UK broadcast regulator Ofcom has published fresh analysis setting out the challenges facing the UK’s public service broadcasters in the face of greater online media consumption and global competition, suggesting that greater co-operation with pay-TV and online competitors may ensure that they remain globally competitive and relevant to UK audiences.
The paper, Public service broadcasting in the digital age, which focuses on television, considers the importance of public service broadcasting, and what Ofcom can do to support the system in the next decade and beyond. The document also explores how broadcasters can collaborate to ensure that they remain globally competitive and relevant to UK audiences.
Ofcom notes that the landscape within which public service broadcasters operate is changing rapidly. “Audiences are benefiting from an explosion of choice in terms of platforms and devices over which they can watch television. Amazon Prime Video and Netflix are now established players. They are in more than a third of UK homes; investing billions of pounds in programmes, dwarfing domestic UK budgets, but focused on a global audience,” it suggests.
In addition, established broadcasters also face competition from the likes of Apple, Facebook and Google, which are developing original content. “This is creating a ‘rush to scale’, principally through mergers and acquisitions. The proposed takeover of Sky by 21st Century Fox and of 21st Century Fox by Disney are recent examples, with Comcast now making a counter-offer for Sky. Meanwhile in the US, AT&T is aiming to purchase Time Warner. Just as traditional broadcasters faced the challenge of digital pay-TV platforms two decades ago, so they are now seeking greater global scale to compete with the digital giants,” says Ofcom.
According to Ofcom, public service broadcasting has so far held up well to greater global competition. “Reach, though falling, remains high. The most popular programmes, dramas like The Night Manager and Broadchurch, and entertainment shows like The Great British Bake Off and Gogglebox, compare well to the best in the world. The main PSB TV channels still account for half of all viewing; though investment in original UK programmes – steady in cash terms – has fallen appreciably taking account of inflation. TV advertising has proved remarkably resilient though it is now softening, probably a mix of cyclical and structural factors. The BBC licence fee is protected in real terms until at least 2022,” advises Ofcom.
Ofcom suggests that the public service broadcasters can take important steps to ensure that they continue to thrive, first and foremost by making high quality and more distinctive programmes that appeal to audiences across the whole of the UK, including young people. “In addition, PSBs will need to exploit different distribution channels so that programmes are easy to find wherever the audience is. In future, PSBs may be able to negotiate retransmission fees with platforms to boost revenues and exploit further the commercial opportunities of increased personalisation and data-driven advertising,” it says.
“Longer term, as viewing shifts further from scheduled TV to on-demand, PSBs may need to work more collectively to strengthen their negotiating hand with smart TV manufacturers and platforms. In assessing the competition effects of such partnerships, the benefits to the health of PSBs need to be properly accounted for. As the national broadcaster, we would expect the BBC to take a leading role in forming partnerships,” says Ofcom.
Among the ways Ofcom says it can support the PSBs, the regulator says it will seek to ensure the widest availability and prominence of PSB. “For a number of years yet, PSB prominence on the linear TV guide will remain important given high, if declining, audiences for scheduled TV. Following new provisions in the 2017 Digital Economy Act, we are undertaking a review of the EPG. Later this year we will be consulting on proposals that ensure PSBs stay easy to find, maintain the top ranking of the main PSBs and give higher slots to smaller PSBs like the BBC’s children’s channels, BBC News, BBC Alba, S4C and local TV channels. We also intend to make recommendations on the possible extension of the current regime to on-demand viewing. If Parliament were to take the view that prominence of on-demand services is crucial for the future health of the public service broadcasters and could be achieved only through regulation, primary legislation would be required.”
Looking ahead, Ofcom suggests that the growing importance of personalisation, recommendation engines and voice search will make it harder for regulation of any kind to guarantee prominence. “As a result, there is a growing international debate about how to address the challenges of prominence in the longer term. For example, the German Bund-Lander Kommission (the German federal – state commission) has considered a new legal framework that would extend PSB prominence rules to new kinds of media platforms in order to ensure choice and plurality.”
According to Ofcom, the public service broadcasters will need to work together to give themselves greater scale. The cost of distribution and content are such that PSBs will need to form partnerships with each other and with pay-TV and commercial competitors. These partnerships could be in areas as diverse as marketing and ad sales, research and development, overseas sales, co-production and distribution deals. ITV and the BBC have successfully launched ‘Britbox’, an on-demand subscriber service in the US, now with 250,000 people signed on. In addition, the PSBs worked together to develop Freeview Play ensuring that their on-demand services are available to Freeview audiences via a standard user interface.
Ofcom accepts that in assessing potential partnerships, the competition framework needs to be more sensitive to the intensity of global competition. “PSBs have sought to join forces in the past. In 2007, they put forward a proposal ‘Kangaroo’ to distribute their on-demand programming together. It was rejected by competition authorities at the time out of a concern that it would weaken the position of other players in the market. Since then, the market dynamics have changed significantly. The competition framework would need to take account of those developments were a similar proposal to be put forward today. Part of the broader context would be the importance of preserving public service broadcasting alongside a consideration of market impact,” it suggests.
According to Ofcom, the PSBs will also need to work in closer partnership with the global players. “Global companies, like Netflix, already contribute significant funds towards PSB programmes, especially in drama, through co-production deals in return for overseas rights such as Troy: Fall of a City, a co-production between the BBC and Netflix. They are also doing deals with UK pay-TV providers. Sky has recently signed an agreement to host a Netflix app on its Sky Q set-top box, while BT, Virgin Media and TalkTalk already offer access to Netflix within their pay TV packages. The PSBs will need to explore new ways of working with the online players, whether to secure more investment in UK original programming, or to ensure that their content is carried prominently,” it states.
“The history of the UK PSB system, and the UK’s television industry more widely, is one of successful adaptation to disruptive change and market entry. The next decade will be all about adapting to an increasingly global marketplace and to a world in which most media consumption is through digital and online services. With the right strategies and support, the PSB system can meet these challenges and continue to play a vital role in the UK creative economy and in society,” concludes Ofcom.