Last week, without any hint or debate, the federal Government dramatically changed the settings and priorities of Australian media policy.

By handing up to $500 million to Australia’s free-to-air TV networks — through licence fee reductions of 33% in 2009-10 and 50% the following year — the government, in effect, delivered the following policy statement:

After careful analysis of the changes to the Australian media marketplace, the Rudd Government has decided to inject about $500 million into the free-to-air television industry over the next two years.

While recognising the importance of encouraging diversity of media ownership, acknowledging the imminent threat to funding sources of quality journalism — a cornerstone of our democracy — and noting the trend of media moving rapidly from analogue to digital and from “mass” to “niche”, the Government at this time believes that bolstering the profitability of existing FTA television operators is its highest priority.

The Government therefore believes an investment of up to $500 million of public funds into FTA companies over two years will create more benefits for Australians and the media industry than allocating any funding to stimulating the new media sector, encouraging greater diversity of media ownership, or replacing the resources that no longer fund quality journalism.

At the same time, the Government continues its policy of placing almost all Government advertising in mainstream media, including Government recruitment advertising in newspapers, in order to subsidise “old media” during its structural decline.

Of course, they didn’t put it that way. In fact, they didn’t really put it any way. They simply gifted some of the country’s most profitable media businesses an unconditional windfall, which, according to the respected Goldman Sachs JB Were market analyst Christian Guerra, will add something like 20% annually to the already healthy profits of the listed Ten and Seven networks.

$500 million is a stratospheric amount of money in the context of prioritising media policy. Even a quarter of that amount would fund dozens of new media start-ups, develop enormous technology capability and pay for armies of journalists and editors.

And that would still leave hundreds of millions to line the silk pockets of Kerry Stokes and the other shareholders of the free-to-air networks.