A FUTURE FOR PUBLIC SERVICE TELEVISION CONTENT AND PLATFORMS IN A DIGITAL WORLD

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A FUTURE FOR PUBLIC SERVICE TELEVISION The online subscription services of Netflix and Amazon have followed that pattern. When Netflix and Amazon’s customers were asked what programmes they watched on these services, 49% mentioned US programmes and series, more than the 37% who mentioned UK material. Some 31% said they watched the original programming now being produced by the distributors such as Netflix’s House of Cards or Amazon’s Transparent. 109 British viewers’ exposure to the highest quality US output has, however, arguably undermined the distinctiveness and primacy of British content and raised questions about whether Britain’s creative industry is really matching the standards reached by the US. Funding and business models in a multichannel age The BBC’s funding arrangements have not been substantially altered throughout these tumultuous changes, despite repeated warnings from various quarters about the unsustainable nature of the licence fee. Given that viewing remains for now mainly linear, some have argued that the licence fee is just about sustainable. But at some point, ideally very soon, it will need to be reformed as we discuss further in Chapter 4. In the absence of such reform, the licence fee has been subjected to increasing demands. Until the start of the 2007-16 charter, the BBC enjoyed annual increases in the fee’s level at or above inflation, as well as profiting from a growth in household numbers. Over the past decade, successive governments (Labour, coalition, and now Conservative) have forced real-terms cuts in the licence fee by making it pay for more and more. In part, this follows the reclassification in 2006 of the licence fee from a ‘service charge’ to a ‘tax’ – a move that further ‘politicised’ licence fee funds and allowed governments “to feel justified in using these funds for purposes beyond those of funding the BBC’s public purposes.” 110 The costs of both the BBC’s move to Salford and digital switchover were imposed on the corporation by the Labour government. The 2010-15 coalition made the BBC pay for the World Service and S4C, as well as getting it to fund the rollout of Local TV and superfast broadband. The latest funding deal, struck by the Conservative government in 2015, landed the BBC with the cost of providing free TV licences to over-75s. The result has been that the BBC has had to make cuts to its main services and that much government spending has been outsourced, with the BBC taking charge of essentially political schemes. This has not been healthy for the BBC or for British democracy as we discuss in the next chapter. Channels funded by advertising have been subject to the deflationary pressure on prices that greater competition brings. ITV regional licences were once known as licences to print money; those days of monopoly are long gone. But the legacy channels have held on to much of their share, and have seen out the switchover to multichannel. The financial crisis of 2008-9 and the associated slowdown in advertising was a blow, but they have recovered well. Total advertising revenues in the TV industry have risen an average of 4.1% a year since 2009 to reach £3.8 billion in 2014. 111 Thinkbox, the main marketing body for commercial television in the UK, puts 109 Ofcom, CMR 2015, p. 55. 110 Martin Moore, Better protecting BBC financial independence: An exploratory report for the BBC Trust. January 2016, p. 37. 111 Ofcom, CMR 2015, p. 165. 46
CONTENT AND PLATFORMS IN A DIGITAL WORLD the figures even higher and argues that TV advertising topped £5 billion in 2015, up 7.4% on the previous year. 112 Seen in the wider context of the media industry, TV advertising has held up well as online advertising has taken off, with TV accounting for 43.5% of all display advertising expenditure in 2014, up from 41% in 2009. 113 It is the print media that have really suffered, while TV continues to attract spend as a medium for delivering impact to a mass audience. Meanwhile, subscription has provided a new revenue model. In the UK, consumers typically pay for a bundled package of channels from a distributor: Sky, Virgin Media, or BT. Subscription tends not to be to individual channels or services. However, with superfast broadband facilitating easier downloading and streaming, there is greater potential now for content providers to retail channels or even individual shows direct to consumers. It is worth noting that while Sky and Virgin “OVER THE PAST DECADE, SUCCESSIVE GOVERNMENTS (LABOUR, COALITION, AND NOW CONSERVATIVE) HAVE FORCED REAL-TERMS CUTS IN THE LICENCE FEE BY MAKING IT PAY FOR MORE AND MORE” have been the main gatekeepers charging for access, many channel operators have gained indirectly from putting their services behind Sky and Virgin’s paywalls. ITV, for example, now has a Sky-only channel, ITV Encore. The advantages accrued by these subscription services which are able to offer the main public service channels to their customers without paying for them would seem to be much more significant. The PSBs believe that the current arrangement undervalues their assets and that there is a case, as in the US, Belgium, Germany and the Netherlands, for pay-TV distribution platforms to compensate the public service channels in the form of ‘retransmission fees’, given that the latter produce by far the highest levels of original UK content. Sky have described retransmission fees as “a new tax on TV viewing” and argue that, at present, they charge PSBs nothing in return for giving up valuable slots on the Sky EPG. 114 While we recognise that this is an area of great regulatory complexity (and political controversy), we feel that pay-TV platforms do indeed benefit enormously from the free availability of PSB content and that, as long as the proceeds of any retransmission fees were funnelled back into original content production, audiences would be well served by the introduction of such fees. We return to this debate in Chapter 6. 112 Thinkbox, A Year in TV: Annual Review 2015, 2016, p. 14. 113 Ofcom, CMR 2015, p. 150. 114 Sky, submission to Ofcom’s third review of public service broadcasting, 2015, 47
Page 1 and 2: A FUTURE FOR PUBLIC SERVICE TELEVIS
Page 3 and 4: Contents Foreword by David Puttnam
Page 5 and 6: To instruct democracy, if possible
Page 7 and 8: Welcome Television is leading a cha
Page 9 and 10: CONTENT AND PLATFORMS IN A DIGITAL
Page 11 and 12: PSB channels 71.9% All other channe
Page 15 and 16: Why television matters Television i
Page 19 and 20: 1982 1990s 2012 The BBC-ITV duopoly
Page 23 and 24: Time for action Today’s policymak
Page 29 and 30: Basic principles At the core of pre
Page 39 and 40: The multichannel revolution Perhaps
Page 45: CONTENT AND PLATFORMS IN A DIGITAL
Page 51 and 52: The BBC For most people, the BBC is
Page 67 and 68: Channel 4 If the BBC is the most im
Page 71 and 72: Only 8% of Channel 4’s total spen
Page 79 and 80: ITV and Channel 5 The focus of atte
Page 85 and 86: The changing face of ITV 1993-2002
Page 91 and 92: New sources of public service conte
Page 97 and 98:
CONTENT AND PLATFORMS IN A DIGITAL
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Television and diversity We have ea
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THE PEOPLE SHOULD BE TELEVISED If t
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Nations and Regions Public service
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Content diversity One of the key wa
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Sports content now accounts for som
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Talent development and training In
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Conclusion Television is changing.
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Recommendations General The UK’s
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Appointing the BBC board Sir David
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APPLICATION OF THE NOLAN PRINCIPLES
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BAFTA members’ survey delivered i
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Public service broadcasting, public
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Inquiry events Do we still need pub
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Acknowledgements Inquiry Report Con
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A FUTURE FOR PUBLIC SERVICE TELEVISION CONTENT AND PLATFORMS IN A DIGITAL WORLD

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