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Sky: Why should the BBC get a free ride?

October 20, 2011

Rob Webster, BSkyB’s group commercial director, has responded to the BBC’s plea to let it off the £10 million re-transmission fee for relaying regional programmes around the UK.

Webster lists a bunch of BBC operational costs including travel, hotels and hospitality then asks: “Now, of those costs, which is the odd one out? Well, it’s the money the BBC pays Sky for providing technical services that enable it to make 49 TV and radio channels available to more than 10 million homes. Why the odd one out? Well, it’s this cost that the BBC believes it should no longer pay. Rather, it believes Sky should provide it with a multi-million-pound subsidy, with the bill footed ultimately by Sky customers who’ve already paid the licence fee.”

“Of course, it’s understandable that tight budgets mean the BBC is seeking to save money where it can. But can it be fair that, of all the BBC’s suppliers, Sky should be singled out and asked to offer a free ride? We think not.”

Writing in The Guardian, he goes on: “We’ve invested well over £1bn in our platform over more than a decade and it’s only right that each broadcaster should pay a fair and proportionate share of the costs if they want the benefits. We accept our fair share of these costs, which is why we ask other broadcasters to contribute less than 10 per cent of total costs. Since 1998, they have made that contribution by paying Sky a fee – regulated by Ofcom – if they choose to use platform services such as listings on our electronic programme guide (EPG), regionalisation, and access to interactive functionality and conditional access.

The BBC is now lobbying for a change to the rules so that public service broadcasters (PSBs) shouldn’t have to pay for these services. In an unusual intervention in the commercial sector, it even claims that it is Sky that should be paying the likes of ITV, Channel 4 and Channel 5 for carrying their channels on our EPG. Both of those arguments overlook a number of important points.

First, no broadcaster is under any obligation to buy the full range of platform services from Sky. In fact, ITV chose to stay off Sky’s platform initially and only decided to join later once it recognised that the commercial benefits of doing so far outweighed the costs. Let’s remember that all five main terrestrial channels rely on the Sky platform to reach about a third of their entire respective audiences. And not to put too fine a point on it, for the likes of ITV and Channel 4, these many millions of eyeballs translate into serious advertising revenue.

Second, the BBC and the other public service channels are not part of Sky’s pay-TV package. They are free-to-air on the Sky platform, which means they are still available if a customer cancels their subscription. Similarly, they are also widely available for free on platforms such as Freeview and BBC Freesat, as well as our own Freesat from Sky. This situation is very different to the US, where cable operators pay retransmission fees to the major networks because they are included within a subscription package and non-paying customers cannot access them.

Of course, if the PSBs wanted to have their channels included within a pay package, following in the wake of E4 HD and ITV2, ITV3 and ITV4 ITV HD, we’d be more than happy to discuss an appropriate payment. The choice is theirs.

All broadcasters understand that distribution is a necessary cost of doing business. For the BBC, for example, our current platform charges of £10 million represent just a small fraction of the £181m that the corporation spends annually to distribute its TV and radio services. And that’s an investment which enables it to serve the 40% of licence fee payers who choose to access the BBC over the Sky platform. That’s just £1 per Sky home per year to distribute dozens of channels and radio stations. Or put another way, just 3p per home per day.

When you put aside the rhetoric, those distribution costs are no different to paying for electricity, studio facilities or any other services. No one expects satellite operator Astra to provide the BBC or the other PSBs with free transponders or British Gas to provide them with cheap energy, subsidised by its other customers. In these examples, the PSBs pay the same rate as everyone else and do not expect, nor receive, a subsidy.”


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