Communications Minister Mitch Fifield has dubbed the television industry's $153 million annual fees a "super profits tax" and indicated that they may no longer be appropriate for the challenged free-to-air industry.
Network bosses, who say licence fees do not reflect competitive pressure for audiences from unregulated digital platforms such as Netflix, Facebook and Google, welcomed his comments saying the abolition of fees was top of their wish list as regards media reforms.
Senator Fifield was speaking after Fairfax Media revealed that the Department of Communications has recommended that the Turnbull government cut TV licence fees, which are among the highest in the world.
Asked by Sky News about the report, Mr Fifield noted that TV and radio licence fees were introduced in the late 1950s when the only media options for people were print, radio and TV.
"[Licence fees] were, if you like, the original super profits tax. There was no other broadcast media so TV and radio were in a very strong and dominant position there. Obviously things have changed a lot since then. There are a larger range of options for people," he said.
If the Treasury enacts a fee cut as part of the May budget, it would the be the first since the Gillard government rushed through a permanent effective reduction in TV licence fees from 9 per cent to 4.5 per cent of revenues in March 2013, the last federal election year."In recognition of the changed landscape in 2013, the licence fees were cut in half," said the Minister. "We've indicated to both radio and TV that we are prepared to examine licence fees in the context of the coming budget and tat's what we are doing."
A cut could prompt investors to re-rate sharemarket valuations for the troubled sector.
It could also help to ease the passage Senator Fifield's proposed loosening of media ownership restrictions as it would meet the demands of Kerry Stokes' Seven West Media, which has been the strongest advocate for licence fee relief.
"We have definitely said that we see changes to media ownership rules as less of a priority than some of our industry colleagues," said Seven CEO Tim Worner.
"It's certainly open to others to view things differently but what we are concerned to ensure is that a focus on these changes does not eclipse a major reform to licence fees that is critical to help the entire industry become more competitive with global players who have found they can march in and do what they like.
"Seven has a huge production slate but we simply won't be able to keep up that level of Australian production if we have to pay exorbitant licence fees. And we need to be able to continue to invest in transforming our business for the digital future.
"We invest heavily and employ thousands of people on Australian productions. Most global multinationals we are competing with don't pay tax, don't support the Australian production sector and don't provide a safe and regulated environment for Australians to access content. It is time to get real."
Seven has a huge production slate but we simply won't be able to keep up that level of Australian production if we have to pay exorbitant licence fees.Seven CEO Tim Worner
Nine Entertainment Co chief executive Hugh Marks urged Treasury to adopt the Department's licence fee recommendations.
"There's no doubt that licence fees are the biggest issue as part of comprehensive media reform that we'd love to see addressed," he told Fairfax Media.
He said FTA broadcasters had to pay company taxes - which overseas rivals Netflix, Google and Facebook minimise in Australia - and had to meet local and children's content obligations.
Scrapping licence fees would level the playing field and allow the industry to keep investing in local content, he said, adding: "That is great for the Treasury because generally 50 per cent to 60 per cent of the cost of any programme is in people [who pay tax on their wages]."
Ten Network Holdings CEO Paul Anderson also welcomed Senator Fifield's comments saying, in an email: "There are a number of deregulation measures that we have been seeking for some time and the abolition of licence fees is at the top of that list.
"In an incredibly competitive market, abolishing the outdated licence fee regime will allow us to continue to innovate and invest more in a service that Australians highly value and rely on, even with the influx of foreign content players.
"As the Minister said today this was originally a super profits tax from a time when the industry looked very different and that is why the government is reviewing it in the Budget context."
Senator Fifield still needs to assuage fears of the National Party over allowing greater media consolidation. The Nats have proposed that regional television broadcasters should be forced to spend more on local news if media ownership restrictions are loosened, sparking an angry response from some regional TV executives.
Senator Fifield is expected to bring a reform package to Parliament in March.
"I don't want to let the grass grow in terms of media reform, it is something that's been debated for a long, long, long time. I've been in this gig for about four months, I'm keen to bring something to the parliament early this year," he said.
He added that it would not be in the first two weeks of Parliament, however, saying: "There is a bit of work to do but I'm keen to get on with it."