Media convergence and the transformed media environment

3.2 Convergence has been defined as

the interlinking of computing and ICTs, communication networks, and media content that has occurred with the development and popularisation of the Internet, and the convergent products, services and activities that have emerged in the digital media space. Many see this as simply the tip of the iceberg, since all aspects of institutional activity and social life—from art to business, government to journalism, health and education, and beyond—are increasingly conducted in this interactive digital media environment, across a plethora of networked ICT devices.^[1]

3.3 In their book Media Convergence: Networked Digital Media in Everyday Life, Graham Meikle and Sherman Young observe that convergence can be understood in four dimensions:

• technological—the combination of computing, communications and content around networked digital media platforms;

• industrial—the engagement of established media institutions in the digital media space, and the rise of digitally-based companies such as Google, Apple, Microsoft and others as significant media content providers;

• social—the rise of social network media such as Facebook, Twitter and YouTube, and the growth of user-created content; and

• textual—the re-use and remixing of media into what has been termed a ‘transmedia’ model, where stories and media content (for example, sounds, images, written text) are dispersed across multiple media platforms.^[2]

3.4 While technological change is a constant feature of modern economies, the changes associated with convergence, digitalisation and networking have been seen as providing the basis for a new ‘techno-economic paradigm’. This is a term developed by innovation economists to refer to 50-year cycles of changes to the technological and knowledge base of societies. A techno-economic paradigm is defined as:

A cluster of inter-related technical, organisational, and managerial innovations whose advantages are to be found not only in a new range of products and systems, but most of all in the dynamics of the relative cost structure of all possible inputs to production.^[3]

3.5 Historically, the major techno-economic paradigms have been: the Industrial Revolution (1780s–1830s); the Age of Steam and Railways (1840s–1870s); the Age of Steel, Electricity and Heavy Engineering (1880s–1920s); the Age of Oil, the Automobile and Mass Production (1930s–1980s); and the Age of Information and Telecommunications (1990s–present).^[4]

3.6 The rise of a new techno-economic paradigm is invariably disruptive, as it challenges established business models, industry structures, organisational frameworks and public policy settings. As it generates losers as well as winners, and disrupts the institutional status quo associated with established institutional and social arrangements, there is invariably conflict and disagreement in the process of social adaptation to technological and economic change.

Each great surge of development involves a turbulent process of diffusion and assimilation. The major incumbent industries are replaced as engines of growth by new emerging ones; the established technologies and the prevailing paradigm are made obsolete and transformed by the new ones; many of the working and management skills that had been successful in the past become outdated and inefficient … Such changes in the economy are very disturbing of the social status-quo … Imbalances and tensions resulting from the technological upheaval … end up creating conditions that require an equally deep transformation of the whole institutional framework.^[5]

3.7 The Convergence Review: Emerging Issues Paper drew attention to the extent to which key stakeholders in Australia’s media and communication industries had identified convergence as having a transformational impact on their sectors, and the need for radical changes to the policy framework in response to such transformations:

Australia’s communications sectors are undergoing profound change as a result of convergence. Existing regulatory arrangements built around industry ‘silos’ are challenged by new technologies, market structures and business models. In this committee’s view it is likely that revolutionary change to the existing policy framework will be needed to respond to convergence.^[6]

Increased access to high-speed broadband internet

3.8 As of December 2010, there were 10.45 million active internet subscribers in Australia, of which 8.15 million were household subscribers and 2.3 million were business and government subscribers. This figure had grown by 17% from 8.95 million in December 2009. Nearly 15.1 million Australians aged 14 or over (83% of the population) went online during the December quarter of 2010, and 71% of internet users went online at least once a day. Approximately 3.1 million Australians aged 14 or over accessed the internet via a mobile phone handset during December 2010, as compared to 1.9 million during December 2009.

3.9 Australians are also accessing the internet through higher-speed connections: 46% of household subscribers are accessing services with a maximum download speed of 8Mbps or higher, while the number of dial-up subscribers declined by 21% over 2009–2010, with about 18.8 gigabytes of data being downloaded per internet subscriber in December 2010, up by 28.8% on the previous year, and with major growth in the downloading of video content.^[7]

Digitisation of media products and services

3.10 Associated with rapidly increasing internet usage by consumers and business is the digitisation of all media products and services. It is estimated that 48 hours of video are uploaded every minute onto YouTube, and three billion videos are viewed every day worldwide from that site alone. In Australia, there are an estimated six million YouTube users, watching over 200 million videos a month. The Apple iTunes store now sells almost 10 million songs a day, making it by far the major music retailer worldwide.

3.11 At a more general level, Deloitte Access Economics estimated that in 2010, the direct contribution of the internet to the Australian economy was approximately $50 billion, or 3.6% of Australia’s Gross Domestic Product. It found that 190,000 people were directly employed in occupations related to the internet, ranging from internet hardware and software industries to online information services, IT software and consulting, online advertising, government and e-commerce activities. This report also indicated that benefits to households, business and government arising from the use of the internet to access, operate, purchase and deliver goods, services and information were about $80 billion in 2010.^[8]

Convergence of media platforms and services

3.12 Convergence of media platforms and services is now a feature of all established media, as well as being a core feature of new media. In the case of news media, for example, the top five Australian online news sites—news.com.au, ninemsn.com.au, smh.com.au, abc.net.au and theage.com.au—all rank among the top 25 Australian websites in terms of traffic, and an estimated 4.35 million users per month visit at least one of these sites.^[9] For all of these media organisations, their digital content services are now very much at the heart of their news operations, and these patterns are intensifying.

3.13 At the same time, media convergence has increased the tendency towards media globalisation. In its submission, Telstra observed that, over the period from October 2009 to October 2010, the iTunes site attracted four times the number of video downloads of the largest Australian providers (ABC iView, Yahoo!7 and NineMSN), and that its viewers spent over 10 times longer on iTunes than on the equivalent Australian sites.^[10]

3.14 Media convergence has major policy consequences. In its review of policies for audio-visual media, the Organisation for Economic Co-operation and Development (OECD) identified four fundamental changes in the media policy environment in the context of convergence:

• media policy needs to be premised upon content abundance and increased media competition, rather than upon distribution scarcity and monopolistic or oligopolistic media markets;

• technological changes generate new challenges for maintaining technology-neutral or network-neutral media regulations;

• media regulations can have unintended consequences in advantaging or disadvantaging some platforms, services and providers as compared to others engaged in comparable activities; and

• media markets have become more international, and national regulations may not be compatible with these international media and communications markets.^[11]

3.15 The OECD therefore proposes as a guide to developing policy and regulatory instruments in a convergent media environment that:

New developments do not imply that existing regulations need to extend their coverage over other platforms and services … [I]t is important that instruments used do not hinder the positive developments and aspects of convergence while also being effective, robust and flexible.^[12]

Globalisation of media platforms, content and services

3.16 The globalisation of media platforms, content and services is also a critical feature of the convergent media environment. At one level, it can be argued that media globalisation is not a new phenomenon. Hollywood movies and American television programs were a feature of the global media landscape for most of the 20th century, and this led to extended discussions worldwide about the risks of cultural domination and ‘cultural imperialism’.

3.17 At the same time, local audiences have frequently displayed a preference for culturally relevant local media content where it is available.^[13] In the Australian context, television ratings data consistently shows that locally-produced programs dominate the list of the top 20 watched shows, with sporting events, news and current affairs programs, drama programs such as Winners and Losers, and competition reality programs such as Masterchef and Australia’s Got Talent, dominating the ratings lists. In the week of 3–9 July, 2011, for example, there was only one imported television program in the top 20 list—the British drama series Downton Abbey.^[14]

3.18 What has changed has been the extent to which digital media content can be sourced, distributed and accessed from any point in the world to any other point in the world. This has led to the rise of media platforms and content distributors such as YouTube, Facebook, Twitter and Apple iTunes that sit across national jurisdictions.

3.19 For much of the 20th century, media regulations could be nationally based, as media services largely operated within existing territorial jurisdictions, and were therefore clearly subject to the laws and regulations of a single nation-state, even when they operated as multinational corporations. The ACMA has described the resulting internationalisation of content distribution in relation to the mobile applications (‘apps’) market in these terms:

The mobile applications market functions on both a national and global scale, and this has implications for regulation in Australia. The app stores analysed for this paper are all based overseas, which is representative of the market as a whole at this time. App developers are also based in multiple international jurisdictions.^[15]

3.20 In the 21st century, a range of network-based media platforms and services operate on a global scale in real time since, as the OECD has observed, ‘the Internet has achieved global interconnection without the development of any international regulatory regime’.^[16]

3.21 The challenges that this uncoupling of global internet-based media and national legal and regulatory systems present have important implications for all forms of media content regulation in Australia, including the National Classification Scheme. This point has been noted by Associate Professor Kate Crawford and Professor Catharine Lumby in their paper, The Adaptive Moment:

Nation state governments clearly have a remit to enforce the laws of their country and to protect public policy priorities when it comes to cultural and social parameters. Their ability to enforce this remit is restricted due to the sheer volume of media content as well as the decentralisation and vast number of media producers.^[17]

Acceleration of innovation

3.22 There is an accelerated rate of innovation in the context of a knowledge-based economy, in which ideas and innovation are increasingly the drivers of economic growth. The World Intellectual Property Office has observed, for example, that the number of patent applications worldwide has grown from about 1 million in 1995 to 1.9 million in 2008, and the number of patents granted has grown from 450,000 in 1995 to 750,000 in 2008.^[18]

3.23 In discussing the economics of the knowledge society, Paul David and Dominique Foray relate the acceleration of knowledge production to the interrelationship between four developments:

• The growing share of intangible capital—including investment in education and training, research and development, and information and coordination as well as health expenditures—as compared to tangible capital in total capital formation. They estimate that the stock of intangible capital first exceeded that of tangible capital in the United States in 1973, and has continued to grow since then.

• The growing speed and intensity of innovation, and the increasing diversity of sources of innovation, including users themselves as co-creators of new or improved products and services.

• The ICT revolution, which has fundamentally transformed the conditions for creating, storing, accessing, distributing and reusing information and data.

• The rise of knowledge-based communities and global knowledge networks, where information can be easily shared and re-used, and where collaboration can occur that is not reliant upon physical co-presence in particular geographical locations.^[19]

3.24 The media industries, broadly defined, have been at the centre of these developments. In its survey of corporate executives’ responses to the global digital economy, Oxford Economics found that the three business sectors that anticipated the most dramatic transformations over a five-year timeframe were: IT and technology; telecommunications; and entertainment, media and publishing.^[20]

Rise of user-created content

3.25 An important shift in the media ecology associated with convergence is the rise of user-created content, and a shift in the nature of media users from audiences to participants.

3.26 In its 2007 report, Participative Web: User-Created Content, the OECD observed that,

User-created content is already an important economic phenomenon despite it originally being largely non-commercial. The spread of [user-created content] and the amount of attention devoted to it by users appears to be a significant disruptive force for how content is created and consumed and for traditional content suppliers. This disruption creates both opportunities and challenges for established market participants and their strategies.

The more immediate economic impacts in terms of growth, entry of new firms and employment are currently with ICT goods and services providers and newly forming [user-created content] platforms. New digital content innovations seem to be more based on decentralised creativity, organisational innovation and new value-added models, which favour new entrants, and less on traditional scale advantages and large start-up investments.^[21]

3.27 The OECD refers to the wider social implications of the rise of user-created content in these terms:

The Internet as a new creative outlet has altered the economics of information production, increased the democratisation of media production and led to changes in the nature of communication and social relationships (sometimes referred to as the ‘rise—or return—of the amateurs’). Changes in the way users produce, distribute, access and re-use information, knowledge and entertainment potentially give rise to increased user autonomy, increased participation and increased diversity.^[22]

3.28 Associate Professor Axel Bruns has referred to the rise of the ‘produser’, or the internet user who is both a user and a creator of online content.^[23] Charles Leadbeater and Paul Miller have referred to such trends as the ‘pro-am revolution’ where the tools of content creation become cheaper and simpler to use, thereby blurring distinctions between ‘amateurs’ and ‘experts’.^[24]

Greater media user empowerment

3.29 The rise of user-created content, and the shift in the nature of audiences towards a more participatory media culture, is associated with greater user control over their individual media environment. This is partly related to a greater diversity of choices of media content and platforms, but also in the ability to achieve greater personalisation of the media content that one chooses to access.

3.30 Henry Jenkins of the University of Southern California has described the relationship between media convergence and user empowerment, and its implications for traditional media companies, as follows:

Convergence requires media companies to rethink old assumptions about what it means to consume media, assumptions that shape both programming and marketing decisions. If old consumers were assumed to be passive, the new consumers are active. If old consumers were predictable and stayed where you told them to stay, then new consumers are migratory, showing a declining loyalty to networks or media. If old consumers were isolated individuals, the new consumers are more socially connected. If the work of media consumers was once silent and invisible, the new consumers are now noisy and public.^[25]

3.31 The capacity for more personalised media is strongly related to the internet, but it is also increasingly characteristic of more traditional media platforms, such as the increasing number of Australian households with some form of personal video recorder (PVR). OzTAM observes that the percentage of Australian households with a PVR increased from 31% of metropolitan households in July 2010 to 43% in July 2011.^[26] PVRs include FOXTEL IQ2, Austar MyStar and TiVo, and as an increasing number of new digital television purchases take the form of ‘smart TVs’, this share is expected to increase significantly.

3.32 The significance of PVRs is that they enable household access to programs of choice to be less dependent upon the scheduling decisions of the television networks. They change the television viewing experience from one where the viewer faces a wide range of programs available at a given time, to an arrangement of greater consumer choice about what to view and when. Importantly, such devices also include parental locks, giving parents greater potential to control the access that their children have to material accessed from such platforms.

Blurring of public/private and age-based distinctions

3.33 The eighth and final driver of change associated with media convergence is the blurring of distinctions between public and private, and of age-based restrictions to media access. Historically, there has been more extensive regulation applied to those media which have been felt to be either publicly available or distributed, as with cinema, radio and television, than towards print media (books, newspapers, magazines) whose distribution and consumption were considered to be more private and personal in nature. In 1976, the Green Report into Australian broadcasting observed that:

The public own the airwaves … [and] since frequencies are scarce, and the broadcast media are influential, to grant a broadcast licence is to bestow a privilege. This privilege carries with it an obligation to provide the public with programs which meet the standards it expects.^[27]

3.34 While expectations that the media continue to meet community standards remains important, the distinctive features of different media platforms are now less clear-cut. Newspapers, magazines, audiovisual media content, music and film are increasingly distributed and consumed online, in environments that are both public in terms of the networked platforms from which they are accessed, and private in terms of their consumption in the home rather than in public places. The ALRC expects that such trends will intensify, as more and more Australians acquire access to high-speed broadband services.

3.35 It is estimated that, in the 12 months prior to April 2009, 2.2 million children (79%) aged 5–14 years reported accessing the internet, which was an increase from 65% in 2006. This included 60% of those aged 5–8, and 96% of 12–14 year olds. In 2009, 92% of child internet users accessed the internet from home, 86% accessed it from schools, and 45% from public libraries and internet cafes.^[28]

3.36 It is considerably more difficult to restrict access to online content on an age basis than is possible in other media platforms. While television has operated on a time-based classification framework for many years (as programs with certain types of content—violence, nudity, sexual references—cannot be shown before particular times), and cinemas and video stores have applied a rough and ready assessment of the ages of those purchasing tickets or hiring DVDs, age verification is far more ad hoc on the internet.