The free-to-air and subscription television sectors are at odds over the Turnbull government's 25 per cent cut to broadcast licence fees, with the former stating the reduction is not enough and the latter labelling it a "$150 million handout."

As revealed by Fairfax Media last month, Australia's free-to-air broadcasters did not get the dramatic cut in licence fees they were hoping for and instead were given a smaller reduction in Tuesday night's budget.

The commercial free-to-air networks will get a 25 per cent reduction in their licence fees from 4.5 per cent of revenues to 3.375 per cent.

"The government's decision to reduce the fees recognises that the Australian media market has changed significantly since broadcasting licence fees were first introduced, with the move to online and on-demand content fragmenting the market for media services and increasing competition for audiences and advertising dollars," Communications Minister Mitch Fifield said in a statement.

"In turn, this is placing increasing financial pressure on Australia's commercial broadcasters whose main competitors, including online operators such as Netflix and Apple, pay no licence fees."

Senator Fifield also flagged the consideration of further licence fee reductions later in the year.

However, Australia's three metropolitan commercial broadcasters were disappointed with the cut and believe it does not go far enough.

"The small cut in this budget is not nearly what the industry needs to compete and innovate in a fundamentally changing media environment.  We are disappointed that the Government has not recognised this," Seven West Media chief executive Tim Worner said.

"It seems that commercial television broadcasters will continue to struggle under the burden of the highest licence fees in the world for the next few years and that the spectrum we use to provide our services is also under threat."

Mr Worner said that not have a larger cut will impact the Seven's ability to provide jobs in the local production sector.

Ten Network chief executive Paul Anderson said a bigger cut would have resulted in more work for those in the local production sector and more Australian content on television.

"Without an urgent path to a sustainable fee going forward, local content remains under threat," Mr Anderson said.

"While any reduction is positive, at this level our fee remains wildly out of step with fees paid in any comparable jurisdiction. This single reduction does not recognise the urgency of the challenges that this industry faces and the Government has not indicated a clear path forward to a truly sustainable fee."

Sources at Nine said the executives at the network are disappointed and don't believe the cut is meaningful or addresses the long term issues confronting for sector.

However, pay TV lobby the Australian Subscription Television and Radio Association said taxpayers will be footing an "unconditional handout of approximately $150 million" to the free-to-air networks due to the cut.

ASTRA chief executive Andrew Maiden said licence fees reflect the protections that the free TV sector is given, such as the anti-siphoning list which determines which sports free-to-air broadcasters have first rights to bid on.

"In exchange for paying licence fees, Australian free-to-air broadcasters enjoy a legislated ban on competition, guaranteed access to broadcasting spectrum and the world's most protected market for sports broadcast rights," Mr Maiden said.

"There should be no reduction in licence fees without a corresponding reduction in the privileges and protections from competition that free-to-air television networks have amassed over decades.

"Thirty years after serious efforts began to eliminate protectionism, few industries enjoy greater structural advantages than free-to-air television, and even fewer expect corporate welfare as changing technology and consumer choices challenge their privileged position."

Screen Producers Australia chief executive Matthew Deaner said he was cautiously optimistic that the cut in licence fees will strengthen the TV sector, given their role in funding local production.

"In the past Screen Producers Australia has been supportive of a reduction in spectrum licence fees so long as these are balanced by content obligations and a commensurate increase in the level of expenditure on local production. In particular, commercial free-to-air's investment in drama, documentary and children's production is around $160 million annually, less than half that spent by these broadcasters on sports," Mr Deaner said.

"From anti-siphoning to sub-quota obligations, there has historically been a delicate balance of Government regulation and interventions to ensure that commercial free-to-air investments in local production are wide ranging, across low cost per hour genres like news and current affairs to higher cost content like documentaries and drama. Diversity of programming is an obligation they must continue to carry."

Harold Mitchell, chairman of Free TV, the commercial broadcaster's lobby group, called the reduction in licence fees a modest first step, but was disappointed the cut was not bigger and there was no clear path given to greater cuts.

"We appreciate that the budget delivers a small permanent reduction in licence fees however, we are concerned that the Government hasn't acknowledged that these changes are urgent," Mr Mitchell said.

"In the new media environment, the government can't afford to be complacent. We need to act now to make sure broadcasters can continue to invest in great Australian programming and in transforming our businesses."