Malcolm Turnbull swings back at Murdoch over sports on free to air TV - 17th March 2015

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Communications minister Malcolm Turnbull says saying Australians should still be able to watch major sporting events like the AFL and Olympics for free. Photo: Andrew Meares

The right to watch top sporting events on free-to-air television is a "very Australian arrangement" that should be protected, Communications Minister Malcolm Turnbull has declared.

In comments that threaten to widen a rift between Mr Turnbull and the billionaire media mogul Rupert Murdoch, the minister said his decision to keep key sports rights ringfenced for free-to-air broadcasters ensured a "fair go" for all Australians.

Mr Murdoch has criticised Mr Turnbull's decision to omit changes to sports rights arrangements from his media reform proposals to the Prime Minister Tony Abbott, accusing him of pandering to his "buddies" at free-to-air network owner Nine Entertainment Co.

The chairman of News Corp, which owns 50 per cent of local cable TV monopoly Foxtel, wrote on social media site Twitter on Monday morning: "Aust! Turnbull's plans to scrap certain rules suit buddies at Nine. Can't oppose dumping all regs but not this. Nice to see how MT plays."

But in an exclusive interview with Fairfax Media, Mr Turnbull gave a robust defence of his decision, saying ordinary Australians should still be able to watch major sporting events like the AFL and Olympics for free.

"The policy question for government is simply whether we want to continue with a free-to-air television system where ordinary Australians, who may not be able afford a Foxtel subscription, can nonetheless watch their favourite sport on free to air TV?" Mr Turnbull said.

"This is a very Australian arrangement. In many countries, pay TV has been able to secure the rights to major sporting codes thus requiring sports fans to pay for a subscription.

"Our arrangements, which are very long-standing and are amended from time to time, strike a balance between egalitarianism and our sense of a fair go on the one hand and strict economic rationalism on the other."

Mr Turnbull said he had "encouraged" free-to-air broadcasters, pay TV and sport organisations to work together to see if they could agree on areas of reform. "To date they have not been able to do so," he said.

Foxtel had called for the anti-siphoning list of 1300 sporting events – currently reserved for free-to-air television – to be trimmed to allow the pay TV company to bid directly for the rights to show the preliminary rounds of overseas tournaments such as Wimbledon and the US Masters Golf. It currently has to buy any sports rights it gets from free-to-air owners if they are wiling to sell.

The minister also scotched suggestions by News Corp Australia CEO Julian Clarke and Foxtel CEO Richard Freudenstein that Foxtel customers would be forced to pay more as results of changes Mr Turnbull has proposed to retransmission arrangements.

"It would only mean that pay TV companies would have to seek permission from the free-to-air networks in order to rebroadcast their signal, just as, in fact, a free to air broadcaster would need to seek permission from Foxtel to rebroadcast one of its channels," said Mr Turnbull.

"The idea that the free to airs would demand a fee for such retransmission is hypothetical and in my view most unlikely."

The minister's central recommendations, which he is seeking the Prime Minister's approval to put to cabinet, are that the government scrap Keating-era cross-media ownership rules, a move which would allow more mergers between TV networks, radio stations and newspapers.

He has told Mr Abbott that he has found a broad consensus for abolishing the 'reach rule', which limits coverage of any TV network to 75 per cent of Australians, stopping metropolitan broadcasters – Seven, Nine and Ten – from merging with their regional affiliates.

Mr Turnbull also said the industry supported his plan to scrap the 'two-out-of-three rule', which bans a company from owning a radio station, television network and newspaper in the same market.

"Our sources of news and entertainment have never been as diverse as they are today so there is a very powerful argument for not having industry specific rules of this kind," he told Fairfax Media, adding the internet has made the media market "more competitive than ever".

Mr Turnbull said there was a "very powerful argument" for letting the Australian Competition and Consumer Commission ensure the market remained competitive.

Separately, he has suggested forcing less-regulated, lightly-taxed tech companies such as Google, Facebook and Twitter to collect GST on advertising they sell in Australia, saying it would "recover very substantial amounts of revenue".

"The Australian media is under enormous pressure from online platforms, notably Google and Facebook," Mr Turnbull said.

"The modest amounts of company tax both companies pay in Australia has been a matter of great concern, here as well as in other countries."

Nine Entertainment Co chief executive David Gyngell welcomed the idea. "I think it's a must," he said. "I support the government in collecting taxes from advertising sales on Google so it can offset licence fees."

Mr Gyngell has advocated the removal of the three commercial networks' $160 million annual television licence fees. A previous 50 per cent rebate on the licence fee was made permanent in 2013.

News Corporation declined to comment on the GST proposal, as did Kerry Stokes's Seven West Media and Fairfax Media, owner of BusinessDay and The Australian Financial Review. Fairfax has already welcomed Mr Turnbull's other proposals.

Free TV Australia chairman Harold Mitchell supported a review of television licence fees, saying "we have the highest licence fees in the world in a dramatically changing media environment". "We put it to the government that this needs immediate review," he said.

But Mr Mitchell questioned the GST proposal. "A GST on the products of Google and others does run the danger of them passing it immediately on to the consumer, because … GST doesn't taxes the company, it taxes Australians.

"[Mr Turnbull's proposal] doesn't attack the real need for a greater taxation on profits derived from Australia."

It has been estimated that Mr Turnbull's plan could raise up to an extra $240 million a year in GST revenue for the states, considering Australian advertising and search engine revenues are about $2.4 billion.

But MinterEllison partner and GST specialist Bastian Gasser dismissed this calculation. He said the actual amount collected would be considerably lower because bigger Australian companies who advertise on the digital behemoths would simply claim back the tax.

"It should not impact on large advertisers who are registered for GST because they would simply claim back any new GST charged by Google etc as a result of Turnbull's changes, as they currently do when they use local websites/newspapers to advertise," Mr Gasser said.

(The Sydney Morning Herald)