watching Australian screen content, which is particularly useful in instances where the content is
free to watch.
Using a mixture of these two approaches, this report nds that the total audience value of Australia’s
Broad lm and TV content viewing in 2014-15 was approximately $17.4 billion in consumer welfare
benet, almost seven times the size of the total value add for Broad Australian content. Moreover,
by way of comparison, total Australian industry value added in 2014-15 was around $12.8 billion for arts and
recreation services.
Australian screen content is considered unique
In estimating the audience value, it was found that Australian screen content was unique – almost two
thirds (64%) of Australian lm and TV content was considered to be ‘fairly’, ‘very’ or ‘completely’ dierent
from foreign content based on qualities such as storyline, setting, acting music and camera work.
Further still, Australian screen content generates a valuable contribution to the cultural landscape –
widely recognised, though a value indirectly measured through people’s appraisal of Australian lm
and television.
Cultural value generated by Australian screen content has value in terms of its contribution to the overall
cultural environment of the country. For example, local lm and TV can support creative and artistic ventures,
such as the acting, music, writing and set design.
The value of individuals personally having the option of viewing Australian content in the future – known as
the “option value” – is estimated to be approximately $511 million a year. Similarly, the value that individuals
place on other people being able to watch Australian content in the future – known as the “existence” or
“altruism value” – is estimated to be approximately $415 million a year.
11 It should be noted that while this is not directly comparable with the screen-induced tourism expenditure across entire country
due to the fact that the Sydney Opera House report reports the amount of expenditure attributable to only Sydney tourism
expenditure, this provides a point of comparison between tourism attributable to screen content and a major driver of tourism
in Australia.
12 It should be noted that public support value for Australian TV and lm content can also be aected by a number of factors – for
example, respondents may think that higher levels of government support will reduce the purchasing price of future Australian
lms and TV shows.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Further, when individuals were asked how much government should allocate between lm and TV and a
maximum of a $100 tax cut in the survey, the results suggests that the total public support value of Australian
lm and TV to be approximately $1.02 billion a year.
12
For comparison, direct funding from government sources for Australian feature lm and drama TV in
production in 2014-15 was approximately $58 million, support through the Producer Oset came to $77
million and the PDV Oset for TV was over $7 million.
13
In addition, documentaries received $25 million in
direct funding and $18 million through the Producer Oset in 2014-15.
14
Further, government expenditure in
2014-15 in public broadcasting came to around $1.43 billion.
15
Deloitte Access Economics
13 Screen Australia (2015a) Drama Report data
on funding sources for feature lm and
drama TV.
14 Screen Australia (2016b) “Documentary
Finance”, http://www.screenaustralia.
gov.au/fact-nders/production-trends/
documentary-production/sources-of-nance
15 Australian Government (2016). It should be
noted that this also includes the radio and
internet services of the ABC and SBS, as
well as their transmission and distribution
services. As such, it is not a directly
comparable with the public support value
estimated in this report.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Deloitte Access Economic was commissioned by Screen Australia to estimate the economic and cultural
value of Australia’s screen sector. This study assesses the Australian screen sector’s contribution to
Australia through a number of dimensions, including its contribution to employment and gross domestic
product, to exports and tourism, and the audience and cultural value of Australian screen content.
The Australian screen sector is recognised as an enduring and dynamic component of the national
economy with close linkages to various economic inputs including skilled employment, digital technology
and innovation. Screen production alone stimulates signicant activity, employing numerous skilled and
creative workers, such as performers, designers, directors, producers and technical cast and crew. Further,
the screen sector can be viewed as an entire supply chain, from development through to distribution,
broadcast and retail, with each segment generating its own contribution to employment and economic
gross value add.
The screen sector also transcends economic benets, as the content that the sector produces can help
inuence and shape Australia’s cultural fabric and social identity. Images, ideas and experiences told by
the sector can help inform Australians about what it means to be Australian, their place in the world and
provides people with a set of shared stories that they can relate to.
1.1 Denition of the sector
The Australian screen sector is a large sector that spans the entire industry supply chain from production
to distribution and broadcast. Specic denitions have been developed for the purposes of the analysis
undertaken in this report. Firstly, the report denes the sector in terms of Broad and Core Australian content.
Secondly, it denes the economic activity categories across all segments of the Australian screen industry
supply chain.
1.1.1 Broad and Core content
Given that there is a vast range of types of screen content, both produced domestically and internationally, this
report denes two types of Australian screen content – Broad and Core Australian content.
Broad Australian content
This is lm and television screen content that is made under the creative control of Australians, including (but
not limited to) feature lm, documentaries, TV dramas, as well as a wide range of content such as news and
current aairs, light entertainment (e.g. The Project, Millionaire Hot Seat), reality shows (e.g. MasterChef Australia,
Australia’s Next Top Model, House Rules), lifestyle/food/travel shows and televised sports programs.
Core Australian content
This is screen content that is made under the creative control of Australians, which falls within the scope
of Screen Australia’s focus. Screen Australia’s focus is solely on Australian lm and television that has a scripted,
narrative focus as well as lm and TV documentaries. As such, Core Australian content sits within Broad content.
It includes Australia’s feature lms (e.g. Mad Max: Fury Road, The Dressmaker) and documentary lms (e.g.
That Sugar Film, Frackman). It also includes TV documentaries (e.g. First Contact, Go Back To Where You Came
From) and TV drama, which encompasses a diverse range of content, such as mini-series (e.g. The Secret River,
Catching Milat), drama shows (e.g. Wentworth, Underbelly), comedy shows (e.g. Upper Middle Bogan, The Family
Law) and children’s TV shows (e.g. Nowhere Boys, Totally Wild).
1. Introduction
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Digital games
In addition to lm and TV content, the screen sector also includes digital games produced in Australia as well.
These include mobile and tablet games (e.g. Real Racing 3, Fruit Ninja, Crossy Road) and PC and console games
(e.g. Don Bradman Cricket, Rugby League Live 3).
Overall scope
All in all, the scope of this project is diverse and substantial, covering not only the areas of production that fall
within the interest of Screen Australia (and other screen agencies), but also the broader category of all lm
and television content that is produced under Australian creative control.
Figure 1.1 captures the distinction of Broad and Core screen content by format. Both Broad and Core screen
content can go through a variety of delivery channels, including TV, video and digital-only platforms.
Figure 1.1: Broad and Core screen content
News
Sports
Talk shows
Lifestyle/food/travel
programs, etc.
Core screen
content
Feature film
Drama TV
Documentaries
Digital
games
Broad Australian content
Under Australian creative content
Source: Deloitte Access Economics (2016)
1.1.2 Supply chain
The screen sector can be thought of as eight main sectors: production, distributors, exhibition (e.g. cinema),
free-to-air TV, pay TV, retail, rental and the online sector.
• Production: This encompasses content creation in lm and television products in Australia. It includes
pre-production activities, principal photography, as well as a wide range of post, digital and visual (PDV)
activities such as editing and applying computer generated imagery
• Distribution: The distribution subsector is the intermediary which provides an avenue between the
producers of screen content and television, retail, rental and cinemas
• Exhibition: The exhibition subsector provides cinema venues for the general public to view screen content
(primarily feature lms)
• Free-to-air TV: The free-to-air TV subsector is comprised of public (SBS and ABC) and commercial (Seven,
Nine and Ten) providers of broadcast television content. In the case of commercial networks, earnings
primarily come from advertising revenue
• Subscription TV: the subscription television sector provides television content to audiences via a
subscription-based service. This content is often more specialised and caters to smaller audience groups
• Retail: The retail subsector captures commercial retail activity involved in the sale of DVD and Blu-Ray
screen content
• Rental: The rental subsector captures commercial rental services which allow consumers to hire DVD and
Blu-Ray screen content
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• Online: These are mainly internet-based video on demand (VOD) services for screen content and include
subscription video on demand (SVOD) services (such as Netix, Presto and Stan) and free online catch-up
services (such as ABC iview and TENPlay). Online does not include video-sharing websites such as YouTube,
which provide a range of professional web-based and user-generated screen content.
Screen content is created by the production subsector, enters the distribution subsector and is purchased by
audiences in the exhibition, free-to-air TV, pay TV, retail, rental and online subsectors (Figure 1.2).
Figure 1.2: The Australian screen industry supply chain
Audiences
Exhibition
Free-to-air TV
Pay TV
Retail
Rental
Online
Production
Distributors
Source: Deloitte Access Economics (2016)
This supply chain also includes other production activity undertaken by Australian companies, such as
production services for international “footloose productions” (e.g. Pirates of the Caribbean: Dead Men Tell No
Tales lmed in Queensland) and post, digital and visual eects (PDV) services provided to foreign companies
(e.g. PDV work on Ted 2, The Avengers: Age of Ultron and The LEGO Batman Movie).
1.2 Framework for analysis
Deloitte Access Economics has developed a comprehensive framework to ensure that the research captures
the entirety of the contribution of Australian screen sector. A valuation methodology, consisting of four broad
parts is used. Further, in order to achieve these valuations, this report drew on other techniques such as
survey analysis and stakeholder consultations.
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1.2.1 Valuation methodology
As shown in Figure 1.3, this report includes estimates of the value of the screen sector in terms of audience
value, economic contribution and cultural value.
Figure 1.3: Valuation methodology
Audience value
Film and TV delivers substantial
value to consumers in the form of
entertainment and leisure
Economic contribution
The economic contribution of Australian
film and TV is economic activities directly
attributable to Australian screen content
Cultural value
Australian-made screen
content has significant cultural
value and social importance
Source: Deloitte Access Economics (2016)
Audience value can be measured in two ways:
• Firstly, the value to audiences is equal to the revenue received from consumers plus any additional surplus
received by the consumer. These measures include total box oce revenue, consumer surplus and the
value of consumption choice
• Secondly, the value to audiences can also be measured by the value of time spent watching Australian
screen content.
Economic contribution quanties the value of production by a rm or industry in a historical reference year.
This was examined in terms of:
• Broad and Core screen content
• Footloose productions
• Digital games
• Screen exports
• Screen-induced tourism.
16
For example, excessive screen consumption may be associated with prolonged periods of inactivity which is linked to obesity;
screen content may depict subjects and imagery that is deemed to have potential social costs; and screen consumption may be
an addictive behaviour for some individuals, inducing them to potentially forego other activities they would like to engage in.
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Cultural value can be captured through willingness-to-pay measures. For example, even those Australians
who do not regularly watch Australian lm or TV can place signicant “non-use” value on the existence of this
content. These include:
• The value of having the option to watch it in the future
• The value of others being able to watch it.
This report does not undertake a benet-cost analysis, and, therefore, does not consider the costs that can
be associated with screen consumption.
16
1.2.2 Survey analysis
To estimate the audience value and cultural value of Australian screen content, Deloitte Access Economics
elded a survey of domestic and international audiences. Approximately 1,000 domestic Australian
respondents and over 100 international respondents who had visited Australia, from New Zealand, the
United Kingdom, the United States and Canada, were surveyed for this report.
Domestic respondents were asked questions such as their willingness to pay and screen consumption
patterns of domestic audiences. This survey was also used to get a sense of the tourism impact of Australian
screen content from international respondents, and the data here was used to estimate the economic
contribution of screen-induced tourism.
1.2.3 Stakeholder engagement
To ll information gaps, gather practical insights into the sector and inform case studies, a series of
interviews was undertaken with a selection of organisations involved in the Australian lm, television,
and digital media industry. Nine stakeholder interviews were held with individuals who were able to provide
an informed view regarding the current economic and cultural contribution of the screen sector.
These consultations included stakeholders in the areas of production, lm distribution, documentary
lmmaking and digital distribution. The stakeholders interviewed are listed in Appendix A.
1.3 Structure of report
The report is divided into four main chapters of analysis, with each chapter looking at a specic area of
contribution, e.g. the sector’s economic contribution to exports and tourism, the audience value of the
screen medium, and the cultural value of the medium.
• Chapter 2 presents the economic contribution of the screen sector as classied by Figure 1.1 and Figure
1.2, in terms of its direct and indirect contribution to FTE employment, labour income, gross operating
surplus, and value add. This chapter also discusses the structural impacts of digital disruption and the rise
of digital screen content on the Australian screen sector
• Chapter 3 covers the contribution the screen sector makes to Australia’s export industry, in terms of export
income such as overseas royalties and license fees. Further, it examines the contribution the
sector makes to Australia’s tourism industry, in terms of promoting Australia internationally as a desirable
tourism location
• Chapter 4 explores the audience value of Australian screen content for domestic audiences. That is, how
much consumers value Australian content over and above what they pay (i.e., the consumer surplus) and
their willingness to pay, particularly for content that does not have a market price. This chapter also
discusses how digital screen content and digital technologies are altering the value of the content for
domestic audiences
• Chapter 5 covers the cultural and non-use value of the screen sector. These values can be estimated
through a survey and capture values that people may hold such as the valuing the existence of Australian
screen content and valuing the option to experience screen content.
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2. Economic contribution analysis
This chapter presents the economic contribution of the screen sector, in terms of its direct and indirect
contribution to full-time equivalent (FTE) employment, labour income (total wage), gross operating surplus
(prots), and value add to the economy.
The estimates are presented for the:
• Broad screen sector
• Core screen sector
• Footloose production
• Digital games production.
Further, this chapter discusses the challenges and opportunities that the sector faces as a result of digital
disruption and the rise of digital screen content.
2.1 Economic contribution modelling
In this study, the total economic contribution of the Australian screen sector represents the sum of the
industry’s direct and indirect contributions.
The direct economic contribution of the screen sector is the value add created by labour and capital inputs
employed directly by the sector. In contrast, the indirect contribution is a measure of the demand for goods
and services produced in other sectors of the economy as a result of intermediate inputs demanded by the
screen sector (e.g. nancial services, electricity, rental services). The size of this ow-on activity is dictated by
the extent of linkages with other supplier sectors of the economy.
Value add, GOS and labour income
Value add can be thought of as the revenue earned by an economic entity (e.g. a company or sector) for
the goods and services it sells, excluding the cost of inputs it bought from other sectors. For example,
in the production subsector, a company applies its workers (e.g. cast and crew) and capital equipment
(e.g. studios and camera equipment) to goods and services supplied from other parts of the economy to
create products that are worth more.
The value add of an entity is comprised of the labour income that is earned by the workers it
employs and the gross operating surplus (GOS) which represents the prot that is earned by its
capital equipment. Value add excludes any subsidies that have been granted to the entity by the
government or similar public bodies.
All direct, indirect and total contributions are reported as value add and employment. Further detail on the
approach used to measure the economic contribution of the screen sector is discussed in Appendix E.
2.1.1 Data
The key data source was retail, box oce, production and recoupment data on Australian lm and television
content provided to Deloitte Access Economics by Screen Australia. This data covered Core documentary,
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
13
feature lm and drama television screen content supported by Screen Australia, but also covered broader
screen content as well. This data was particularly signicant in informing the gross revenue gures and
expenditure gures for the screen subsectors.
To supplement this data in the contribution modelling, other sources were used, including the Screen
Australia (2015a) Drama Report and data from the Screen Australia website on topics such as domestic box
oce performance, share of Australian cinema releases and Australian audiovisual royalties earned from
overseas sales.
Data was also drawn from the ABS datasets on lm, television and digital games industry in Australia for
2011-12 (ABS, 2013), from publicly available sales statistics from the Australian Home Entertainment
Distribution Association (AHEDA) and from various industry reports, such as IBISworld reports, and media
releases. This data was used to inform the overall cost structures and growth rates in key industry variables,
as well as determine the relative sizes of the Broad subsectors and Core subsectors. Finally, insights and data
provided during the stakeholder consultation process also served to validate the data incorporated and the
modelling estimates.
2.2 Contribution of screen sector
Previous studies have estimated the overall size of the Australian screen sector. For example, the Deloitte
Access Economics (2015a) report on the total economic contribution of the lm and television industry found
total value add to be around $5.8 billion in 2012-13.
17
Likewise, Deloitte Access Economics (2015b) found total
value add to be $77.2 million for South Australia’s screen production subsector alone.
This report, however, goes further and isolates the economic activity into lm and TV productions under
Australian creative control in terms of the Broad screen sector and the Core screen sector. It also isolates this
activity for footloose productions and for digital game production in Australia as well.
Australian TV content encompasses a wide range of production activity – it includes ctional or drama
production (such as mini-series, drama shows, comedy shows and children’s TV shows), as well as
factual documentaries. The remainder is allocated to content such as news, current aairs, light
entertainment, reality, and sport. In 2014-15, 47 TV drama programs (517 hours) were produced in
Australia, with expenditure of $299 million. The majority of these titles (and expenditure) were associated
with domestic programs.
Likewise, feature lm content in Australia covers a range of content – from ones with large international
releases to ones that have been domestic box oce and/or critical successes to more low-budget lms
and lms with limited local releases. In 2014-15, there were 35 Australian features released (including both
domestic productions and co-productions), representing $121 million of production expenditure.
2.2.1 The Broad screen sector
From 24-hour news to a vast array of sports coverage to countless lifestyle and reality shows, Broad
Australian screen content is highly prevalent. For example, in terms of television content, under broadcasting
regulations, all commercial free-to-air television licensees are required to broadcast an annual minimum
quota of 55% Australian content between 6am and midnight on their primary channel (ACMA, 2016a). They
are also required to provide during the same time at least 1,460 hours of Australian content on their non-
primary channels (ACMA, 2016a).
17
It is acknowledged that there is a dierence between the $5.8 billion gure from the 2012-13 estimates of Australian lm and
television and the gures estimated in this report. The dierence lies in two main areas: Firstly, the $5.8 billion gure covers a
larger remit of activity, including footloose as well as other content that is produced like advertising, which are not covered in
our report. Secondly, the data that was used in that modelling was older, whereas the ones in this report are considerably more
up-to-date and robust.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Australian content features quite heavily for the public free-to-air channels. For example, according to the
consultation with the ABC, 10-15% of children’s content on ABC Kids is Australian-made, as is 45% of prime-
time content on ABC1 and ABC2. Further, in terms of content commissioned by the ABC, Australian content
made up approximately 50% of their commissioned hours and 70% of their budget.
Further, pay TV is also regulated by a compulsory standard which requires a minimum expenditure of 10% on
Australian dramas on their drama channels, although this can also be covered by their expenditure in other
content such as feature lms (ACMA, 2016b). This also ensures some level of Australian content is present on
subscription-based television channels, notwithstanding other types of locally produced content on pay TV,
from Australian lifestyle shows to news programs.
Economic contribution
The Broad screen sector in Australia had a total estimated economic contribution of approximately
$2.6 billion in value add to Australia’s GDP and 20,158 FTE jobs to national employment in 2014-15.
This total value add is the equivalent of around 5% of Australia’s information media and telecommunications
industry or around 18% of its arts and recreation services industry.
18
Value add is the sum of GOS and labour income, minus any subsidies. The total gures presented below in
Table 2.1 are the summation of the total direct gures and the indirect gures.
Table 2.1: Economic contribution of all Broad screen sectors, 2014–15
GOS ($m) Labour income ($m) Value add ($m) Employment (FTE)
Direct 649.1 1,259.6 1,825.5 13,151.2
Production* 84.8 492.0 493.6 6,558.0
Distribution 92.9 36.9 129.8 432.0
Free-to-air TV 277.9 519.4 797.3 3,64 6.1
Pay TV 165.3 178.9 344.2 1,649.6
Exhibition 8.4 9.5 17.9 275.9
Retail 8.0 14.5 22.5 450.7
Rental 4.2 4.9 9.1 109.0
Online 7.7 3.5 11.2 30.0
Indirect** 296.4 444.8 741.2 7,007.1
Total 945.6 1,704.4 2,566.8 20,158.4
Source: Deloitte Access Economics (2016). Due to rounding, gures may not add up to totals.
*Due to subsidies, value add is less than GOS and labour income
**Indirect gures refer to production only.
In terms of employment, the production subsector made the largest contribution, directly employing
6,558 FTEs. This was followed by free-to-air TV with around 3,646 FTE jobs and pay TV with around
1,650 FTE jobs. In terms of direct value add, the largest contribution came from the free-to-air TV
subsector with around $797 million in value add, with the production subsector next at around $494 million
in value add. The pay TV subsector also made a signicant contribution with $344 million in direct value add.
18
It is acknowledged that there is a dierence between the $5.8 billion gure from the 2012-13 estimates of Australian lm and
television and the gures estimated in this report. The dierence lies in two main areas: Firstly, the $5.8 billion gure covers a
larger remit of activity, including footloose as well as other content that is produced like advertising, which are not covered in
our report. Secondly, the data that was used in that modelling was older, whereas the ones in this report are considerably more
up-to-date and robust.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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The smallest contribution, in terms of both value add and employment, for Broad screen content was made
by the online and rental subsectors. The small size of the rental subsector very much reects the declining
popularity of video rental. Analysis of AHEDA statistics on rental wholesale of all video formats, over the ve
year period leading to 2012-13, shows that total sales fell overall by 65%. In contrast, online platforms are
small due to starting o from a small base, but are anticipated to grow, with rapid domestic uptake following
the introduction of the SVOD services Netix, Presto and Stan in 2015.
19
In order to avoid any double counting, the indirect contribution gures provided here are for the production
subsector only (reecting that numerous shared resources across the screen content supply chain).
20
The role of advertising
Although not examined in this chapter in terms of its economic contribution, the advertising industry
also plays an important role with regards to Australian screen sector activities. Firstly, it funds a
signicant amount of Broad and Core screen content, such as through advertising revenue earned by
free-to-air TV broadcasts. According to ZenithOptimedia forecasts, Australia’s television advertising
revenue is expected to reach just under $4 billion in 2016 (Mason, 2016).
It is also an important adjacency to the production subsector, as cast and crew employed in the Broad
and Core screen sector also earn income from advertising work and many technical and creative screen
professionals that eventually end up in Australian lm and TV productions were initially trained through
working on advertisements.
On free-to-air television, Australian produced content dominates in terms of ratings. According to
consolidated OzTam ratings data across ve metropolitan markets (Sydney, Melbourne, Brisbane,
Adelaide and Perth), the highest rated non-sports shows were the nal episodes of MastercChef, My
Kitchen Rules and The Block, with 2 million views and over (Knox, 2016a). Given these high ratings, it is
apparent that Australian content is associated with a large amount of advertising revenue which accrues
to the commercial free-to-air television subsector.
2.2.2 The Core screen sector
According to the Drama Report (Screen Australia, 2015a), the total domestic spend for Australian feature lm
and drama TV was $420 million in 2014-15, amounting to a total of 82 titles. Breaking this down, $121 million
was spent on 35 feature lm titles and $299 million was spent on 47 drama TV titles.
The Australian screen sector produces a substantial amount of broader screen content. As such, the
economic contribution gures in this section tend to be smaller as these numbers focus on the supply chain
of Australian content solely in the realm of feature lm, drama TV and documentaries.
Over the last few years, Australian TV drama expenditure has been higher than Australian feature lm
expenditure and has been relatively more stable, with spending on feature lms uctuating more signicantly
in comparison (Chart 2.1). The ve year average domestic spend (2010-11 to 2014-15) for feature lm has
been $213 million while the ve year average domestic spend for drama TV has been $329 million – which
makes 2014-15 a relatively low year in terms of feature lm and drama TV domestic spending.
19 Domestic uptake of SVOD has grown rapidly despite a number of these services only being introduced to Australia in 2015. By
May of 2016, nearly 6.2 million Australians over the age of 14 had access to SVOD services in their homes, representing a total of
over 2.3 million home subscriptions (Roy Morgan Research, 2016).
20 This most likely provides a conservative estimate of the indirect contribution of the screen sector, given that other subsectors
may also demand domestic intermediate inputs which are not used by other subsectors.
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Chart 2.1: Total domestic feature lm and TV drama expenditure, 2010–11 to 2014–15
400
350
300
250
200
150
100
50
0
2010-11 2010-12 2012-13
Financial year
Features TV drama
2013-14 2014-15
Expenditure ($m)
Source: Deloitte Access Economics (2016) based on Screen Australia (2015a) Drama Report’s feature lm and TV drama
expenditure data.
Further, in the documentary space, the total production budget for 2014-15 was $147 million and 184 titles
were produced, of which 97 were single titles and 87 were for documentary series. In terms of production
budget, this is not far o from the ve year average production budget (2010-11 to 2014-15) of $144 million.
Economic contribution
In terms of all eight subsectors involved with Core Australian content in 2014-15, the total economic
contribution was $847 million in value add to Australia’s GDP and 7,650 in FTE jobs to national
employment (Table 2.2). This total value add is the equivalent of around 7% of Australia’s arts and
recreation services industry.
Table 2.2: Economic contribution of all Core screen sectors, 2014–15
GOS ($m) Labour income ($m) Value add ($m) Employment (FTE)
Direct 206.1 420.7 543.5 4,782.6
Production* 34.7 201.3 152.8 2,683.6
Distribution 38.0 15.1 53.1 176.8
Free-to-air TV 74.0 138.2 212.2 970.3
Pay TV 44.0 47.6 91.6 439.0
Exhibition 8.4 9.5 17.9 275.9
Retail 3.3 5.9 9.2 184.4
Rental 1.7 2.0 3.7 44.6
Online 2.0 0.9 3.0 8.0
Indirect** 121.3 182.0 303.3 2,867.4
Total 327.4 602.7 846.9 7,650.0
Source: Deloitte Access Economics (2016). Due to rounding, gures may not add up to totals.
*Due to subsidies, value add is less than GOS and labour income
**Indirect gures refer to production only.
As with Broad screen, Core screen content production remains the largest direct employer and free-to-air TV
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
17
generates the largest direct value add, while the rental and online subsectors provides the smallest
economic contribution.
In terms of employment, the production subsector – through its creation of Australian feature lm, drama
TV and documentaries – made the largest contribution, directly employing around 2,684 FTEs. This was
followed by free-to-air TV with around 970 FTE jobs and pay TV with 439 FTE jobs.
In terms of direct value add, the largest contribution came from the free-to-air TV subsector with around
$212 million in value add, with the production subsector next at $153 million in value add. Not counting for
government subsidies in Australian Core screen content production, the sum of capital and labour earnings
in the production subsector (i.e. the sum of GOS and labour income) exceeds that of all other subsectors. The
pay TV subsector also made a signicant contribution with $92 million in direct value add.
The direct economic contribution of production is smaller for Core content than for Broad – $153 million
and 2,684 FTE jobs for Core compared to $494 million and 6,558 FTE jobs for Broad. The direct economic
contribution of subsectors such as free-to-air TV and pay TV are also signicantly smaller as well.
Because the exhibition subsector deals only with Core screen content, namely feature lm and documentary
lms, its economic contribution (around $18 million in direct value add and 276 in direct FTE jobs) for Core
screen content is the same as for Broad screen content.
One notable change in relative sizes among subsectors is that the Core retail subsector, in terms of both
direct value add and employment, is smaller than the exhibition subsector, in contrast to being larger than
the exhibition subsector for Broad retail.
2.2.3 Footloose production
Footloose production refers to television and lm production activity which can be placed and located in
many dierent locations. This applies particularly to large budget, international studio nanced productions
that choose to lm in Australia instead of elsewhere.
In 2014-15, the total expenditure (both production and PDV-only activity) spent by footloose productions in
Australia was $418 million according to the Screen Australian Drama Report (2015a). This comprised $397
million in foreign features (including Pirates of the Caribbean: Dead Men Tell No Tales, the largest international
feature ever to shoot in Australia) and $21 million in foreign TV drama activity. It should be noted that 2014-15
was unusual in terms of how high foreign expenditure was, with the ve year average being $196 million from
2010-11 to 2014–15.
Economic contribution
Much of the growth in footloose production in 2014-15 was driven by the presence of the Pirates of the
Caribbean production in Queensland. These large international opportunities vary over time in terms of
frequency and size and their presence in Australia can depend on a number of external factors, including
exchange rates, tax incentives and the lming decisions of international studio companies. As such, these
economic contribution gures can best be seen as supportive of the sustainability and growth of the
domestic Broad and Core screen sector.
The total economic contribution of footloose activity in Australia in 2014-15 amounted to $382 million in
total value add and 4,093 in FTE jobs.
18
Table 2.3: Economic contribution of the Australian production subsector from footloose activity, 2014–15
GOS ($m) Labour income ($m) Value add ($m) Employment (FTE)
Direct 9.5 148.4 158.0 1,978.8
Indirect 89.4 134.2 223.7 2,114.3
Total 99.0 282.7 381.6 4,093.0
Source: Deloitte Access Economics (2016). Due to rounding, gures may not add up to totals.
The indirect economic contribution is a signicant component of the total economic contribution, generating
a higher value add and level of employment through ow-on eects in the economy than the direct value add
and employment generated by footloose productions Australia.
One thing to note is that labour income makes up the majority of value add. This is due to the fact that
footloose productions primarily hire Australian cast and crew as labour input, with any prots accrued (i.e.
the gross operating surplus) from these activities going to the overseas production studios.
2.2.4 Digital games
At present, Australian game developers are predominantly small- to medium-sized independent studios
and studios of international publishers that produce game content for mobile phones, tablets, PCs and, to
a lesser extent, consoles. These games are primarily exported to the international market. According to the
GDAA (2015), there are currently 225 game development businesses in Australia.
The majority (48%) of the 225 current Australian game development businesses are located in Victoria
with the next two largest centres being Queensland (19%) and New South Wales (18%) (GDAA, 2015). This is
illustrated below in Chart 2.2.
Chart 2.2: Geographic spread of Australian game development businesses
South Australia
8%
Victoria
48%
Western Australia
7%
Queensland
19%
New South Wales
18%
Source: Deloitte Access Economics (2016) based on GDAA (2015)
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Digital games consumption in Australia
The consumption of digital games is growing strongly in Australia. In 2015, revenues from the sale
of gaming-related goods (which includes games, subscriptions, hardware and accessories) reached
an estimated $2.83 billion, an increase of 15% over retail revenue of 2014 (IGEA, 2016). In addition,
digital sales in 2015 ($1.59 billion, up 27% from 2014) exceeded traditional retail sales ($1.24 billion,
up 2% from 2014).
According to the Digital Australia Report 2016 (IGEA, 2015), video game consumption is highly prevalent
in Australian households. Around 98% of homes with children under eight have a device for playing
computer and video games. Of all homes, nine in 10 have game devices in use. The percentage of
households with games has grown from around 75% in 2005 to over 90% in 2015, demonstrating that
this is a mature media market.
Economic contribution
In 2014-15, the total economic contribution of digital game production in Australia was around $123 million
in value add and 1,053 in FTE jobs. This gure relates to the production of digital games alone and does not
include publishers/distributors and retail, rental or online subsectors that are further along the value chain
for the Australian games sector.
Table 2.4: Economic contribution of the digital game production subsector, 2014–15
GOS ($m) Labour income ($m) Value add ($m) Employment (FTE)
Direct 46.8 50.7 96.6 844.2
Indirect 10.4 15.8 26.2 208.2
Total 57.2 66.5 122.7 1,052.4
Source: Deloitte Access Economics (2016). Due to rounding, gures may not add up to totals.
The digital game production subsector also generates a much larger direct value add and employment
gure than through indirect ow-on eects in the Australian economy. Much of this relates to digital game
production being a technical and creative industry requiring high-skilled workers generating complex
software products. For example, in 2015 there were 37 tertiary providers in Australia oering 172 games or
games-related courses (GDAA, 2015). In many instances, this process – while costly and intensive in terms
of direct capital, labour inputs and imported intermediate inputs – does not source the majority of its
intermediate inputs from domestic suppliers in Australia.
2.3 Benets and challenges facing the sector from digital disruption
It is important to recognise that the rise of digital screen content and its supporting technologies such as
video on demand has changed how value accrues to Australian suppliers and distributors. These changes are
bringing signicant structural changes to the whole screen sector.
In this report, digital screen content is dened as consisting of traditional content made for traditional
distribution that is digitally distributed, as well as online originals which are professional web-based
productions made specically for online viewing.
21
21
Another form of digital screen content is user-generated content that is produced and uploaded to video-sharing sites
and social media by everyday users, usually without any intention to earn revenue. This encompasses an immense variety of
screen content and is a rapidly growing form of content creation. However, for the purposes of this report on the Australian
screen sector, this chapter will focus only on traditional content and online originals as they are more closely associated with
traditional screen sector activity.
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One on hand, digital screen content brings benets such as heightened potential for audience reach and potential
cost-savings associated with delivering screen content. On the other hand, it has altered the traditional revenue
stream of Australian lm and TV subsectors and made content monetisation more complex.
2.3.1 Benets for producers and distributors
Dissemination of content
A major appeal of digital distribution is that the audience for content is now potentially global. Dissemination
is helped by the fact that video on demand services makes it easier for niche screen content to be
distributed. Without restrictions such as broadcast or cinema schedules, a wide range of content can be
distributed. Likewise, it bypasses distribution bottlenecks and physical costs (such as the storage and
transport of DVD/Blu-Ray).
Opportunities for new and niche content creators
Digital distribution can benet new entrants and niche content creators in the production subsector, allowing
them sell their content earlier than otherwise. These companies can grow an audience base in a shorter span
of time, without needing to rely heavily on intermediaries such as major distributors, cinema operators and
television broadcasters to reach potential audiences.
There are also opportunities for audience-driven business models, where online content with a strong
following can become self-sustaining productions. An example of this was the comedy series The Katering
Show which was initially released on YouTube in 2015, before being picked up and partly funded by the ABC
for a second series on iview in 2016.
Digital disruption brings with it opportunities to engage new markets
While Australian content may face challenges domestically, advances in digital technology bring with it
opportunities to engage new markets overseas. Data provided by Screen Australia for the 2014-15 sample
period shows that 39 Australian titles are available for rent, own or subscription via 323 VOD sources
both domestically and abroad. Over 50% of these titles have reached international audiences, with nearly
20 countries other than Australia able to access Australian content on VOD. This provides insight into the
revenue raising potential of Australian content via digital platforms to international markets.
2.3.2 Challenges for producers and distributors
Loss of traditional ancillary markets
Content has been typically released through one delivery channel for a set period of time (“release window”)
before it can be released via other delivery channels. This can benet Australian content – for example, even
if a local lm struggled to cover costs at the box oce, other outlets such as video, subscription TV and free-
to-air TV have served as ancillary markets, giving the lm alternative revenue streams.
Digital disruption has greatly aected the viability of monetisation through ancillary markets. The retail
subsector is experiencing falling sales due to competition from online and Australian content is experiencing
lower licensing fees in the TV subsectors. This is in part due to competition with SVOD and, in the case of
free-to-air TV, changes to prime time show composition in order to attract advertising revenue (Screen
Australia, 2015b). The alternative to the erosion of ancillary markets is to focus solely on digital distribution.
But Australian content that is predominantly released online have yet to reach the consistent levels of
monetisation provided by traditional release chains.
Release windows becoming more complicated
Greater monetisation is possible through creative windowing arrangements, such as having the content
shown for a window of time on a SVOD or catch-up service around the same time as it is shown by free-to-air
broadcasters, in cinemas or on pay TV. However, the ability to monetise content and sell the content rights
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
21
in hybrid arrangements is constrained by the fact that negotiating creative windowing can be costly. The
framework for purchasing the right to broadcast content in the current environment of multi-channel and
online streaming has led to ongoing complexities for the screen sector.
Uncertainty around dominant SVOD services
Australian-based producers are faced with the challenge of signicant content saturation, having to compete
with a large quantity of easily accessible international content. It remains to be seen whether dominant SVOD
services will support the viability of the local production subsector.
22
Need for better data analytics and reporting
One challenge to creating a successful monetisation strategy is a need for better data and measurements
analogous to box oce revenue and television ratings that can provide insight into the performance of
Australian content in a digital environment (Screen Australia, 2015b). There are also untapped opportunities
for data analytics to drive value for producers and distributors. The consumption of digital screen content
generates large amounts of data on consumer behaviour which can provide valuable insight on how to
improve the audience reach and audience engagement with their content, as well as address advertising
revenue challenges.
Online originals
Online originals – that is, screen content that is professional produced specically for online platforms
– is quickly becoming a signicant part of the Australian screen sector. For example, ABC iView has
begun to commission short-form online original content to engage with online-orientated audiences
and help support Australia’s emerging digital production subsector (Knox 2015; 2016b). According to
consultations with the ABC, these emerging talents have experience producing content that resonates
with audiences more attuned to online video formats. By engaging with them, the ABC is seeking to learn
from their productions techniques.
Recent examples of well-received online original shows include The Katering Show, Starting From… Now!,
Fragments of Friday and The Wizards of Aus. Overall, online originals are an evolving and rapidly growing
part of the screen sector.
2.4 Summary
In summary, in Australia in the reference year 2014-15:
• The Broad screen sector made a total economic contribution of approximately
$2.6 billion in value add and 20,158 FTE jobs
• The Core screen sector made a total economic contribution of
$847 million in value add and 7,650 FTE jobs
• Footloose activity made a total economic contribution of
$382 million in total value add and 4,093 FTE jobs
• The digital game production subsector made a total economic contribution of
$123 million in value add and 1,053 FTE jobs.
22 That being said, Australia’s main SVOD services have begun to invest in original Australian content. For example, Screen
Queensland recently announced a partnership with Stan to develop and nance a feature lm to be distributed exclusively
on the service (Queensland Government, 2016). Stan has also commissioned a season of the comedy series No Activity
and invested in the television show Wolf Creek (Media Day, 2015).
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
22
Figure 2.1: Total economic contribution of Broad and Core screen content
$2,567 million
in value add
20,158 FTE job
Core screen
content
$847 million
in value add
7,650 in FTE job
Broad Australian content
Digital games
Under Australian creative control
$123 million
in value add
1,053 FTE job
Source: Deloitte Access Economics (2016)
Table 2.5 below provides the list of full estimates for the 2014-15 direct economic contribution of the
Broad screen sector, Core screen sector, footloose production subsector and the digital games production
subsector. It includes standard estimates such as value add and employment, as well as estimates of
revenue, intermediate inputs, subsidies and taxes.
23
Table 2.5: Full direct economic contribution estimates, 2014–15
Broad
(All)
Core
(All)
Footloose
(Production)
Digital games
(Production)
Gross revenue ($m)
24
7,248.9 2,294.6 418.0 127.2
Direct value add ($m)
25
1,825.5 543.5 158.0 96.6
GOS ($m) 649.1 420.7 9.5 46.8
Taxes on production ($m) 223.8 61.6 1.6 1.5
Labour income ($m) 1,259.6 206.1 148.4 50.7
Excluding subsidies ($m) -83.2 -83.2 - -0.9
Intermediate inputs ($m) 5,043.8 1,586.3 257.9 28.1
Subsidies ($m) 83.2 83.2 - 0.9
Taxes on products ($m) 296.3 81.6 2.1 1.7
Direct employment (FTE) 13,151.2 4,782.6 1,978.8 844.2
Source: Deloitte Access Economics (2016).
23 Gross revenue estimates are collected from a variety of sources, such as data provided by Screen Australia and from industry
reports. Intermediate inputs were estimated from the percentage of total industry expenses for the relevant subsectors as
reported by the ABS and other sources. Subsidies came from the Screen Australia (2015a) Drama Report. Taxes on production
and products were estimated from the tax split reported by the ABS Input-Output tables for the relevant subsectors. A
summary of government subsidies, as well as other forms of government support not included in Table 2.5, is provided in
Appendix B.
24 Gross revenue is equal to direct value add, intermediate inputs, subsidies and taxes on products.
25 Direct value add is equal to GOS (EBITDA) and labour income, minus subsidies. Taxes on production are included in direct value
add under GOS.
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3. Exports and tourism
This chapter examines the economic contribution of Australian screen content in terms of screen content
exports and screen-induced tourism. This chapter provides:
• An overview of export earnings for lm and television
• An estimate of 2014-15 export earnings for Core Australian content
• A discussion of how screen content can induce tourism
• An estimate of the overall value of screen-induced tourism in Australia.
3.1 Export earnings for lm and television
Exports of Australian lm and television to international markets occur primarily through distributors. For
example, ABC has ABC Commercial which delivers screen content internationally. Examples of ABC exports
include Miss Fisher’s Murder Mysteries and The Code which has been shown in a number of countries, such as in
the United Kingdom, Canada and France, among others.
Further, according to ASTRA (2015), in 2014-15, pay TV providers exported a total of 13,199 hours of
Australian content overseas for foreign audiences. Likewise, a number of recent Australian lms have also
been exported overseas in the last year, including The Dressmaker, The Water Diviner and – perhaps, most
signicantly – Mad Max: Fury Road, which was highly successful at the international box oce.
3.1.1 Audiovisual royalties in previous years
Screen Australia releases data on royalties earned and paid by Australia for international screen content
(Screen Australia, 2016a). This data is drawn from unpublished data from the Australian Bureau of Statistics
(ABS), Balance of Payments and International Investment Position (cat. no. 5302.0), and reports the value of
royalties arising from export of cinema, television, video (Blu-ray, DVD and VHS) and multimedia releases.
26
In 2013-14, total foreign royalties earned in cinema, television, video and multimedia releases amounted to
$199 million. In contrast, total foreign royalties paid were $1.36 billion. When imports are accounted for,
Australia has had a persistent annual decit in audiovisual trade since 1991-92. One exception to this decit
was in 2000-01 when television royalties earned by the Sydney Organising Committee for the Olympic Games
(SOCOG) created Australia’s rst ever screen royalty trade surplus of $552 million.
As shown below in Chart 3.1, the movement of total royalty earnings appears to be driven primarily by
television exports (particularly between 2005-06 and 2009-10, and from 2012-13), with rises and falls in
television exports contributing heavily to rises and falls in total screen exports. These television royalties also
include earnings from feature lms sold for overseas television screenings.
Furthermore, as shown in the chart, the majority of total royalty earnings and television royalties are to the
OECD nations (e.g. UK, US, Canada, New Zealand). This is to be expected given that OECD countries have
higher average levels of disposable household income and some are Anglophone countries with culture,
heritage and language comparable to that produced in Australian screen content.
26
It is important to note that the ABS also reports gures for unidentied audiovisual imports and exports – this is included
in the total royalty gures, but is not captured in their separate reporting of television, cinema, and video. Further, for
certain years and for certain export destinations where the data is unpublished due to condentiality reasons.
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Chart 3.1: Total and television royalty earnings, OECD and all territories, 2005–2014
300
250
200
150
100
50
0
2005-06 2006-07 2007-08 2008-09
Financial year
Total screen royalities (All territories)
Total screen royalities (OECD)
2009-10 2010-11 2011-12 2012-13 2013-14
$m
Total screen royalities (All territories)
Total screen royalities (OECD)
Source: Deloitte Access Economics (2016) based on Screen Australia (2016a) data from the Australian Bureau of Statistics
(ABS), Balance of Payments and International Investment Position (cat. no. 5302.0).
While year-to-year royalty earnings from abroad are volatile, from 2005-06 to 2013-14, total royalties earned
from all territories have grown by 2% on average per year and total royalties earned from the OECD nations
have grown by 4% on average per year. Further, analysis of publicly available data on international royalties
reveals that from 2005-06 to 2013-14, average annual television royalty earnings were around $99.2 million.
In contrast, the average for cinema was $5 million, and the average for video was $4.1 million.
27
3.1.2 Total lm and television export earnings
International royalty earnings alone, however, do not capture the full scope of lm and television export
earnings for the screen sector. Along with royalties, lm and television also generates other export products
in the form of international pre-sale of television shows.
Below are the types of export earnings which can accrue to Australian lm and television content:
• Foreign box oce earnings – e.g. the international box oce earnings for The Dressmaker, which was
released in countries such as Argentina and the UK, or The Water Diviner, which was released in countries
such as Turkey and the US
• License fees to foreign television broadcasters or video sell-through, video-on-demand, etc. – e.g.
licensing earnings from Neighbours being broadcast on Channel 5 in the UK or Wentworth being added to
Netix in the United States
• DVD/Blu-ray/other format retail sales overseas – e.g. international DVD sales of the television series The
Slap or international Blu-ray sales of Mad Max: Fury Road.
27 Noting that 2012-13 and 2013-14 export gures for video are unpublished.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Core screen content export earnings for 2014–15
Drawing on a number of data sources, including gross box oce and recoupment data provided by Screen
Australia, the total screen export earnings for Core screen content were estimated for the reference year
2014-15. This was approximately 97% the size of Australia’s sugar and honey exports, and 10% the size of
Australia’s medicinal and pharmaceutical product exports in 2014–15.
In 2014-15, total screen export earnings from Australian Core lm and television screen content were
approximately $252 million. This comprises mainly international box oce earnings that accrue to Australia,
amounting to 72% of total screen export earnings. The high level of international box oce earnings was
driven in part by the international success of Australian lms such as Mad Max: Fury Road, The Water Diviner
and Maya the Bee.
It should be noted that the licence fee data used in these estimates only takes into account Screen Australia
funded rst releases, meaning that the export earnings gure here should be interpreted as a lower bound
on export earnings.
Table 3.1 below provides a breakdown by types of export earnings:
Table 3.1: Breakdown of Core screen content export earnings
Type of export earnings Amount ($m) Description
Box oce earnings
28
181.9 Amount of foreign box oce earnings that
accrue to Australia.
License fees and royalties from
broadcast and video
29
70.0 Earning from sales and pre-sales of Core screen
content rights to foreign broadcasters and
earnings from foreign video retail sales.
Total 251.9
Source: Deloitte Access Economics (2016)
It should be emphasised that these export earnings are not additive with the economic contribution gures
from Chapter 2, as they are revenue to the screen sector that has already been counted in the economic
contribution estimates.
Further, while not estimated here, it should be noted that digital game production also generates signicant
exports. Game production companies in Australia are primarily export-driven due to a small domestic
market, with developments in technologies greatly changing the ease with which games can reach
international audiences. As such, Australian games released on mobile platforms such as Real Racing 3, Fruit
Ninja and Crossy Road have reached hundreds of millions of players around the world.
3.2 International tourism impact of lm and television
Australian lm and TV that is exported and seen by overseas audiences can potentially have another eect
– they can positively inuence international visitation decisions, attracting greater number of tourists to visit
Australia than otherwise. This can be seen as a source of indirect export earnings as well.
28 Box oce earnings are calculated from international gross box oce gures, which are then apportioned back to the Australian
screen sector once the portion attributable to foreign exhibition and distribution subsectors are deducted from the total.
29 This calculated from ABS data on royalties from video, combined with recoupment data provided by Screen Australia on
international sale and presale gures for projects that they have funded.
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3.2.1 The relationship between screen content and tourism
The relationship between screen content and international tourism has been well-documented over the
years, with screen-induced tourism manifesting in dierent ways – namely, location and destination tourism.
Nordicity (2013) observes that screen-induced tourism can include location tourism where tourism is most
connected with the lm’s content; drawing visitors to a destination or attraction specically to visit locations
where the lm was shot. As such, many locations are associated with well-known lms that were shot there –
e.g. Mt Macedon with Picnic at Hanging Rock, Broken Hill with The Adventures of Priscilla, Queen of the Desert or
Vermont South, which is the actual setting of Ramsay Street in the soap opera Neighbours.
It can also include more general destination tourism where tourism transcends specic lming locations
and visitation is driven by the broader features/characteristics of the destination itself (e.g. landscapes and
attractions). According to Oxford Economics (2010), Australia experienced a boost in tourism numbers, such
as a 20% increase in visitors from the United States, in the 1980s. This was partially due to the international
popularity of lms such as “Crocodile” Dundee.
Sometimes screen content can specically be used for tourism marketing purposes, such as the deliberate
campaign that Tourism Australia ran following the release of Baz Luhrmann’s Australia. Often, however,
Australian lm and television can inuence tourism in more diuse and intangible ways. For example,
according to Oxford Economics (2010):
“...the role that lms play in promoting a country or a regional rather
than a specic location is also important. Films not only generate
interest in a country but also act to remind people about what the
country has to oer – for example by showcasing scenery and the
cultural oer.”
Australian lm and television can showcase the country as a desirable place to visit for international visitors,
regardless of whether or not there was a deliberate tourism campaign behind the screen content or whether
they visit the actual locations depicted in the content they viewed. Similarly, Australian screen actors and
practitioners can also help promote the Australian brand and bring attention to Australia as a potential
tourism location. Australians with a strong international screen prole have also been used in tourism
marketing. For example, it is estimated that Chris Hemsworth’s involvement in a Tourism Australia campaign
had potentially generated more than 2,000 media stories, worth $55 million in marketing (Ironside, 2016).
Sometimes the economic eects extend beyond merely increased international visitors, with tourism
operators unaliated with the lm or television program oering activities related in some way to the screen
content. For example, horseback riding tours and lessons was an Australian industry that grew materially
following the success of The Man from Snowy River lms (Beeton, 2006).
Although not examined here, lm and television can also boost domestic tourism. Following the domestic
box oce success of the family lm Oddball – a story based on an actual program in Warrnambool where
Maremma sheepdogs guard the penguin colony on Middle Island – visits to Flagsta Hill Maritime Village,
where the Maremma sheepdogs are housed when not on the island, increased 48% from the 2014 spring
school holidays (Warrnambool City Council, 2016).
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3.2.2 Tourism expenditure attributable to Australian lm and TV
Using a unique survey on international visitors to Australia, this report was able to estimate the proportion of
tourism which can be attributed to the eects of Australian screen content.
The survey estimated a “screen inducement rate” of 2.27%, which was the share of international survey
respondents that responded armative to the following:
1. That they came on holiday
2. Had seen Australian lm or TV content prior to visiting Australia
3. That the content had increased their interest in visiting Australia
4. That they had visited places in Australia they had seen in Australian lm/TV.
Applying this screen inducement rate to the total number of international visitors to Australia and their
average stay and tourism expenditure, this report nds that the number of international tourism visits
associated with Australian lms and TV is estimated to be around 144,000 a year. Drawing on the Tourism
Research Australia (TRA) survey on tourism spending, this translates to around $704 million in tourism
expenditure in Australia each year. Further, it is estimated that an additional 85,000 international tourists
have stayed an additional 1.7 nights on average to see locations in Australian lms or TV. The value
associated with this incremental demand is estimated to be in the order of $21 million.
Combining the two expenditure estimates, this suggests that total tourism expenditure that may be
associated with Australian lm and television amounts to $725 million each year. This suggests that
Australian screen content that is seen by international audiences may be a signicant driver of tourism in
the country. For comparison, total visitor spending in Australia in 2014-15 was around $107 billion. This
associated tourism expenditure is over twice the size of the estimated direct export earnings of Australian
screen content.
Comparisons with other tourism ndings
Tourist attractions are regularly assessed on how they contribute to tourism and economic activity. In
moist countries, a handful of high prole attractions are likely to be very signicant in driving tourism
demand such as the Great Wall of China and the Pyramids of Giza. But, the image of countries is a big
driver of tourism also, such as the urban experience of New York City and food and lifestyle of Paris.
In Australia, some of the most high prole drivers of tourism include the Great Barrier Reef and the
Sydney Opera House. What this report shows is that Australia’s lifestyle and image, as communicated
through television and lm, also serve as compelling inducers of tourism activity, when considered
against other high prole national attractions.
Consider the Deloitte Access Economic (2013a) report on the Sydney Opera House that found that the
Sydney Opera House could be responsible for around $640 million of tourism expenditure in Sydney
in 2012–13. While not directly comparable with the screen-induced tourism expenditure across the
entire country (due to the fact that the Sydney Opera House report reports the amount of expenditure
attributable to only Sydney tourism expenditure), this provides a point of comparison between tourism
attributable to screen content and other major drivers of tourism in Australia..
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3.2.3 Other survey ndings
Visiting places in Australian lms or TV
Over 60% of international tourists recall seeing an Australian lm or TV prior to their visit, of those that have
seen it, 85% said the content made them more likely to visit Australia. In fact, of the key reasons for visit, 7%
were to visit a location in Australian lm or TV.
Staying longer in Australia
Of those who visited locations in Australian lm or TV, a third said they had stayed longer in Australia than
they would otherwise.
3.3 Summary
In summary, in terms of exports and tourism:
• Total export earnings from Australian Core lm and television screen content were approximately
$252 million in 2014–15
• Total tourism expenditure that may be associated with Australian lm and TV is estimated to be
$725 million a year.
Figure 3.1: Export earnings and tourism expenditure
$725 million
Tourism expenditure Export earnings
$252 million
Source: Deloitte Access Economics (2016)
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4. Audience value
This chapter measures the audience value of Australian screen content, in order to capture the consumer
welfare benet of lm and TV to domestic audiences. This chapter provides:
• An overview of the approach used to measure the value of screen content to audiences
• An estimate of the audience value spent watching Australian screen content
• A discussion of audience values generated by digital screen content that is not be captured by
these estimates.
4.1 Approach
The primary measure of value of any media content lies in its value to audiences. This report estimates the
value of screen content to audiences using two methods. Firstly, the value to consumers can be measured as
the industry revenue plus any surplus received by the consumer. Secondly, the value to consumers can also
be measured by value of time spent watching Australian screen content.
Figure 4.1: Two methods for estimating audience value
Total value captured by the
industry and consumer surplus
Value of time spent watching
by consumers.
Method 2:
Measured as the value
associated with the time spent
watching Australian screen
content by consumers.
Method 1:
Measured as the revenue
received by the Australian
screen industry from consumers
plus estimated consumer surplus.
Source: Deloitte Access Economics (2016)
The rst method is only applied in instances where audiences purchase the screen content – e.g. tickets
for a lm or price paid to watch DVDs in the case of retail. In instances where audiences do not purchase
the screen content outright (such as with free-to-air TV), the time-use value of their consumption will be
calculated instead.
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This chapter estimates audience value by examining the channels through which they consume Australian
lm and TV: cinema, TV, online (VOD only) and retail and rental.
30
Table 4.1 below summarises which methods
are applied to particular delivery channels.
Table 4.1: Type of method used
Content delivery channel Method 1: Revenue and
consumer value
Method 2: Time-use value
Cinema
TV
Commercial free-to-air TV
Public free-to-air TV
Pay TV
Online (VOD only)
Subscription video on demand
Non-subscription video on demand
Retail and rental
DVD and Blu-Ray sales
DVD and Blu-Ray rental
Source: Deloitte Access Economics (2016)
4.1.2 Method 1: Revenue and consumer value
One method to value content is how much consumers would be willing to pay for it. This can be thought of as
a combination of both how much they spent and how much extra they would spend, the so-called ‘consumer
surplus’. Further, consumers may value having choice and variety of dierent content.
Method 1 value is calculated as the summation of the revenue streams from audiences, and adding the
average of the consumer surplus and consumer choice value associated with this expenditure as well. The
average of consumer surplus and consumer choice is taken due to uncertainty present in the two consumer
valuations. For example, the consumer surplus value may also capture the choice value of Australian screen
content for audiences, making them comparable but not additive. As such, the average of the two values is
used instead for cinema, the pay TV component of TV, the SVOD component of online and retail and rental.
Revenue
For cinema, total revenue is the sum of box oce revenue that was earned by Australian lms. For pay
TV, this is the subscription revenue from Australian TV content. For rental and retail, this is purchases of
Australian content on Blu-Ray and DVD.
Revenue data came from a variety of sources, such as IBISworld industry reports, GfK retail data provided by
Screen Australia, SVOD data from Telsyte (2015), and gross box oce data from the MPDAA.
30 Much of the data comes from reports on overall domestic audience spend and time-use through various delivery channels, not
just for Australian content. In order to apportion to only locally produced content, the share of Australian content was drawn
from various sources, such as the survey data, gross box oce data from MPDAA, data from ASTRA (2015), TV rating statistics
from OzTam and desktop analysis of pay TV and SVOD channel oerings and program libraries.
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Consumer surplus
Consumer surplus is an economic measure of consumer satisfaction, which is calculated by estimating the
dierence between what consumers are willing to pay for Australian screen content relative to its market
price (i.e. what consumers actually pay).
To measure consumer surplus, various sources were used. One key data source was the survey that was
elded for this report. In the survey, people directly were asked whether they would purchase tickets at
particular prices and this data was then used to ascertain the average willingness-to-pay for Australian lms.
According to the survey data, of those Australians who visited a cinema, on average, they are willing to pay up
to $25 for a screening of an Australian movie. This is a consumer surplus of up to approximately $11 above
the average ticket price of $14, or a 44% consumer surplus premium.
This is comparable to Deloitte Access Economics (2013b) which drew on a consumer surplus premium
associated with telecommunications spending of around 35% from Ovum (2012). It is also important to note
that the consumer surplus premium do not necessarily imply that cinema operators or other screen content
providers should charge more since higher prices do not necessarily support prot maximisation.
This nding was then applied to cinema expenditure in order to determine the consumer surplus for
cinemas. Further, pay TV, SVOD, retail and rental were also assumed to have the same premium as cinema.
31
Consumer choice
Australian lm and TV also generate value by providing a variety of content that would otherwise not be
available to domestic audiences. The concept here is that Australian lm and TV are dierent from other
screen content in some ways to consumers (e.g. dierences in stories, settings, artistic choices, acting)
and that these translate into a higher degree of overall consumption value than if they had only access to
overseas screen content. An economic model of consumer choice by Brynjolfsson et al (2003) is used to
capture the choice value here. See Appendix D for more details on this approach.
This report uses the Brynjolfsson approach to measure the value of choice on Australian lm and TV content,
noting there are three challenges:
• Quantifying the dierences between Australian and non-Australian screen content
• The data with regards to spending on Australian and non-Australian is not entirely clear or
somewhat limited
• The absence of consumer prices with which to measure elasticity between Australian and
non-Australian content as they are often shown via the same delivery channel (e.g. the same SVOD
or pay TV subscription service or the same free-to-air channel).
With regards to quantifying the dierences between Australian and non-Australian screen content, this
report assessed the uniqueness of Australian screen content from the survey data, which captures the share
of respondents that considered Australian lm and TV content to be ‘fairly’, ‘very’ or ‘completely’ dierent
from foreign content based on qualities such as storyline, setting, acting music and camera work.
Australian screen content was found to be unique – with almost two thirds (64%) of respondents considering
Australian lm and TV content to be ‘fairly’, ‘very’ or ‘completely’ dierent from foreign content based on
qualities such as storyline, setting, acting music and camera work. The spending on Australian and non-
Australian content is taken from the various revenue streams – e.g. subscription revenue, box oce revenue
and retail/rental revenue – for the various content delivery channels.
Finally, to measure the elasticity between Australian and non-Australian screen content, this report draws on
the same price elasticity estimates used by Brynjolfsson et al for the book market (-1.56 to -1.79) on the basis
31
This assumption hinges on the concept that Australia screen content viewed in the cinema is substitutable with screen content
viewed on television devices, digital platforms or via DVD/Blu-Ray so as to yield the same average consumer surplus premium.
This may not necessarily be the case and could result in an under- or overestimate of the actual consumer surplus.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
32
that consumer preferences between dierent books are likely to be similar to that between dierent media
options. The midpoint of this elasticity range is used for the calculations here.
4.1.3 Method 2: Time-use method
As demonstrated in Goolsbee et al (2006), the relationship between time spent consuming screen content
and the opportunity cost of time can be analysed to estimate the demand curve for screen content. Applying
this estimate from the paper, the elasticity of substitution is calculated to be 1.30. See Appendix D for more
details on this approach.
In order to apply this elasticity, additional data is needed. Using ABS data on GDP per capita per week,
the average income per week in Australia was found to be $1,326. Drawing on the survey data, it was also found
that on average, time spent TV watching made up around 14% of all leisure time. From the survey data, it was also
found that on average, over 17 hours per week was spent watching TV among individuals that watched it.
32
Using this elasticity, along with the average income per week in Australia, the leisure time share of TV
watching and the average time spent per week watching TV, this report nds the value of time per hour of
watching screen content to be approximately $4.57.
This value of time watching TV can be applied to the time spent by Australians watching screen content to
calculate the time-use value, particularly in instances where they do not pay for the content outright.
33
Pay TV example using both methods
Using method 1:
This report calculates a consumer surplus of approximately $476 million for Broad Australian
screen content, based o the 44% consumer surplus premium applied to audience expenditure and
apportioned by the share of Australian content shown on pay TV channels. It also applies a consumer
choice value of approximately $533 million, drawing on audience expenditure apportioned by the
Australian content share and a uniqueness factor of 64%. Further, subscription revenue attributable to
Broad Australian screen content shown on pay TV is estimated at approximately $595 million.
The average of the consumer surplus and consumer choice value, plus the subscription revenue yields a
total audience value of $1,109 million for Australian screen content on pay TV in 2014-15.
Using method 2:
Drawing on the survey data and data on the pay TV share of audience views from OzTAM and
RegionalTAM, this report estimates that around 254 million hours were spent by Australians watching
Broad Australian screen content on pay TV in 2014-15.
Applying the time-use value per hour of watching screen content (approximately $3.5) to total time spent, the
audience value is estimated at $1,160 million for Australian screen content on pay TV in 2014-15.
It is interesting to note that when comparing the results of these two methods for pay TV, there is a
modest dierence of $51 million between the two audience values. Moreover, when combining the
average of the consumer surplus and consumer choice value with subscription revenue (from method
1) and dividing that by the number of hours watched (from method 2), the result is an approximate time
value per hour of $4.37.
32 One limitation of the survey data is that it only captures a single week of screening watching behaviour from respondents. For
example, there may be seasonality eects for screen content consumption – i.e. higher or lower levels of TV use during certain
times of the year – that are unadjusted for.
33 In the case of commercial free-to-air TV and SBS, the time-use value was adjusted downwards to remove the time spent viewing
non-program advertisements.
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4.2 Audience value of Australian lm and TV
The total audience value of Australian lm and TV content viewing in 2014-15 was approximately
$17,403 million, or $17.4 billion, in consumer welfare benet.
Interpreting these results
The audience value of $17.4 billion is a signicant estimate and much higher than the direct value add
of $2.6 billion for the Broad screen sector. As a point of comparison, this is somewhat larger than the
industry gross value added for arts and recreation services in Australia (136%).
The high audience value estimate is highly sensitive to the time-use value of content consumed, which
is around $4.6 per hour. Indeed, this gure is higher than other willingness to pay estimates, such as
Venture Consulting’s (2015) report on The value of free TV, which said “that Australian households would
be prepared to pay an average of $17 per month to receive the programming they currently receive for
free from the commercial free-to-air TV broadcasters” (p9). However, as the report noted, that estimate
tends to be an underestimate as they quantify “the consumer’s willingness to pay, rather than a notional
concept of perceived “value”” (p9). Therefore, if an individual “highly values the services but does not
have the nancial means to pay, then this value is not reected in the calculation” (p9). The report also
notes that the conservative estimate is also driven by a “strategic eect of customers not wanting to
suggest they might be willing to pay” (p9).
At another level, a high value of screen content is not surprising, given how much leisure spending can
take place per hour at cinemas or for screen content on DVD/Blu-Ray. Further, TV viewership is one of
the largest shares of time outside of sleeping and working for adult Australia which – when combined
with the large amount of Australian produced TV content – suggests that Australian screen content
generates high levels of value for its consumers. Indeed, whenever new channels of delivery have
been introduced to the market (e.g. multi-channels, subscription TV and video on demand), they have
experienced strong expansion, suggesting that there exists latent audience demand that commercial
screen production has not fully captured. It is unsurprising under these circumstances that audience
value is much higher than the economic contribution estimates.
However, there are a range of other factors that may inuence the result. Australian content quotas
may lift the level of viewing compared with an unregulated environment. It is possible that because
of Australian content quotas, the audience value presented here is overstated. It is unclear what the
audience value would be in a counterfactual situation without content quotas, given that the screen
sector is not a purely competitive market.
Another limitation is that the gross hours of TV consumption also includes time where individuals may
be engaging in other activities. For example, to the extent that just ‘having the television on’ is something
that his happening by default, rather than screen content being actively consumed, adds uncertainty to
the estimates of audience value.
The vast majority of audience value was generated from Australian content watched on TV (public and
commercial free-to-air and pay TV).
• Types of Australian content that falls under commercial free-to-air TV (i.e. Seven Network, Nine Network and
Network Ten) includes highly popular shows such as Catching Milat, MasterChef Australia and The Bachelorette.
• Types of Australian content that falls under public free-to-air TV (i.e. ABC and SBS) include shows ranging
from predominantly non-ctional shows such as Q&A and Dateline to scripted, narrative content such as
Jack Irish and The Family Law.
• Types of Australian content that falls under pay TV services (such as Foxtel) include the lifestyle show River
Cottage Australia and dramas such as Wentworth.
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This was followed by online (VOD only), with the majority of its audience value being generated by non-
subscription video on demand (i.e. online catch-up services). These services can provide a variety of Australian
lm and television content, much of it which has been previously aired on TV or released in cinemas, although the
Australian content share in SVOD remains low. This is a small but growing area of media consumption.
Cinema was the next largest in terms of the audience value it generated from Australian content. The
smallest was retail and rental, with retail generating a larger audience value than rental. Retail and rental also
has low Australian content shares and is facing declining overall demand for DVD/Blu-Ray purchases and
rental services.
The Australian domestic box oce in 2015
2015 was a strong year for Australian lms. Australian lms had their best domestic box oce since
2001, earning over $88 million (7.18% of the total) with the success of feature lms such as Mad Max:
Fury Road ($21.7 million), The Water Diviner ($10.18 million) and The Dressmaker ($18.6 million). Further, the
documentary lm That Sugar Film grossed over $1.7 million, making it the highest grossing Australian
documentary ever, excluding IMAX lms (MPDAA, 2016).
4.3 Additional survey ndings
According to the survey, TV remains the dominant channel of consumption, followed by cinema and
mobile devices.
• Respondents stated that over 30% of the lm and TV they watched in a typical week was Australian-made
• Over 90% of respondents said they would watch TV in a regular week, on average spending a total of
15 hours
• Around a third said they would go to the cinema, spending an average of 2.6 hours each week.
• 9% of survey respondents they watched lm and TV on their mobile or tablet device and that was for
around 7.3 hours each week.
• Finally, a fth of respondents said they used their PC and laptop for screen content, spending an average of
just under 8.5 hours each week.
Chart 4.1: Survey responses on time spent on screen devices for lm and TV (Australian and non-Australian
content)
16
14
12
10
8
6
4
2
0
0% 20% 40% 60% 80% 100%
Average time spent per week (hr)
Proportion of respondents (%)
PC/Laptop
Mobile/Tablet
Cinema
TV
Source: Deloitte Access Economics (2016), n = 1,438
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Further, most respondents watched Australian-produced news and current aairs programs, followed by
drama/comedy TV shows and documentaries. Two third of respondents said they watch Australian news/
current aairs programs. Travel shows are the least popular, with only 27% reported watching, although they
may reect some overlap with documentaries.
Chart 4.2: Type of Australian screen content watched by survey respondents
Travel shows
Proportion of respondents (%)
Cooking shows
Reality TV/game shows
Sports
Drama comedy movie
Documentary
Drama/comedy TV programme
News/current affairs
0% 20% 30%10% 40% 50% 70%60% 80%
Source: Deloitte Access Economics (2016), n = 2,106
4.4 Audience value of digital screen content
It is important to note that the estimates in this chapter do not capture the audience value generated by
professional web-based producers in Australia that create original online videos specically for online
viewing. For example, the top ten YouTube channels from Australia have generated a total nearly 12 billion
views as of August 2016.
34
Indeed, the rise of digital screen content has impacted the value generated for audiences. Like in many other
industries, consumers have become signicantly empowered by digital disruption, with increases in terms of
convenience of consumption, greater choice and heightened content engagement through social media.
Convenience of content consumption
SVOD services and free catch-up services are a key facilitator of convenience as they have expanded
consumer choice; with consumers no longer being restricted by TV broadcast schedules or retail/rental
and cinema oerings. As noted by the Deloitte Media Consumer Survey, 30% of respondents stated they
purchased a digital streaming subscription to have more choice when selecting lm and TV to watch (Deloitte,
2015). Digital video recorders have also increased convenience, enabling consumers to time-shift with greater
ease and oering innovative functions such as being able to pause a live television broadcast and rewind and
rewatch it, or being able to fast forward through commercials.
34 Data compiled from “Top YouTubers in Australia by Most Viewed” on socialblade.com
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
36
Households are also increasingly taking advantage of the ability to view screen content on multiple devices
at the same time (i.e. ‘multi-screening’), such as smartphones, TVs, laptops and tablets. According to the
Deloitte Media Consumer Survey, 85% of Australians multi-screen while watching the TV, with 31% social
networking and 30% browsing and surng the web while doing so (Deloitte, 2015). For those that multi-
screen, the exibility to engage with other activities while they are watching content is highly valued.
Catering to niche audiences
Video on demand can also aggregate audiences with less popular content preferences, making it economical
to distribute their preferred content. This allows them to provide niche content to those that would otherwise
be unable to obtain it, increasing the consumer choice value for audiences.
Online distribution allows “long tail” business models to be more viable than ever.
35
Products that are in
low demand can be aggregated and collectively sold, making up a market share similar to that of recent
‘blockbuster’ content. Australian consumers can greatly benet from distributors and producers that provide
the long tail of content.
Heightened content engagement
Finally, consumer engagement with content is deepened with social media integration. High levels of social
media use, combined with multi-screening behaviour, means consumers can engage with lm and television
in new ways via social media, allowing conversations and communities to form around the content.
An example of this is Twitter feeds during live television broadcasts, such as on ABC’s Q&A or media events
such as Eurovision or major sporting matches. As stated by Cassella (2015) in a study on the relationship
between social media and television:
“Those championing the in-show use of social media saw it as a
way to make the audience part of the show. The inclusive nature of
social networks… allowed consumers to feel like they were ‘part of
something bigger’, thereby make a popular media ‘something out of
the ordinary’.”
Insight into the value generated by online originals
Research and analysis into the value of digital-online content (or online originals) is still evolving, with
data and developed measures yet to be collected and interpreted in a systematic manner. However,
insights into the potential value of online originals can be gained where data does exist (subject to
various assumptions).
Screen Australia has contributed funds to over 140 online projects. Data collected on 21 online originals
that were completed in or subsequent to 2015 have generated over 1 billion views globally to date
36
by
specic YouTube channels, with a total time-viewed of over 544 million hours.
These measures are likely to capture a global audience, the Australian proportion of which is unclear as
is the length of content ‘watched’. However, even with a very conservative estimate of the value of online
original content, it appears that such value is high and will grow into the future.
35 A ‘long tail’ business model refers to a sales model that focuses less on selling a small number of products at high volumes (e.g.
the ‘front-end’ of a product line in terms of sales performance) and more on selling a large number of products at low volumes
(e.g. the longer, ‘tail-end’ of a product line in terms of sales performance).
36 Consultation with Screen Australia notes that the ‘views’ measurement is an underestimation of each project’s total views, due
to measurement and collection factors.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
37
4.5 Summary
In summary, Australian screen content generates a signicant amount of audience value:
• The total audience value of Australian lm and TV content viewing in 2014–15 was approximately
$17.4 billion in consumer welfare benet.
– For comparison, total Australian industry value added in 2014-15 was around $12.8 billion for arts and
recreation services.
– Further, it is important to note that this is a consumer welfare measure, not a measure of economic
contribution to GDP.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
38
5. Cultural value
The cultural value of Australian screen content can be captured through willingness-to-pay measures
that estimate the maximum amount people are willing to sacrice in particular situations related to the
production and availability of Australian screen content. This chapter:
• Discusses how Australian lm and TV content can generate cultural value
• Details the approach to estimating cultural value of screen content
• Provides estimates for these cultural values.
5.1 Cultural value and screen content
Australian lm and TV can have cultural value in the sense that locally produced screen content represents or
contributes to the Australian cultural environment – that is, its arts, history, people, beliefs, traditions, etc. – in
a way which can be quantied through economic estimates.
Film and TV can do this in a number of ways. Australian lm and TV can support local creative and artistic
ventures, such as the performing arts (i.e. acting), music composition, writing, costume, set design and
cinematography. They can also, either through scripted narratives or non-scripted content, help document
important aspects of Australian culture. Local documentaries, for example, have depicted the Australian
natural landscape, its ora and fauna, and important historical events and local stories.
Locally made lm and TV also serves to tell uniquely Australian stories and depict a distinctly Australian way
of life. A report by Ipsos Australia (2013) for Screen Australia notes that audiences enjoy watching stories they
could relate to, which had a sense of familiarity and were comprised of locations, ways of life, characters and
humour that they could connect with. As Mark Scott, former managing director of the ABC (2015a) notes:
37
“…the work of the Australian content industry in telling Australian stories underpins
Australian identity, culture and society.
Shows such as Puberty Blues, The Time of our Lives, Redfern Now and The Slap get
audiences thinking and talking about Australian families and dierent life experiences
in our shared nation.
Gallipoli, Mabo and The Secret River gave us insights into both our history and our
present condition. 2014’s popular political drama, The Code, made us think about the
profound impact of the technology in which our contemporary lives are so immersed.
Some stories, like Miss Fisher and Dr Blake, SeaChange and Rake simply drew us
together to be entertained and to laugh at ourselves.
We have developed a very vibrant Australian TV production industry and one that has
provided us with so many stories about ourselves and our way of life.”
37 Public broadcasters, in particular, support of Australian culture as one of their primarily purposes. The ABC Charter, for
example, species that one of the functions of the Corporation is “broadcasting programs that contribute to a sense of national
identity and inform and entertain, and reect the cultural diversity of, the Australian community” (ABC, 2015b). Similarly,
the ABC Board has stated that the ABC plays a “pivotal place in Australian society as the trusted, and independent home of
Australian stories and conversations” (ABC, 2015c).
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
39
Research conducted by Screen Australia also found evidence that supports the view that domestic
audiences place signicant importance on Australian narrative content in the feature lms, TV dramas and
documentaries they watch. Specically, that 79% of people agreed (32% strongly) that Australian lm and TV
stories are vital for maintaining and building Australian national identity (Screen Australia, 2011).
Below are some examples of how dierent types of screen content can generate cultural value and
contribute to Australia’s cultural environment.
Feature lm
Feature lms portray Australian stories and artistic endeavours. This particularly occurs in instances when
Australian lms become highly successful at an international level, such as with the lms like “Crocodile”
Dundee, Mad Max or Australia.
Films that are well-known locally have explored Australian experiences from dierent angles. Some lms,
such as Gallipoli, The Dressmaker and Rabbit-Proof Fence have captured Australian experiences in ways that
have not been done before. Similarly, lms such as Holding the Man, Paper Planes and The Sapphires were
based o actual real-life Australian stories.
Other lms, including comedies such as The Adventures of Priscilla: Queen of the Desert, The Castle and Muriel’s
Wedding, have been embraced by collective popular culture as “classics”, with references, imagery and
themes from these lms becoming part of the national identity and cultural lexicon.
Documentaries
Documentaries have helped raise awareness on numerous issues in contemporary Australia and they often
explore dicult themes and ideas through a dierent creative lens. For example, the recent documentary
lm That Sugar Film explored the negative health associated with the consumption of high levels of sugar.
Similarly, documentaries such as Utopia explored issues among Indigenous Australians and Frackman
highlighted activism against the coal seam gas industry.
Children’s television
One aspect of how TV and lm contributes to the cultural environment is through children’s content. For
example, Australian content on ABC Kids allows children to hear Australian accents and see their local
communities on screen devices. In 2014–15, 27% of all broadcast hours on ABC Kids was Australian and
included popular local shows such as Bananas in Pyjamas, Ready Steady Wiggle! and Play School (ABC, 2015d).
Factual television
The cultural contribution of Australian screen content also extends beyond just Core content such as feature
lm and drama TV. Broad content, including non-ctional TV content can inform and educate audiences as
well as stimulate public debate. Examples of such programs include current aairs programs such as Inside
Story, Today Tonight and A Current Aair. It also includes other programs such as Catalyst (science journalism),
Media Watch (media analysis and commentary) and The Checkout (consumer aairs and advocacy).
Some programs provide interesting glimpses into the lives of other Australians. Examples include Territory
Cops (police in the Northern Territory), Bondi Rescue (lifeguards on Bondi Beach), The Embassy (diplomats and
embassy personnel) and Border Security: Australia’s Front Line (customs and border protection ocers).
Some broadcasters also cover certain themes or topics at particular times of the year. This includes ABC’s Mental
As initiative held during Mental Health Week (ABC, 2016) and programming by the ABC that covered Indigenous
topics during NAIDOC (National Aboriginal and Islander Day Observance Committee) week (ABC, 2015e).
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
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Light entertainment
As with factual television, light entertainment shows such as lifestyle or cooking shows are a part of Broad
content which also serve to capture Australian values, ways of life or generate stories, thus contributing to
cultural environment. Often these shows are shared and discussed and there is a community generated
around this content. This is particularly important given that Broad content often reaches more Australians
than just Core content.
5.2 Approach to estimating cultural value of screen content
Cultural value generated by Australian screen content has a value in terms of its contribution to the overall
cultural environment of the country in a way that cannot be allocated to individuals. Because of this, a
particular economic approach is needed to estimate cultural value from the existing survey data.
5.2.1 Contingent valuation
The value of Australian stories on screens to national culture, for example, is a non-market good where the
price of the good cannot be observed through market transactions. As such, it is important to measure the
cultural “non-use” value of Australian screen content – that is, the value that Australians gain from of locally
made lm and TV, even when they do not directly purchase and consume the content themselves.
These values can be estimated using an approach known as Contingent Valuation (CV). CV is a method of
placing a market value on non-market resources (such as the natural environment or a cultural institution)
through survey based economic techniques (Carson et al, 2001). The survey questions seek to estimate the
willingness-to-pay for various scenarios related to the non-market resource, use and non-use. These ndings
can then be extrapolated to an Australia-wide value.
This report draws on the data from the survey which was elded in order to estimate the contingent
valuation of two non-use values (Frey, 1997):
• Option value – the value people place on seeing screen content even if they personally do not watch it.
• Existence/altruism value – the value of being in a society where other people can watch screen content,
regardless of whether they watch it themselves.
It is important that people face a choice in putting a value on something that is not used. It cannot simply be
an unbounded option to value something without constraint. To ensure respondents were presented with a
budget constraint, the survey also asked people what they would be willing to pay to Australian lm and TV
from a given amount of money, if that amount could also be redirected towards a tax cut for them. This was
used to estimate a more general public support value.
5.2.2 Limitations and interpretation
The use of survey data to measure value must be caveated. For one, there may be dierences between
people’s stated preference and their actual preferences that goes unobserved. For another, there may be an
underestimate of value if respondents are only willing to pay what they think non-market goods and services
should cost rather than how much they actually benet from it.
The public support value for Australian TV and lm content can also be aected by a number of factors – for
example, respondents may think that higher levels of government support will reduce the purchasing price of
future Australian lms and TV shows.
Because the survey inquired about willingness to pay for all Australian screen content (that is, the option,
existence/altruism and public support value of Broad content), there is also uncertainty around how much of
the total willingness to pay can be attributed to Core content over other content that is viewed.
It is important to note that the results presented in this chapter cannot be compared with other commonly used
measures of value, such as GDP. These estimates also do not net out the cost to consumers, governments, or any
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
41
opportunity costs that are associated with creating and viewing Australian lm and TV. In this sense, therefore,
they are gross benet measures. Finally, as these values are not revealed through a transaction, they must be
considered under a separate valuation framework to the economic contribution results.
5.3 Non-use value estimates
It is estimated that the average Australian is willing to pay around $28 a year to have the option to watch
Australian-made screen content in the future, regardless of whether or not they watch Australian lm and TV
currently. When this estimate is scaled up to the entire adult population of Australia,
38
the total willingness to
pay for the option to view Australian-made screen content is approximately $511 million a year.
Similarly, it is estimated that the average Australian is willing to pay around $22 a year for others to have the
option to watch Australian lm and TV, regardless of whether they personally wish to watch it at any point in
time. This option/altruism value could reect a number of sentiments. For example, these individuals place
value on others having the freedom to access information about politics and current events, or value screen
content being uncensored and unrestricted. When this nding is applied to Australia’s adult population,
the total willingness to pay for others to have the option to view Australian screen content is approximately
$415 million a year.
Table 5.1: Option value and Existence/altruism value
Option value Existence/altruism value
Willingness to pay $27.6/person $22.4/person
Total value $510.9 million $414.9 million
Source: Deloitte Access Economics (2016)
As a point of comparison with either the option value or existence/altruism value reported here, the non-use
value of the Sydney Opera House – one of the most famous cultural icons in Australia – is estimated at
$2.1 billion (Deloitte Access Economics, 2013).
The survey also revealed that consumers value Australian lm and TV content above private monetary gains.
When asked how government should allocate a hypothetical pool of money worth $100 between funding
Australian lm and TV and a tax break, the average survey respondent said around $55 should be spent
on Australian screen content. Scaling this up by the Australian adult population suggests that the total
willingness-to-pay for Australian screen content, according to this trade-o, is $1.02 billion.
Table 5.2: Option value and Existence/altruism value
Public support value
Willingness to pay $55.28/person
Total value $1,023.7 million
Source: Deloitte Access Economics (2016)
For comparison, Australian feature lm and drama TV in production in 2014-15 received approximately
$58 million in direct funding from government sources (i.e. Australian state and federal agencies and funding
bodies) as well as $77 million cash-owed by producers through the Producer Oset and $7.4 million cash-
owed through the PDV Oset for TV (Screen Australia, 2015a). In addition to this, documentaries received
38 This is calculated as the resident population of Australian which is over the age of 18. This was approximately 18.5 million in
2015 (ABS 3101.0 September 2015).
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
42
$25 million in direct funding from Screen Australia and state agencies and $18 million through the Producer
Oset in 2014-15 (Screen Australia, 2016b).
Further, government expenditure in 2014-15 in public broadcasting came to around $1.43 billion (Australian
Government, 2016). It is worth noting that this expenditure gure for public broadcasting covers the general
operations of the ABC and SBS, which also includes radio and internet services, as well as their transmission
and distribution services. As such, this is not a directly equivalent comparison with the public support value
estimated here.
The $1.02 billion willingness-to-pay gure estimated in this report suggests that there is high public support
in Australia for the continuation of domestic screen content production. Given the altruism value estimated
in this report is also signicant ($415 million in total), this also indicates that the public support for Australian
content is not merely a reection of personal lm and TV consumption, but also encompasses the non-use
value of domestic screen content to the general Australian public.
5.4 Other survey ndings
The survey also revealed other ndings with regards to people’s attitudes towards Australian lm and TV content:
• Children – of the survey respondents with children under the age of 13, around 76% said it was at least
slightly important that their children watch Australian lm and TV. Of those that said it was important,
around 61% said it was important because Australian children’s content is educational and 46% said it was
because the content contributes to children’s cultural identity.
• Availability – 46% of respondents said there is not enough Australian lm or TV.
• Dierentiation – 85% of respondents said Australian lm and TV are dierent from overseas screen
content. 72% of respondents said they thought the quality of Australian lm and TV content was as good
as or better than overseas content.
• Cultural identity – 44% of respondents said Australian lm and TV are a key part of Australian cultural
identity. Film and TV was rated above ‘laws and institutions’, but below ‘songs and music’.
• Government support – around 76% of Australians believe government should provide support to
the Australian screen sector. Approximately 12% opposed the idea and 12% also said they don’t know (Chart 5.1).
Chart 5.1: Survey responses on government support for Australian screen sector
0%
Yes No
Don’t know
20%
40%
60%
80%
Proportion of respondents (%)
Source: Deloitte Access Economics (2016), n = 928
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
43
5.5 Summary
The cultural value of Australian lm and TV content is signicant. This chapter has found that:
• When we estimate the Australia-wide option value (the value of individuals personally having the option
of viewing Australian content in the future) we nd a non-use value of approximately $511 million a year.
• When we estimate the Australia-wide existence/altruism value (the value that they have in other people
being able to watch Australian content in the future), we nd a non-use value to be approximately
$415 million a year.
• Further, when asked how much government should allocate between lm and TV and a maximum of a
$100 tax cut, the combined response suggests a value of lm and TV of approximately $1.02 billion a year.
Chart 5.2: Cultural value estimates of Australian lm and TV
0
Total option
value
Total existence
value
Total public
support value
200
400
600
800
1,000
1,200
$m
Source: Deloitte Access Economics (2016)
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
44
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screenaustralia.gov.au/research/statistics/tradetotal.aspx
Screen Australia (2016b) “Documentary Finance”, online, available at http://www.screenaustralia.gov.au/fact-
nders/production-trends/documentary-production/sources-of-nance
Telsyte (2015) “Australians ock to SVOD with 2 million subscriptions to online streaing video services taken
up this year”, online, available at http://www.telsyte.com.au/announcements/2015/7/21/australians-ock-to-
svod-with-2-million-subscriptions-to-online-streaming-video-services-taken-up-this-year
Think TV (2015) “TV Trends”, media research.
Venture Consulting (2015), ‘The value of Free TV. The contribution of commercial free-to-air television to
the Australian economy’, http://www.freetv.com.au/SiteMedia/W3SVC751/Uploads/Documents/FreeTV_
Economic_Study_Report_Venture_Consulting.pdf
Warrnambool City Council (2016) “Oddball earns local government award”, online, available at
https://www.warrnambool.vic.gov.au/news/oddball-earns-local-government-award
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Appendix A – External stakeholders
As listed below in Table A.1, eight stakeholder interviews were held with individuals from a number of areas of
expertise, including stakeholders in the areas of production, lm distribution, documentary lmmaking and
digital distribution.
Table A.1: External stakeholder consultations
Stakeholder Sector/area of expertise
AusFilm Footloose productions
Australian Broadcasting Corporation (ABC) Public free-to-air TV, online catch-up TV service
Foxtel Subscription TV
FreeTV Commercial free-to-air TV
Matchbox Pictures Domestic production
Media Entertainment & Arts Alliance (MEAA) Production cast and crew
Shark Island Institute Documentaries
Transmission Films Distribution
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Appendix B – Government support
Table B.1 below lists the government support that is received by the domestic production subsector
for the production of feature lm, TV and documentaries. Total direct support comes to approximately
$185.5 million.
Additionally, government expenditure in 2014-15 in public broadcasting was around $1.43 billion (Australian
Government, 2016). This gure includes the radio and internet services of the ABC and SBS, as well as their
transmission and distribution services.
Table B.1: Government support for the domestic screen sector, 2014–15
Government support for 2014–15 $m
Direct government sources (features) 25.3
Producer Oset (features) 39.4
Direct government sources (TV) 32.9
Producer Oset (TV) 37.5
PDV Oset (TV) 7.4
Direct government sources (documentaries) 25
Producer Oset (documentaries) 18
Total 185.5
Source: Screen Australia (2015a) Drama Report, Screen Australia (2016b) “Documentary Finance”.
It should be noted that osets are not included in standard value add estimates. This is because value add
captures the contribution to the economy which an entity generates through its activities, regardless of
who it accrues to. Therefore, value add is reported as pre-tax. Osets are in essence tax rebates, these are
transfers which take place post-tax so they do not factor into value add. For example, if a company has a
value add of $1 billion, and $500 million is taxed and $250 million of this tax is rebated, it is still the case its
contribution to GDP is $1 billion.
However, subsidies are subtracted from value-add. The reasoning is that this is a direct payment from the
government and represents value that is taken from elsewhere. It does not represent the value that an entity
produces on its own through its use of capital, labour and intermediate inputs and should not be counted as
part of the entity’s contribution to GDP.
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Appendix C – Survey results
Survey breakdown
Total sample 1,049
Domestic 928
International 121
Age Count Share
18–24 83 7.9%
25–34 144 13.7%
35–44 192 18.3%
45–54 206 19.6%
55–65 193 18.4%
65 and over 231 22.0%
Total 1049 100.0%
Gender Count Share
Male 513 48.9%
Female 534 50.9
Other 2 0.2%
Total 1049 100.0%
Gender Count Share Share (Intl.)
Australia 928 88.5%
New Zealand 31 3.0% 26%
UK 30 2.9% 25%
USA 30 2.9% 25%
Canada 30 2.9% 25%
Total 1049 100.0%
Children under 13 Count Share
Yes 195 21.0%
No 733 79.0%
Total 928 100.0%
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Appendix D – Consumer choice value
and time-use elasticity
Calculating consumer choice value
The benet to consumers of lm and TV variety is dicult to measure, although economic theories of
consumer choice attempt to capture this. Hausman (1997), for example, shows the consumer benets of the
introduction of a new product is equivalent to the welfare eect of a reduction in the price of the product
from the price at which demand is zero to its current price.
That is to say, a benet which accrues to consumers under a scenario in which a new good is introduced
at a price is equivalent to the benet which accrues to them under a scenario where the new good was
initially priced prohibitively high at (a price just high enough so that no one wants to buy it) and falls down
to price .
This theoretical consideration can be exploited to model real-world examples of consumer choice. One
fully worked example is provided by Brynjolfsson et al (2003). In it, the value of increased consumer welfare
from increased book variety on Amazon.com is compared with a traditional book store and estimated to be
between US$731 million and US$1.03 billion.
That study estimated these benets by looking at how much prices would have to fall to make the book buyer
as well o as the new product oering.
The compensating variation (CV) is a function of the amount of new sales and the willingness of consumers to
switch between products (the price elasticity) where
is the post-introduction price and quantity of the
new product; and is the price elasticity:
Calculating the elasticity of substitution
As shown in Goolsbee et al (2006), time-use value can be estimated by capturing the relationship between
time spent consuming screen content and the opportunity cost of time.
This relationship can be used to estimate the consumer welfare from screen content which depends on
a consumer’s willingness to switch between screen content and other leisure activities. Economic theory
predicts that, as wages rise, the opportunity cost of time rises, so time spent on screen content should
decrease. In order to measure this willingness, the elasticity of substitution between screen content and
other leisure activities needs to be measured.
Using the survey data, which included income data and time spent watching television, this report regressed
(the natural logs) of the share of leisure time spent on non-television activity with income:
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Where
is equivalent to the share of leisure time spent on activities other than television, is a
constant, is the weekly wage and is the coecient that is being estimated and is the error term.
From the regression analysis, we nd a coecient of 0.113. As solved for in the theoretical model in
Goolsbee et al (2006), the elasticity of substitution is calculated as:
Where is the expenditure share dierential, which is calculated in the Goolsbee et al (2006) paper as
0.38. Applying the estimate from the paper with the coecient, the elasticity is calculated to be 1.30.
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Appendix E – Economic
contribution studies
Framework for assessing economic contribution
Economic contribution assessments quantify measures such as value add and employment associated with
given industry or rm, in a historical reference year. The economic contribution is a measure of the value of
production by a rm or industry.
In this study, the total economic contribution of the Australian screen sector represents the sum of the
industry’s direct and indirect contributions to the economy:
• The direct economic contribution of the screen sector is the value add created by labour and capital inputs
employed directly by the screen industry. Direct activities related specically to the screen sector include
lm and television production, distribution, and exhibition.
• The indirect contribution is a measure of the demand for goods and services produced in other sectors
of the economy as a result of the direct economic activity from the screen sector. The size of this ow-on
activity is dictated by the extent of linkages with other supplier sectors of the economy. Estimation of the
indirect contribution is undertaken in an IO framework using Australian Bureau of Statistics (ABS) IO tables.
All direct, indirect and total contributions are reported as gross operating surplus (GOS), labour income, value
add and employment (with these terms dened in Table E.1).
Table E.1: Denitions of economic contribution estimates
Estimate Denition
Gross operating surplus (GOS) GOS represents the value of income generated by the entity’s direct
capital inputs, generally measured as the earnings before interest,
tax, depreciation, and amortisation (EBITDA).
Labour income Labour income is a subcomponent of value add. It represents the
value of output generated by the entity’s direct labour inputs, as
measured by the income to labour.
Value add Value add measures the value of output (i.e. goods and services)
generated by the entity’s factors of production (i.e. labour and
capital) as measured in the income to those factors of production.
The sum of value add across all entities in the economy equals gross
domestic product. Given the relationship to GDP, the value add
measure can be thought of as the increased contribution to welfare.
Employment (FTE) Employment is a fundamentally dierent measure of activity to those
above. It measures the number of workers (measured in full-time
equivalent terms) that are employed by the entity, rather than the
value of the workers’ output.
Direct economic contribution The direct economic contribution is a representation of the ow from
labour and capital committed in the economic activity.
Indirect economic contribution The indirect contribution is a measure of the demand for goods and
services produced in other sectors as a result of demand generated
by economic activity.
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Estimate Denition
Total economic contribution The total economic contribution to the economy is the sum of the
direct and indirect economic contributions.
Source: Deloitte Access Economics (2016)
Figure E.1 shows the accounting framework used to evaluate economic activity, along with the components
that make up gross output. Gross output is the sum of value add and the value of intermediate inputs.
Value add can be calculated directly by summing the payments to the primary factors of production, labour
(i.e.salaries) and capital (i.e. gross operating surplus, ‘GOS’, or prot), as well as production taxes less
subsidies. The value of intermediate inputs can also be calculated directly by summing up expenses related
to non-primary factor inputs.
Figure E.1: Economic contribution accounting framework
Labour
Gross operating surplus
Net tax on production (e.g.
company tax, casino royalties)
Net tax on products
(e.g. GST, fuel excise)
Output
(revenue)
Direct Value
added
Intermediate inputs
(sourced from other industries)
Source: Deloitte Access Economics
Limitations of economic contribution studies
While describing the geographic origin of production inputs may be a guide to a rm’s linkages with the local
economy, it should be recognised that these are the type of normal industry linkages that characterise all
economic activities.
Unless there is signicant unused capacity in the economy (such as unemployed labour), there is only a weak
relationship between a rm’s economic contribution as measured by value add (or other static aggregates)
and the welfare or living standard of the community. Indeed, the use of labour and capital by demand
created from the industry comes at an opportunity cost as it may reduce the amount of resources available
to spend on other economic activities.
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This is not to say that the economic contribution, including employment, is not important. As stated by the
Productivity Commission in the context of Australia’s gambling industries:
Value added, trade and job creation arguments need to be
considered in the context of the economy as a whole … income
from trade uses real resources, which could have been employed
to generate benets elsewhere. These arguments do not mean
that jobs, trade and activity are unimportant in an economy. To
the contrary they are critical to people’s well-being. However, any
particular industry’s contribution to these benets is much smaller
than might at rst be thought, because substitute industries could
produce similar, though not equal gains.
In a fundamental sense, economic contribution studies are simply historical accounting exercises. The
contribution is independent of a counterfactual scenario, it is simply a measure of the value add or
employment created by the industry. Contribution studies therefore cannot be used to say anything
about how much larger the economy is relative to a counterfactual and, in particular, the results cannot be
interpreted as the benet created by the industry or saying that the economy is larger by the contribution
measured relative to if the industry did not exist.
The analysis assumes that goods and services provided to the sector are produced by factors of production
that are located completely within the state or region dened and that income ows do not leak to other
states. The derivation of the multipliers also assumes that the relevant economic activity takes place within
an unconstrained environment. That is, an increase in economic activity in one area of the economy does not
increase prices and subsequently crowd out economic activity in another area of the economy. As a result,
the modelled total and indirect contribution can be regarded as an upper-bound estimate of the contribution
made by the supply of intermediate inputs.
Similarly, this modelling framework does not account for further ow-on benets as captured in a more
dynamic modelling environment like a Computable General Equilibrium model.
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Limitation of our work
General use restriction
This report is prepared solely for the use of Screen Australia. This report is not intended to and should not be
used or relied upon by anyone else and we accept no duty of care to any other person or entity. The report
has been prepared for the purpose of analysing the economic and cultural value of Australia’s screen sector.
You should not refer to or use our name or the advice for any other purpose.
What are our stories worth? | Measuring the economic and cultural value of Australia’s screen sector
56
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joomahony@deloitte.com.au
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madahdah@deloitte.com.au
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Analyst
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mingliu@deloitte.com.au
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Partner
+61 2 9322 7984
NAlcorn@deloitte.com.au
Contacts
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