Mind The Funding Gap: The Potential of Industry Levies For Continued Funding of Public Service Broadcasting

WWW.IPPR.
ORG
Mindthefundinggap
Thepotentialofindustryleviesfor
continuedfundingofpublic
servicebroadcasting
AnipprreportforBECTUandtheNUJ
March2009
©ippr2009
InstituteforPublicPolicyResearch
Challengingideas– Changingpolicy
2 ippr|MindtheFundingGap:Thepotentialofindustryleviesforcontinuedfundingofpublicservicebroadcasting
Contents
Aboutippr ............................................................................................................................. 3
Acknowledgements ............................................................................................................... 3
Executivesummary................................................................................................................ 4
Introduction........................................................................................................................... 6
1.PublicbroadcastservicesintheUK:anoverview............................................................. 7
2.Technologicalchallenges ................................................................................................. 12
3.Financialchallenges ........................................................................................................ 16
4.Thecurrentpolicycontext .............................................................................................. 22
5.Thepotentialofindustrylevies....................................................................................... 26
6.Thevalueofregulatoryassets......................................................................................... 35
7.Conclusion....................................................................................................................... 38
References ........................................................................................................................... 39
Appendix1:TheExpenditureandFoodSurvey(EFS)data................................................ 42
Aboutippr
TheInstituteforPublicPolicyResearch(ippr)istheUK’sleadingprogressivethinktank,
producingcutting-edgeresearchandinnovativepolicyideasforajust,democraticand
sustainableworld.
Since1988,wehavebeenattheforefrontofprogressivedebateandpolicymakinginthe
UK.Throughourindependentresearchandanalysiswedefinenewagendasforchangeand
providepracticalsolutionstochallengesacrossthefullrangeofpublicpolicyissues.
WithofficesinbothLondonandNewcastle,weensureouroutlookisasbroad-basedas
possible,whileourinternationalandmigrationteamsandclimatechangeprogrammeextend
ourpartnershipsandinfluencebeyondtheUK,givingusatrulyworld-classreputationfor
highqualityresearch.
ippr,30-32SouthamptonStreet,LondonWC2E7RA.Tel:+44(0)2074706100
E:info@ippr.orgwww.ippr.org.
RegisteredCharityNo.800065
ThispaperwasfirstpublishedinMarch2009.©ippr2009
Acknowledgements
TheresearchforthisreportwasconductedbyKayWithersandHowardReed.Thereportwas
writtenbyKayWithers.
Thereportrepresentstheviewsoftheauthorandnotnecessarilythoseofippr’sdirectorsor
trustees,orofBECTU(theBroadcastingEntertainmentCinematographandTheatreUnion)
ortheNUJ(NationalUnionofJournalists).
Executivesummary
Publicservicebroadcasting(PSB)–televisioncontentfundedeitherdirectlyorindirectlyby
thestateanddesignedtomeetspecificsocietalandculturalobjectives–isaculturallyand
economicallyvaluablepartoftheUK’smedialandscape.Itispopularandvaluedbycitizens,
andpublicservicebrands–suchastheBBCandChannel4–areinternationallyrespected.
Therecontinuestobedemandforpublicservicebroadcastingtobeproducedbymorethan
onesourceintheUK,andforUK-basedproductionsthatrepresentthemanydiverse
culturesandwaysoflifeintheUKtoday.
However,theUK’smedialandscapehasseenrapidchangeoverthepastdecadeandthe
digitalrevolutionhaspresentedpublicservicebroadcasterswithhugechallenges.Theswitch
todigitalduetotakeplaceby2012meansthattheimplicitsubsidiesderivedfromspectrum
allocationinthebroadcastingsystemwillfalldramaticallyinvalue.Thiswillpresentahuge
challengetotheeconomicbasisonwhichtheUK’sPSBsystemrelies.
ButPSBprovidershavealsorespondedtotechnologicalchange.Whilethegrowthofthe
internetsawearlypredictionsthattelevision–andbroadcastersinparticular–would
becomeredundantinanewdigitalworld,PSBprovidershavediversifiedintheirofferings,
enablingsomecontenttobeconsumedonlineviatheinternetandevenaccessedviathe
newgenerationofsmartmobilephones.TheBBC’siPlayer,forexample,whichgivesaccess
toitsprogrammesfromtheprevioussevendaysonline,isoneofthemajorcontentsuccess
storiesofthepastfewyears.
Thefundinggap
Followingdigitalswitchover,thedeclineinvalueofspectrumgiftedtoPSBproviderswill
causeafundinggapofbetween£145and£235milliontoemerge.
ButPSBprovidersarealreadyfeelingthepressuresofthecurrenteconomicclimateand
greatercompetitionfromdigitalproviders.ThecontinuedpopularityanddesireforPSB
amongBritishcitizensmeansthataddressingthefundinggapandongoingfinancial
pressuresisamatterofgreaturgencyandimportance.
Bridgingthegap:industrylevies
Variousdifferentmethodsandmodelshavebeensuggestedtobridgethefundinggap.One
solution,showntobepopularwithmembersofthepublic,istheintroductionofindustry
levies:putsimply,asurchargeortaxleviedoncertainsectionsofthemediaindustry,based
onannualrevenueorprofit.IndustryleviesexistinmanyEuropeannationsandarenota
newconcept.
Examplesoflevysystemsinclude:
• Directmedialevies –levieschargedonrevenuefromorganisationssuchas
broadcasters,cinemasorvideolabels
• Newmedialevies –levieschargedonorganisationssuchasInternetServiceProviders
andmobilephoneoperators.
A1percentlevyon‘paytelevision’(subscription-basedTVservices)intheUK,wouldyield
anestimated£70millionperannum,basedonassessmentsfromtheUK’stwomajorpayTV
broadcasters,VirginandSky.
A1percentlevyonthefivemajormobilephoneoperatorsintheUK(O2,Orange,T-Mobile,
3andVodafone)wouldyieldanestimated£208millionperannum.
Althoughthesefiguresremainestimatesasafinalmodelwouldlikelybedifferent,clearly
thesemethodscouldgosomewaytowardsmeetingthefundinggapidentifiedbythe
industryregulatorOfcom,andensuringthefutureofPSBintheUK.
Thevalueofregulatoryassets
Digitalswitchoveralsopresentsanopportunityforrealisingvaluefromreleasedspectrum
previouslyusedforbroadcastinganaloguetelevisionsignals.
Althoughestimatingtherevenuelikelytobegeneratedfromanyspectrumauctionis
problematic,theTreasurydoesnonethelesshavetheoptionofhypothecatinganyproceeds
towardsfuturefundingofPSB.Thiswouldrepresentaone-off‘windfall’paymentthatcould
providesomemuchneededassistanceintheshortterm.
Summingup
Bothindustryleviesandregulatoryassetsprovidepossiblesourcesofrevenuethatcouldbe
divertedintothePSBsysteminordertomaintainandstrengthenit.Introducingsucha
systemwouldbeaboldmove.However,thescaleofthechallengefacingtheUK’sPSB
systemwouldseemtodemandradicalsolutions.Atfirstglance,leviesmaynotappear
politicallypopularbutthereisastrongrationaleforconsideringthemasaseriousoption.
1.Introduction
Thefutureofpublicservicebroadcasting(PSB)–televisioncontentfundedeitherdirectlyor
indirectlybythestateanddesignedtomeetspecificsocietalandculturalobjectives–is
uncertain.Thecompoundingfactorsofanuncertaineconomicclimateandadownturnin
advertisingrevenue,alongsiderapidtechnologicalchangeandtheloomingprospectof
digitalswitchover,havecreatedhugechallengesforpolicymakersandPSBproviders.One
thingisclear:thepublicstillvaluespublicservicesbroadcasting,andwantstoseeitontheir
screens.ButdespitereviewsbytheGovernmentandtheindependentregulatorand
competitionauthorityfortheUK’scommunicationindustries,Ofcom,itisstillunclearhowto
providethelevelandqualityofprovisiontowhichwehavebecomeaccustomed.
ThisreportwascommissionedbytheBroadcastingEntertainmentCinematographand
TheatreUnion(BECTU)andtheNationalUnionofJournalists(NUJ)in2008,toexploreone
optionforpayingforpublicservicecontentinthefuture:industrylevies.Thisoption(which
involvesapplyingsmallleviesortaxestodifferentelementsofthewidermediaindustry)has
beenindicatedtobepopularwiththepublicaccordingtoOfcomresearch.However,the
proposalhasbeengrantedlittleattentioninrecentpolicydebates.Thisreportaimsto
increaseawarenessandgeneratedebateaboutthisoptionbyillustratingwhatalevysystem
mightlooklike,andhowmuchfundingitcouldraise.
Section1providesabriefoverviewofpublicserviceprovisionintheUK,andexaminesits
value,includingcultural,societalandeconomiccontributions.Insections2and3we
considersomeofthetechnologicalandfinancialchallengesthathavethreatenedthecurrent
systemandthemedialandscapemoregenerally.Thefollowingsectionprovidesabrief
overviewofrecentpolicydebatesanddevelopmentsbeforeinSection5wesetoutanin-
depthconsiderationofwhatamedialevysystemmightlooklike.Wethenconsiderthe
continuingroleofregulatoryassetsforfundingmediacontent,inSection6,beforeproviding
afinalsummaryofthefindingsinsection7.
1.PublicbroadcastservicesintheUK:anoverview
ThehistoryoftelevisionintheUKisinexorablylinkedwiththeconceptofpublicservice
broadcasting(PSB).Atitsinception,LordReith,theBBC’sfirstchairman,established
television’searliestpurpose–‘toinform,educateandentertain’1.Publicservicebroadcasting
–forinstance,contentbroadcastbyBBC,Channel4andsomecontentfromITVandFive–
todayhasawidersetofobjectivesbuttheReithianprinciplesremainacornerstoneofthe
PSBethos.
Fornearlythreedecades,parliamentariansbackedthenotionofapubliclyfundedmonopoly
inbroadcastprovision.Untilthe1950s,theBBCremainedtheonlynationaltelevision
broadcasterintheUK,defendedbyaninfluentialparliamentarycommitteethatargued‘the
rightofaccesstothedomesticsoundandtelevisionreceiversofmillionsofpeoplecarries
withitsuchgreatpropagandapowerthatitcannotbetrustedtoanypersonorbodiesother
thanapubliccorporation’(Beveridge1951).
Discussionsaroundtheintroductionofcommercialtelevisionreflectanunderstandingofthe
politicaleconomyoftelevision:therelationshipbetweenpolicy,industryandoutput.Ithas
longbeenrecognisedthatwhatappearsontelevisiontosomeextentdependsonthe
institutionalcircumstanceswithinwhichtherelevantbroadcasteroperates–particularlyin
relationtocommercialfundingmodels(Elliott1972,Gitlin1985,Hart1988).Whenfinally
introduced,commercialtelevisionwasbeholdentostrongPSBobligations,andwas
effectivelyseenasanextensionofPSBprovisionratherthanprovidingpurelycommercial
competition.
Withtheintroductionin1982ofChannel4–apubliclyownedbroadcastingcompanyaimed
atchallengingthepublicserviceduopolyofBBC1and2–publicservicetelevisionwas
chargedwithtakingmorerisks,behavingmoreinnovatively,andprovidingcontentforniche
audiencesotherwiseunderservedbytheBBC.Theadditionin1997ofFive,withlimited
publicserviceobligations,hasmadeuptheterrestrialpublicservicebroadcastingofferingfor
thepast12years.
Today,publicservicetelevisioncontinuestobedeliveredbytheBBCandChannel4.Both
organisationshavespecificpublicservicemissions:theBBCseeksto‘enrichpeople’slives
withprogrammesandservicesthatinform,educateandentertain’(BBC2009),while
Channel4aimstoprovide‘abroadrangeofhighqualityanddiverseprogrammingwhich…
demonstratesinnovation…appealstothetastesandinterestsofaculturallydiverse
society…andexhibitsadistinctivecharacter’(CommunicationsAct2003).
Meanwhile,ITVandFivecontributesomelevelofpublicserviceprovision,deliveringcontent
–particularlynationalandregionalnewsandprogramming(ITV)andchildren’sprogramming
(Five)–accordingtoquotassetbytheCommunicationsActandperiodicallyreviewedand
modifiedbyOfcom.
Theprinciplesofpublicservicebroadcasting,definedbyOfcom(Ofcom2004)areasfollows:
•Informingourunderstandingoftheworld –Toinformourselvesandothersandto
increaseourunderstandingoftheworldthroughnews,informationandanalysisof
currenteventsandideas
•Stimulatingknowledgeandlearning –Tostimulateourinterestinandknowledgeof
arts,science,historyandothertopicsthroughcontentthatisaccessibleandcan
encourageinformallearning
1.TakenfromBBC’smissionstatementatwww.bbc.co.uk/info/purpose/accessed22March2009
•ReflectingUKculturalidentity –Toreflectandstrengthenourculturalidentity
throughoriginalprogrammingatUK,nationalandregionallevel,onoccasionbringing
audiencestogetherforsharedexperiences
•Representingdiversityandalternativeviewpoints –Tomakeusawareofdifferent
culturesandalternativeviewpoints,throughprogrammesthatreflectthelivesof
otherpeopleandothercommunities,bothwithintheUKandelsewhere.
Therearesomeinherentcontradictionsintheseprinciples,withPSBatoncetaskedwith
bringingaudiencestogetherforsharedexperienceswhilealsoensuringdiversityand
representingarangeofcommunitiesacrosstheUK.Thepublicsphere,asrepresentedby
publicservicebroadcasting,mustatoncebebothrepresentativeanduniting.
InorderforPSBtomaintainabalancebetweenthesesometimes-competingclaims,itmust
‘negotiatethepoliticsofdifferenceonadailybasis’(Murdock1999).So,howcan
broadcastersmanagethis?IntheUK,thepluralityofpublicserviceprovisionmeansthat
bothaimscanbeaccommodated.Forexample,whiletheBBCworkstodeliverashared
culturalexperience,Channel4canproduceprogrammingthat‘appealstothetastesand
interestsofaculturallydiversesociety’(Channel4,2008)andexposesmainstreamaudiences
towhatwouldotherwisebeminorityviews.
Theimportanceofplurality
Therehasbeenahugeincreaseinthenumberoftelevisionandradiochannelsandother
formsofentertainmentcontentsuchasDVDs,computergamesand,ofcourse,theinternet.
Nevertheless,UKcitizenscontinuetovalueplurality–thenotionthatcertaintypesof
programmesshouldbeshownonmorethanonechannel–inpublicserviceprovision(Ipsos
MORI2008).
ResearchundertakenbyIpsosMORIhighlightedthestrengthofUKopinioninthisarea.
Morethanfourinfiverespondents(86percent)statedthatitwasimportantthatnews
shouldbeshownonmorethanoneofthemaintelevisionchannels.Respondentsfeltthat
newswasthegenreinwhichmaintainingpluralitywasmostimportant.
Ahighproportion(76percent)alsobelieveditwasimportanttomaintainpluralityinthe
provisionofregionalandnationalnews.WhenaskediftheBBCandITVshouldcontinueto
eachprovideregionalandnationalnews,83percentrepliedthattheyshould.Inthe
devolvednations,thisviewwasevenstronger,beingheldbynineoutoftenrespondents.
Thosesurveyedalsobelieveditwasimportanttomaintainpluralityinsomeothergenres,
includingfactualandcurrentaffairsprogramming.Almostfourinfive(77percent)thought
itimportantthatsuchprogrammingshouldbeshownonmorethanonechannel.Thiswas
largelybecausetheybelievedthatfactualandcurrentaffairsprogrammescontainedopinions
aswellasfacts,andthatitwasthereforecrucialthattheyconveyedavarietyofoutlooks.
Acrossseveralgenres,thekeyjustificationsforpluralitywerethatitwasnecessarytoensure
accountability,impartialityandquality.Respondentsfeltthatalackofpluralitywouldresult
notonlyinthepublicbeinglessinformedbut,becauseofalackofcompetition,adropin
standards.
Previousresearchhasshownthatdifferentproviderscaterfordifferentaudiences.For
example,newsbulletinsfromITVattractaudiencesfromdifferentsocio-economic
backgroundstosimilarprogrammesonChannel4andBBC1(Ofcom2004b).Similarly,
Channel4tendstoserveayoungeraudience,andinitsfuturevisionhasarguedforan
expansiontoitsremittofurtherenhanceprovisionforolderchildrenandyoungadults
(Channel42008).Thisindicatesafurtherpurposeforplurality:thatofprovidingimproved
access,offeringthepublicanopportunitytofindinterestingandcomplementarycontentat
differenttimesofdayondifferentnetworks(Foster2008).
Toprovideplurality,thereisaneedforcontinuedproductionofcontentoriginatedinthe
UK,whetherinternational,nationalorregionalnews,currentaffairsandfactual
programming,drama,children’stelevisionorcomedy.Themixed‘ecology’ofPSBintheUK
(whichismadeupofabalanceofdifferentfunding,organisationalandoperationalmodels)
hassupportedhigh-qualityprogramming,andcontinuestounderpinthestrengthofthe
UK’sbroadcastingsector(Foster2008).InresearchbyOfcom,83percentofrespondents
believeditisimportantthat‘programmesmadeintheUKareshownonthemaintelevision
channels’(Ofcom2008).
TheeconomicvalueofpublicservicebroadcastingintheUK
CalculatingthevalueofPSBintheUKisextremelydifficult.Itcanberepresentedasa
measureofthelevelofsubsidyitreceives,intermsoflicencefeeandregulatoryassets,asan
estimateoftheopportunitycosts.However,thekeystrengthsandmeritsofPSBareoften
non-commercialinnature,andcapturingthevalueoftheseaspectscanbeacomplex
exercise.
Variousstudieshaveinvestigatedtheextenttowhichcitizensarewillingtopayforpublic
serviceprogrammingoncommercialchannels,inordertoputahypotheticalpriceon
somethingthatiscurrentlyreceivedforfree.ArecentstudyconductedaspartofOfcom’s
reviewofPSBfoundsignificantreadinessamongthosesurveyedtopayforPSBbeyondthe
BBC.Approximatelythree-quartersofrespondentswerepreparedtopayforpublicservice
programmingonITV1,Channel4andFive,uptoanaveragevalueof£3.50amonth,in
additiontothecurrentlicencefee.Thiswouldequateto£42perhouseholdperannum–
over£800millionperannumnationally.Clearly,thevaluethattheserespondentsputonPSB
issignificantlyhigherthanthecostofactuallydeliveringsuchservices(Ofcom2008e).
IthasbeenclaimedthatPSBcancontributetothewidersocial,democraticandcultural
healthoftheUKthroughtherangeandqualityofitsbroadcasting(Banerjeeetal 2006).In
thepast,theBBChasundertakensignificantworkinordertotranslateitsvaluebyutilising
theconceptofpublicvalue.OneofitsaimshasbeentounderstandhowPSBcontributes
valuetopeopleasindividualsandcitizens,andtosocietyasawhole–forexampleby
contributingtothewell-beingofsociety.
PSBalsohasanimpactontheperformanceofthewidereconomicmarket.Recentanalysis
oftheeconomicimpactoftheBBConthecreativeeconomy(PwC2008)estimatesthatBBC
spendingoncreativeactivities–definedascontentanddistributionandexcluding
overheadsandinfrastructure–providesa‘grossvalueadded’totheUKeconomyof
approximately£5billion.IncludingtheBBC’sexpenditureonoverheadsandinfrastructure,
thetotalgrossvalueaddedoftheBBCincreasestoaround£6.5billion.Thisvalueisaccrued
inanumberofways–forexample,throughthevalueofexternalitiessuchaseducationand
trainingactivitiesthattheBBCundertakes,aswellasitsimpactonregeneration,networking
buildingandclustering.
OtherstudiesassessingthevalueofPSBhaveincludedtheCardiffBusinessSchoolstudyon
theeconomicimpactofS4C(DTZetal 2007),whichfoundthattheWelshPSBproviderhad
considerableindirectimpactonsuppliereffectsandincome-inducedeffects.Forexample,
whenemployeesspendtheirwagesandtheirsalariesintheirlocalityongoodsandservices,
thisinturngeneratesfurtherdemand.ThestudyfoundthatS4Cactivitywasfoundto
supportindirectly2,100full-timeequivalentjobsoverafive-yearperiod.Itconcludedthat
thepresenceofS4Cwithinthecreativeindustriesaddedstabilityandcertainty,generatedan
estimated£87millionofvalueaddedfortheWelsheconomyin2006,andhenceencouraged
investment,skillsdevelopmentandcreativeexcellence.
Inanotherstudy,theprofessionalservicesfirmPricewaterhouseCoopers(PwC)analysedthe
impactofChannel4ontheUKindependentsector,onthecreativeindustriesmore
generally,andontheeconomyasawhole(PwC2007).ThestudyfoundthatChannel4
supportsapluralityofindependentproducersandultimatelyensuresthatawiderangeof
ideasandvoicesreachthetelevisionscreen.Itarguedthatbycontributingtothe
developmentofregionalclustersintheUKeconomy,thechannelbuckstheotherwise
London-centrictrendofthemediaandcreativeindustries,identifyingandnurturingtalent
‘inanewanduniqueway’.
TounderstandtheimpactofChannel4asapublicservicebroadcaster,PwCanalysedthe
impactsofchangingtheinstitutionalmodelofthechannelfromapubliclyowned,not-for-
profitcorporationtoonethatoperatedinsteadonapurelycommercialbasis.Theypredicted
thattheeffectwouldbe:
•Increasedconsolidationandfewindependentproducers
•AreductioninsizeandpluralityofChannel4sources
•ArenewedfocusonLondon(reductionofactivityinthenationsandregions)
•Increasedbarriersfortalent
•Reducedrisk-takingandlowerqualitylinkedtoreducedcertaintyoffunding.
Otherresearchhasestimatedthepossibleimpactofreducingthescaleandscopeofpublic
funding.In2006,mediaadvisersOliverandOhlbaumAssociatesarguedthatthecommercial
revenuegrowthresultingfromreducedpublicfundingtotheBBCwouldberelativelylow,
andthattherewouldbeasubstantiallossofrecyclingeffects–thatis,theimpactofthe
BBC’stendencytospendlargeproportionsofitsrevenuewithintheUKcreativeeconomy.
TheyestimatedthatforeveryonepoundofincometakenawayfromtheBBC,UK
programmespendislikelytofallbyabout60pence(OliverandOhlbaumAssociates2006).
Meanwhile,OfcomhasstatedthatBBC’sinvestmentinFreeviewhasbeencentraltothe
successofDigitalTerrestrialTelevision(DTT),whichinturnislikelytoincreaseinter-platform
competition.Thismayincreasecommercialrevenues,ascommercialadvertisingrevenues
haverisenfordigital-onlychannelsandmorehouseholdshavebeendrawnintothepayTV
market.
Wecansee,therefore,thatinadditiontobeingvaluedbyUKcitizens,evidenceshowsthat
PSBprovidersaddconsiderablevaluetothewidermediamarket–throughnetworkeffects,
bytakingrisksthatarenotopentocommercialplayersandalsobypromotingandsustaining
newtechnicalstandardsandplatforms.
TheinternationalvalueofUKpublicservicebroadcasting
TheUKsystematicallyperformsbetterthanothercomparativenationswherebroadcastingis
concerned.TheBBCisaninternationallyrespectedmediabrand,withitsWorldService
reachingmillionsofpeopleworldwide.Similarly,manyprogrammesdevelopedbyChannel4,
BBCandITVhavepopularityworldwide,andUKPSBcontentisfrequentlyhonouredonthe
internationalawardscircuit.
InthecontextoftheUK’screativeindustries,broadcastingisapowerfulplayerin
internationalmarkets.EstimatedtotalrevenuefromthesaleofUKTVprogrammes
internationallyin2005was£632million–anincreaseof21percenton2004.In2007this
figureroseto£663million,accordingtotheUKTelevisionExportsSurvey(PACT2008)This
survey,carriedoutindependentlyonbehalfofUKTradeandInvestment(UKTI)and
ProducersAllianceforCinemaandTelevision(PACT,thetradebodyfortheindependent
television,film,animationandinteractiveindustries),concludedthatUKtelevision
programmescontinuetogrowinpopularityoverseas,withsalesofformatideasup53per
cent,to£82million(PACT2008).
PSBplaysanimmenselyimportantroleinasuccessfultelevisionindustrythatgenerated
revenueof£10.4billionin2007,morethanFrance(£7billion),Germany(£9.3billion),Italy
(£6.3billion)andCanada(£4.4billion)(Ofcom2008b).
Meanwhile,comparedtoothercreativeindustrysectors,radioandtelevisionshowedabove-
averagegrowthof8percentperannum,comparedto4percentforthecreativeindustries
generallyand3percentfortheeconomyasawhole(DCMS2009).
Inotherrespects,too,theUK’sPSBsectorperformswellincomparisontoitsinternational
counterparts.In2007,first-runoriginatedoutputaccountedfor49percentofallhours
broadcastbytheEuropeanPSBproviders,comparedto53percentintheUK.UKPSB
providersalsobroadcastthelowestpercentageofacquiredcontent(5percent,comparedto
theEUaverageof15percent)(Ofcom2008b).
Conclusion
Publicservicebroadcastingcontinuestoberelevantandvaluedbycitizens,asillustratedby
viewinghabits,opinionpolls,andresearchinto‘willingnesstopay’.Italsoformsan
importantpartofasuccessfulUKbroadcastingindustry,andcontributestothegrowthand
expansionoftheUKcreativeindustriesmorewidely.Thisisanimportantfactorthatwe
shouldbecarefulnottooverlook–particularlygiventheGovernment’scommitmentto
transformtheUKintoaleadingknowledgeeconomyandthecontinuedemphasisonthe
futureofourcreativeindustries.
ThevaluethatPSBdelivers–bothintermsofeconomicbenefitsandimprovedwell-being–
indicatethatPSBisnotjustaboutmarketfailure:italsoplaysacrucialroleinUKpubliclife.
Overthecomingsectionsweconsiderthestructuralchangesthreateningthecurrentbalance
oftheUK’sbroadcastindustry–changesthatareimmediateandarelikelytobesevere.
2.Technologicalchallenges
TheUK’smedialandscapehasseenrapidchangeoverthepastdecade.Innovationsin
technologyhaverevolutionisedthewaysinwhichpeopleaccess,consumeandindeedcreate
media.Themovefromanaloguetodigitalhasmeantthatcontentcanbedistributedmore
quickly,easilyandcheaplythananaloguematerial,andcanbestoredforafractionofthe
costwhiletakingupafractionofthespace.
ForPSBproviders,thedigitalplatformoffersbothanopportunityandathreat.Thebiggest
challengeistheendoftheanaloguecompact,inwhichbroadcastershavebeenoffered
discountedorfreeairwavespectruminexchangeforbroadcastingpublicservicecontent.The
switchtodigital,duetotakeplaceby2012,meansthatimplicitsubsidiesderivedfrom
spectrumallocationwillfalldramaticallyinvalue,andwillultimatelychallengetheeconomic
basisonwhichtheUK’sPSBecosystemrelies.
Thissectionprovidesabriefoverviewofhowdevelopmentsintechnologyhaveimpactedon
themediasystem,fromtheperspectiveofthemediaconsumer,anddescribesthe
environmentinwhichPSBprovidersmustnowoperateandsurvive.
WelookattheeconomicconsequencesofthesechangesinmoredetailinSection3,but
briefly,themainchangesrelatetonewopportunitiesforaudiencestochangebehaviourin
consumption,contentcreationandcommunication.ForthetraditionalPSBmodel,themost
importantoftheseisconsumptiontrends.
Changesinconsumptiontrends
Today’smedialandscapeisoneofvastchoice.Justover25yearsago,wesawthearrivalof
theUK’sfourthterrestrialtelevisionchannel,Channel4.Today,theadventofdigitalhasseen
thenumberofTVchannelsrockettomorethan400(Ofcom2008c).Take-upofmulti-
channeltelevisionhasincreasedrapidly:fiveyearsago,justoverhalf(54percent)ofUK
householdshadaccesstomulti-channeltelevision,butby2008thisproportionhadgrownto
nearlynineoutoftenhouseholds(88percent)(ibid).Radiostationshavealsoproliferated
hugely,withdigitalradioprovidingaccesstoagreaternumberofnichestations,while
internetradiooffersinstantaccesstostationsanywhereintheworld.
Meanwhile,internettake-uphasincreasedrapidlyoverthepastdecade.Nearlytwothirdsof
UKhouseholdshaveaccesstobroadbandinternet,andthisnumberissteadilygrowing.The
internetitselfprovidesavastrangeofcontent–fromthatprovidedbyexisting,traditional
mediaoutletstoblogsandotherformsofcontentgeneratedbyusersthemselves.Thescale
ofcontentandinformationishuge.TheblogsearchengineTechnoratiestimatesthatthere
arenowwellinexcessof100millionblogs,whilethevideo-sharingwebsiteYouTubereceives
around65,000videouploadsonadailybasis.
Whatimpacthasthislevelofchoicehadonpeople’sconsumptionhabits?Thegrowing
rangeofcompetingmediadoesnotseemtohaveimpactedontheamountoftimethat
peoplespendwatchingtelevision.DespitetherangeofDVDs,videogamesandinternet
optionsonoffer,televisionviewingperdayhasincreased.In2008,theaverageBritishviewer
watched26hours,18minutesoftelevisionperweek–anincreaseof48minutesfrom2007
(Thinkbox2009).
However,theproliferationofchannelshasmeantthatviewingpatternsarenowmorewidely
dispersed,andwhilethemainfiveterrestrialchannelscontinuetomakeupthebulkof
televisionviewing,theirshareofaudiencesisindecline(Ofcom2008c).In2002,these
channelsaccountedfor77.7percentofviewing,comparedto61percentin2007(Ofcom
2008c).
Theincreasedlevelofchoicehashadasignificantimpactonconsumptionofnewsand
currentaffairsprogramming.Whereasviewersinanaloguehomeswatchedatotalof135
hoursofnationalnewsonthefiveterrestrialchannelsin2006,multi-channelviewers
watchedonly77hours(Ofcom2007).Thelowestlevelsofconsumptionwereamongthe
16–24agegroup,membersofwhomwatchedonly33hoursin2006.
Theinternetandonlinepublicservicecontent
Theinternetasasourceofnewsandinformationisgrowinginsignificance.However,
terrestrialtelevisionremainsthemainsourceofnewsformostofthepopulation(65per
cent)(Ofcom2007).AnalysisbyOfcomsuggeststhattheinternetisseenasasourceof
supplementaryinformationratherthanaprimarysourceinitself(ibid).
Perhapsthebiggestindicatorofchangetocomeisthebehaviourofyoungeragegroups.
Utilisingincreasesinbandwidthandthepotentialofsuperfastbroadband,16–24yearolds
arebeginningtospendmoretimeonlinethanwatchingtelevision(EuropeanInteractive
AdvertisingAssociation[EIAA]2007).Asubstantialamountoftheiruseisdedicatedtotime
onsocialnetworkingsites.However,theinternetisincreasinglyseennotonlyasa
communicationtoolorarichsourceofinformation,butasapointofaccessforaudio-visual
content,includingtelevisionprogrammes.Reactingtothistrend,PSBprovidershavemade
considerableinvestmentinordertoprovidepublicservicecontent(PSC)online.
Publicservicecontentonline–currentprovision
Wenowcometoconsiderpublicservicecontentanditsimportanceintheonlineworld,
lookingatthescaleavailableasameasureoffinancialinvestment,andtheextenttowhich
BritishaudiencesaccessandconsumePSC.
AspartofitssecondreviewofPSB,Ofcomcommissionedtworeportsassessingfirst,the
availabilityofPSConline(MTM2008a)andsecond,thelevelofeconomicinvestmentinPSC
online(MTM2008b).ThesetworeportscoveredalltypesofPSC,includingcontentthatmet
publicservice-typeprinciplesbutmayhavebeenprovidedbycommercialoperators,
individualcitizensornon-governmentalorganisations,artorganisationsandcharities,and
governmentorotherproviders–inadditiontothatprovidedbythepublicservice
broadcastersthemselves.
Theonlineavailabilityreport(MTM2008a)foundthatthereweresignificantlevelsof
informationandcontentaccessibleunderthebroadPSBcategories,including:
•information,search,andreference
•newsandcomment
•businessandcommerce
•entertainmentandlifestyle
•health
•scienceandtechnology
•politicsandgovernment.
However,farlesscontentandinformationwasavailableinotherareas,suchas:
•arts,cultureandheritage
•children
•teens
•communityandsocialaction
•learningandeducation.
Ultimately,becausetherearenodirectoriesofonlinecontent,andbecausethescaleof
contentissovastandchangingsorapidly,itisverydifficulttodetermineonceandforall
howmuchpublicservicecontentisoutthere.Itiseasiertodeterminethescaleofcontent
providedbytraditionalpublicserviceprovidersandtheextenttowhichthisremainsacentral
componentofBritishinternetusers’consumption.
Meanwhile,Ofcom’sfinancialanalysisreport(MTM2008b)showedthatanumberof
differentbodiesweremakingsignificantinvestmentinPSConline.Itidentifiedthefollowing
levelsofinvestmentduringthe2006/7period:
•CentralgovernmentspendingonPSCintheregionof£70–£90million Thelargest
proportionofthiswasonthegovernmentonlineinformationserviceDirectGov,but
thisfigurealsoincludesinvestmentbygovernmentdepartmentssuchastheformer
DepartmentforEducationandSkillsontheteacher.netwebsite.
•OnlinenewssectorannualspendingonPSCintheregionof£200million This
includednewspapersandothermajoronlinenewsproviders,suchasSky.
•PublicservicebroadcasterannualspendingonPSCestimatedat£170million This
wasthesecond-largestsegment.In2006/07theBBCspent£116millionon
bbc.co.ukandafurther£37.7milliononBBCJam.
•Thirdsectorinvestmentof£60–80milliononPSConlineThisincorporated
registeredandunregisteredcharities,andvoluntaryandcommunityorganisations.
•Localanddevolvedgovernmentinvestedintheregionof£45–55million This
estimatewasbasedonananalysisofICTandeGovernmentspendingonPSConline.
•Theeducationcategoryspentonly£6–7million Thisincorporatedexpenditureon
learningresourcesnotcapturedinothercategoriessuchasgovernmentandPSB
providers.
Fromscheduledtoon-demandviewing
Oneofthemostsignificantimpactsoftheinternetonconsumptionofaudio-visualmedia
hasbeentheshiftfromlinear,scheduledviewingtoon-demandaccess.Theinternetisa
‘pull’technology,wheremediaconsumersrequestcontentbyaccessingcertainwebsitesor
downloadingcertaincontent.Thisisinstarkcontrasttobroadcast,whichisa‘push’
technology:itdeliverscontenttotheviewerwithouttheviewerhavingtospecifically
requestit.
Thestorageanddistributionpotentialofdigitalcontenthasledtoinnovationsthatallow
viewerstomoreeasily‘time-shift’content–thatis,towatchitwhentheywant,ratherthan
whenthescheduledictates.NewservicessuchasBT’sInternetProtocolTelevision(IPTV)
serviceBTVisionandVirginMedia’son-demandserviceenabletelevisionviewerstorequest
contentanddownloadittotheirtelevision,inordertoviewitatatimeoftheirchoosing.
Personalvideorecorders(PVRs)haveenabledviewerstocreatetheirowntelevision
schedules,time-shiftingprogrammestostartanythingfromafewminutestoseveraldays
aftertheoriginalbroadcasttime.ViewerscanalsoautomaticallystoreentireseriesonPVR
harddisks,inordertoviewthewholeseriesfromstarttofinishinonesitting,overa
weekendorwhenevertheychoose,ratherthanwaitingforthetypicalweeklyinstalment.
Theycanalsoskiporfast-forwardadvertisementsoncommercialchannels–somethingthat
hasbeenofsignificantconcernintermsoftheeconomicsofcommercialtelevision.
Withinthewiderculturalcontext,themainchallengeofon-demandhasbeencouchedin
termsofadecliningpowerofthetraditionalbroadcasterandthetraditionalbroadcastbrand.
Previously,PSBprovidersinparticularbroughtpeopletogether,toviewthesameprogramme
atthesametime.Thissolidifiedtheirpositionbothintermsofindividualhouseholdsand
families,andintermsofnationalimportance.Thelatterhasbeenparticularlytruewhere
channelssuchastheBBChavebroughtpeopletogetherovereventsofnationalimportance,
suchastheQueen’sCoronation,majorsportingevents,thefirstlandingonthemoon,and
Christmastelevision.
Inrecognitionofitscentralimportanceindomesticlife,televisionhastypicallybeen
scheduledaroundthefamily.Forexample,thewatershed,setat9pm,servestodrawan
explicitdistinctionbetweenthe‘familyviewing’content(whichusuallytakesplacebetween
5.30pmand9pm)andtheadulttelevisionworldthatfollows.Inthisway,ithasbeenargued,
televisionschedulingunderpinnedsociety’sexpectationsofbehaviour(forexample,
expectingchildrentobeinbedby9pm),andhelpedtoprovideasenseoforderand
continuityinindividuals’lives(Silverstone1994).
Today’stechnologicaladvancesarethreateningtheimportanceofschedule,andalongside
this,itisoftenspeculated,thepoweroftelevision‘brands’.However,inreality,theimpact
maynotbeassevereassomehavepredicted.Forexample,researchintouseofPVRs
(Barwise2005)hasshownthatconsumerstendtousethemtoshiftprogrammesbyaslittle
astenminutes,andprimarilyinordertofast-forwardadvertisementsratherthantodiscard
thescheduleentirely.(Ofcourse,thisstillcreatessignificantproblemswheretheeconomics
oftelevisionbroadcastingisconcerned–anissuethatweaddressinSection3.)
Moreover,PSBprovidershavebeguntoadapttothisculturalshift.Themostsuccessful
examplesofPSConlineprovidedbyPSBprovidershavebeenthosethatenableviewersto
accesscontenton-demand,suchastheBBC’siPlayerand4oDfromChannel4.Useofthese
servicesisgrowingrapidly:inDecember2008,viewersaccessedBBCprogrammesviaiPlayer
arecord41milliontimes.Meanwhile,Channel4’son-demandserviceisparticularlypopular
amongyoungeragegroups.Oneinsixviewersofthetelevisionshow‘Skins’watchedthe
programmeonline.
Conclusion
Thespeedandscaleofthetechnologicalchangesinthemediaoverthepastfewdecades
hasbeendramatic.Thesechangeshavecausedrapidchangewithinthewidertechnological
andculturalcontexts,suchasallowingviewerstodefinetheirowntelevisionscheduleand
accesscontentonthemoveonmobiledevices,resultinginimmensechallengesforPSB
providers.
Nevertheless,inthemain,PSBprovidershavereactedproactivelytothesechanges,and
havesoughttoremainrelevantinanincreasinglyonline,on-demandworld.TraditionalPSB
providershavemadesignificantinvestmentinPSConlineand,despitethehugescaleof
competition,televisioncontentproducedbyPSBproviderscontinuestobeaccessedand
consumedinonlineenvironmentsthroughinnovationssuchasiPlayerand4oD.
Continuedinvestment,innovationandavailabilityislikelytoremainimportant.PSConline
originatingfromawidevarietyofinternationalsourceshasbeenshowntomeetOfcom’s
principles1and2ofpublicservicedescribedinSection1(inotherwords,informingand
stimulatinginterest).However,significantlylesscontentappearstomeetprinciples3and4
(strengtheningculturalidentityandraisingawarenessofdifferentculturesandviewpoints).
Thisisimportant,andechoesalong-heldconcernthatthehighlevelsofpersonalisationand
choiceaffordedbytheInternetwillleadusinto‘discursiveghettos’.
Aswesawintheprevioussection,UKviewersplaceconsiderableimportanceoncontinued
sharedexperiences,andonreversingtrendsoffragmentationwithinsociety.Eveninournew
technologicalenvironment,traditionalPSB-typecontenthasavalueandrationale,andis
essentialtoUKcitizens.
Inthenextsection,welookatthefinancialchallengesthatarecurrentlymountingandcould
actasabarriertomaintaininglevelsofpublicservice–inbothonandofflineenvironments.
3.Financialchallenges
Intheprevioussection,wediscussedtheimpactoftechnologicalchangesonculturalfactors,
suchasthewayweaccess,consumeandsharemediaandthewaysinwhichwecommunicate
witheachother.Weconcludedthat,despitethesechanges,PSBcontinuestoberelevantand
importanttoUKcitizens.Butshiftingconsumerbehaviourisnottheonlychallengefacedby
PSBproviders.Technologicaladvanceshaveresultedinmassivechangestotheeconomicbasis
andbusinessmodelsoftelevision,presentingnewdifficultiesinfindingfunding.
ThissectionbrieflyoutlinesthefundingchallengescurrentlyfacedbyPSBprovidersinthe
UK.Itsetstheseoutwithinthewidereconomiccontext,consideringtheimpactandfurther
pressurescreatedbythecurrentrecession.Itthengoesontoconsiderwhichelementsofthe
mediaindustryareseeinggrowth(orthepotentialforgrowth),lookingatinfrastructureand
subscriptionservices,andcontentservices.Finally,itconsiderswhattheshiftsinrevenue
meanforpublicservicecontent–particularlycontentoriginatedintheUK.
Fundingsources
PSB,andthemassivefinancialinterventioninthemarketthatthisrepresents,haslongbeen
justifiedonthegroundsofmarketfailure.Inotherwords,withoutspecialdirectionand
fundingtodoso,itisnotthoughtthatcommercialcompanieswouldinvestinPSBcontent.
Thisisparticularlythecasesincethistypeofcontent(forexample,home-produceddrama,
children’stelevision,in-depthbroadcastnationalandregionalnewsandcurrentaffairs
programming)isoftenexpensivetoproduce.
Table3.1showsthelevelofpublicinterventionstosubsidisePSBcontentstartingin
2003/04andlookingforwardto2012/13.Providingaccuratefiguresforthelevelsof
interventionisnotoriouslydifficult.Thisisbecauseoftheimplicitnatureofsomeofthe
funding,thelackofclearalternativescenariosagainstwhichtotestitsvalue,andlimitsto
theavailabledata.
Themainsourcesoffundingarethelicencefeeandgiftedspectrum,thatisairwave
spectrumprovidedfreetobroadcastersinexchangeforthemmeetingcertainpublicservice
objectives(thelatterbeingmeasuredintermsofopportunitycosts).Opportunitycostsare
particularlydifficulttoestimate.Theyarebasedonlostadvertisingrevenuethatcouldhave
beengainedhadthebroadcastershownaprogrammethatwasmorecommerciallyattractive
(intermsofaudienceandadvertising)instead.Forsomegenres,theopportunitycostis
particularlyacute,andgrowing.Forexample,asaudiencelevelsfornewsandcurrentaffairs
programmesdecline,theopportunitycostsoftheseprogrammesshownduringprimetime
growconsiderably.
Table3.1:Levelsofpublicinterventionstosubsidisepublicservicebroadcasting
Institution 2003/04 2007/08 2012/13
BBC(televisionandonline) 2,700 2,865 3,010
S4C/GMS 105 110 110
ITVplc 280 140 45
Channel4 175 175 80
Five 40 50 50
Otherlicensees 25 25 10
Total 3,325 3,365 3,305
CommercialPSBproviders 520 390 185
Source:Ofcomestimates,BBCannualreports,financialdatafrombroadcasters
Note:Allfiguresinreal2007£million.BBCdataforfinancialyears2003/4,2007/8,2012/13;
othersfor2003,2008and2013respectively
ThemostimportantstatisticshowninTable3.1isthedeclineinvalueofimplicitsubsidies
forthecommercialPSBproviders–from520in2003/4to185in2012/13.Thisrepresentsa
declineinthevalueofpublicsubsidiesof£335millionsincetheintroductionofthe
CommunicationsActin2003.Ifnothingchangesinthisscenario,theBBCwillreceive90per
centofallpublicsubsidies,upfrom80percentin2003(Ofcom2008).Thissituationwilldo
littletopreservethepluralitythattheUKpublicsohighlyvalues.
Ofcomestimatesthatinorderforthesamelevelofpublicservicecontentavailabletodayto
beprovidedby2012,publicfundingofbetween£330and£420millionwillbenecessary.
Existingregulatoryassetsarepredictedtocontribute£185million,asoutlinedabove.This
leavesafundinggapofbetween£145millionand£235million(Ofcom2008).
Thisestimateisbasedonanassessmentofthreefactors(Ofcom2008):
•ThelevelofinvestmentcommercialPSBproviderswouldbelikelytomakeinarange
ofdifferenttypesofprogramminginthefuture,basedontheirrelativeprofitability
•Theamountofcontentthataudiencesarelikelytowantinthefuture,assumingthat
currentdemanddoesnotchange
•Whetherthewidermarketislikelytomakeagreaterorlessercontributiontoeach
typeofcontentinthefuture.
Ascompetitionforadvertisingrevenueincrease,dramaticdeclinesinprofitabilityare
expectedformanygenres.Inthefirstquarterof2009,advertisingrevenuesoncommercial
televisionarepredictedtoexperiencea17percentfall(Sweney2009).Forexample,in
2007,GooglesurpassedITV1’sadvertisingrevenueforthefirsttime,andwiththegrowing
recession,theoutlookforITVisnotgood.Theadvertisingslowdownhasalreadyhada
significantimpactonjobsandprogrammingatthebroadcaster,withseveralbroadcasts
delayedandfurtherjobcutspredictedoverthenextfewmonths.Themanagingdirectorof
ITVbrandandcommercialhasannouncedthatthebroadcasteris‘scrappingforitslife’(cited
inHolmwood2009).
Thewidereconomiccontext
TheUK’smediaindustrycouldnotbeexpectedtobeimmunetothewidereconomicclimate
inwhichitexists.TheUKeconomyispredictedtoshrinkbyupto4percentoverthe
comingyear.Advertisingrevenueshavealreadyfallenintodecline,andarepredictedto
shrinkfurtherovertheperiodoftheeconomicdownturn.Advertisingrevenueisstrongly
correlatedtoGDPgrowth,andastheUKmovesintoarecession,thisisbadnewsnotjust
forPSBproviders,butalsoformanycommercialmediaproviders(Deloitte2009).
Forexample,newspapershavealreadybeguntomakesignificantcutbacks,including
sheddingstaffasthecombinationofdecliningadvertisingrevenueandtechnologicalchange
(withmanynowaccessingnewsonline)hithome.Atarecenteventtodiscussthefutureof
newspapers,EmilyBell,contentdirectorofGuardianDigital,stated:
‘WecouldbeonthebrinkoftwoyearsofcarnageforWesternmedia.Inthe
UK,fivenationalscouldgooutofbusiness,andwecouldbeleftwithnoUK-
ownedbroadcasteroutsideoftheBBC.Wearefacingcompletemarketfailure
inlocalpapersandregionalradio.Thisisasystematiccollapse–notjusta
cyclicaldownturn.Eventhesurvivingbrandswillgothroughaperiodof
unprofitability.’(citedinBeckett2008)
EvenmediamogulRupertMurdochhasinstructedNewsCorporationandthenewspapersin
theNewsInternationalstabletopreparefora‘leanyear’in2009(citedinSweney2008b).
ThisisnotasituationpeculiartotheUK.TheUShasexperiencedsimilarcasualties,with
newspapergiantTribune(owneroftheLosAngelesTimes,ChicagoTribune andBaltimore
Sun,amongothers)filingforbankruptcyinDecember2008,theMinneapolisStarTribune
followingsuitinJanuary2009,andsignificantjoblossesformediafirmBloombergin
February2009.Meanwhile,inFrance,PresidentSarkozyhasannouncedfinancialstateaid
forthenewspaperindustry,includingtaxbreaksfordeliveryanddoublingthevalueof
governmentadvertisinginordertohelptheindustrythroughtherecession.
Whilethedifficultiesfacedbyotherpartsofthemediaindustrydonothaveadirectimpact
onPSB,theynonethelessmassivelychangethecontextinwhichthediscussionregarding
futurefundingtakesplace.Theformerassumptionthatmarketfailureislikelytoreducewith
theadvanceofdigitaltechnologiesisincreasinglydiscounted.Inanycase,therehavelong
beenconcernsaboutinvestmentinareassuchasnews.Whilemanyhavepreviouslyheralded
thepotentialoftheinternettoprovidenewscontent,researchhasshownthatprimary
sourcesofnewsandnewsgatheringremainlimitedtoafewlargeplayers:itisopinion,rather
thanfacts,thathavemultipliedinthedigitalage(Davies2008).
Asothersourcesofpublicservicecontentcomeunderincreasingpressure,andcertain
genresbecomemorecostlyandcommerciallyattractive,PSB–andinparticular,pluralityin
PSBprovision–islikelytobecomemoreimportanttocitizens,notlessso.
Mediarevenues
Alongsidetheeconomicdifficultiescurrentlybeingexperiencedacrossthemedia,there
continuestobemoneyinthemediasystem.However,withchangingconsumerhabitsand
businessmodels,incomeisshiftingfromtraditionalmediacompaniestonewentrants,due
toanumberoftrends:
•Advertisingincomeisshiftingfromtraditionalterrestrialbroadcasttelevisiontodigital
andonlineservices.
•Theeconomicsofonlineadvertisingarevastlydifferenttotelevisionadvertising–
particularlyinthatonlineadvertisingissubstantiallycheaper.
•Emergingbusinessmodelshaveresultedinpeopleincreasinglypayingforsubscription
services,suchaspayTV,voiceanddataservicesonmobilephones,andinternet
services–especiallybroadband.
Wenowlookatthesetrendsinmoredetail.
Shiftsfromterrestrialtodigitalandonlineservices
Ofcom’sanalysissuggeststhatstructuralchangesaredrivingadvertisingtowardsdigital
media.Itestimatesthatoverall,thecompoundannualgrowthrateforalladvertising
between2008and2020willbe0.6percent,withtelevisionadvertisingdecliningby0.8per
centandresponseadvertising(advertisingtargetedaccordingtousers’selections)growing
by1.2percent(Ofcom2009).
Theriseininternetadvertisingspendisawell-documentedphenomenon,withmost
attentionfocusedonthecompetingincomesofsearchgiantGoogleandITVasaindication
oftherapidlychangingtimes.In2002,Googleearned£77millioninUKadvertising,while
GranadaandCarltonearnedacombined£1.5billion.In2007,Google’sUKadvertising
revenues(of£1.3billion)outstrippedITVplc’snetadvertisingrevenuefromitsITV1licences
(£1.2billion)(Ofcom2008).Inthecontextofthecurrentrecession,Google’sprofitsare
slowingbutnonethelesssignificant,withprofitsof£275millionrecordedforthefinalquarter
of2008.
Asaresultoftheanticipatedpotentialofonlineadvertising,someexistingcompanies,eager
tomaintainastakeasrevenuesshifted,purchasedsomeemergingpopularinternetservices
forveryhighfigures.NewsInternationalspentUS$580milliononMySpacein2005,while
GooglepurchasedYouTubeforUS$1.65billionin2006.Microsoftpaidout£117millionfora
1.6percentstakeinFacebookjustoverayearlater.
Sincepeopledonotpaytousetheseservices,theirvalueislargelydeterminedbytheir
popularityandthewiderpotentialtoconvertinvestmentintoadvertisingrevenue.However,
speculationbyplayerssuchasNewsInternationalonthepopularityofthesesiteshasnot
beenprovedwrong.MySpacehasinexcessof150millionusers,andisparticularlypopular
amongyoungeragegroupsandformusicservices.In2007,YouTubewasthethirdmost
popularsitegloballyintermsofminutesspentonthesite.IntheUS,12.6billionvideos
werewatchedduringSeptember2008,whileintheUK55percentofinternetuserswatched
avideocliponline.Facebookisthefifthmostpopularsiteintermsofglobalminutes,and
hasover120millionactiveusers(Meeker2008).Thereismuchspeculationastothelong-
termpotentialforadvertisingrevenueofsomeinternetservices–inparticularsocial
networkingsites.
Cheaperonlineadvertising
Onlineadvertisingiscomparativelycheaperthanotherformsofadvertising,suchasprintor
broadcast.Becauseoftheexpansivenatureoftheinternet,thesupplyofadvertisingspace
caneasilyexceedthedemandforadvertising.Thecostbothofbanneradsandrich-media
advertshavefallenasthenumberofimpressionsincreases(Meeker2008).
Thedifferenteconomicsatplayhaveprovedproblematicbothforbroadcastersseekingto
makecontentavailableandcommerciallyviableonline,andfornewspapers,whichareseeing
significantgrowthinonlineusageatthesametimethatprintsalesfallintosharpdecline.
Fornewspapers,printcirculationhasanestimated10percentofthepotentialreachof
online,whileonlineadvertisingrevenuecontributesabout10percentoftotaladvertising
revenue(Karp2007).
Meanwhile,thesuccessofsomeon-demandserviceshasbeenmutedforcommercialPSB
providersbecausetheamountofadvertisingrevenuethatcanbegainedissignificantlyless.
Channel4,forexample,showedjustthreeminutesofadvertisingduringanonlineversionof
theprogramme‘Skins’;ondigitaltelevision,thechannelshowsnineminutesofadvertising
inthesameperiod(onehour)(Sabbagh2009).Itisgenerallyconsideredthatonlineviewers
arelesstolerantofadvertisingthantelevisionviewers.
Thisaside,thereisspeculationthatultimately,advertisingwillfolloweyeballs,andgradually
onlineadvertisingrevenuewillincreaserapidly,attheexpenseofprintandtelevision.This
may,however,dependoncompaniesdevelopingmoretargetedadvertisingtechniques,
collectinggreaterdataabouttheirusers,andpushingmessagestothemonthisbasis.Social
networkingsitesandservicessuchasGoogle’sGmailemailservicewillhaveadefinite
advantageinthisregard.
Infrastructureandsubscriptions
Anothertrendinmediarevenueisthatincomeisincreasinglygeneratedthroughsubscription
services.IntheUK,thetwomajorpayTVoperatorsareBSkyBandVirginMedia.Despitethe
economicdownturn,BSkyBcontinuestoseecustomergrowth.Theseresultsarepartially
attributedtothesuccessandpopularityoftheSky+digitalrecorder.Atthetimeofwriting,
thecostofabasicSkypackage(includingbroadbandandvoicetelephonyservices)is
£16.50permonth.Themostexpensivepackageis£55.75permonth.Addedtothis,Sky
earnsfurtherrevenuethroughtheSkyBoxOfficeservice,whichenablesviewerstopayto
watchpremiummoviesondemand.
Meanwhile,VirginMediaoffersarangeofpackagesincludingtelephony,broadband
(includingfibreopticbroadband)andtelevision,rangingfrom£5to£38permonthfora
bundlethatincludesfreeUKcalls,fibre-opticbroadbandupto20Mbandaccessto165
digitalchannels.
Thepopularityofmobilebroadbandisalsogrowingrapidly.In2006,5millionmobile
internetmodemsweresold.Thevalueofmobilebroadbandisexpectedtorisetoinexcessof
£68millionby2012.WiththeintroductionoftheAppleiPhone,Google’sG1phone,the
BlackberryStormandNokiaN97overthepastyear,mobilebroadbandtake-uphas
escalatedrapidlyintheUK.Thisispredictedtobeanareaofsignificantgrowthintheyears
tocome.InJapan,mobilebroadbandusenearlymatchesthatofPCinternetuse.
Itistheseservicesthatarepredictedtobebestplacedtoseeouttherecession,sincetheir
revenuecomesfromsubscriptionsratherthanadvertising(ErnstandYoung2009).
Notwithstandingthecurrenteconomicclimate,analystshaveidentifiedmobilebroadband
andsuperfastbroadbandasareaslikelytoexperiencesignificantgrowthinusersandincome
overthenextfewyears(Meeker2008).
So,amidsuchrapidtechnologicalchangeandevolution,somecommercialentitiesare
continuingtogainprofitfromthemediasector.Thesecompaniesare,ofcourse,providing
servicesthatcustomersvalueanddesire–theywouldnotbesuccessfuliftheydidnot.But
theirsuccessalsodependsonfactorsotherthansimplycommercialinvestmentand
exploitationofthemarket.Inordertosurvive,contentservices–whichiswhat,atavery
basiclevel,thesecompaniesareselling–needcontent.Thereisacomplexinterplaybetween
investmentinpublicservicecontentandthoseservicesoperatingoutsidethepublicservice
system.Itistothisinterplaythatwenowturn.
InvestmentinUK-originatedproductions
IntheUK,publicservicechannelsaccountformorethan90percentofallspendingon
originalUKtelevisionprogramming.AsidefromSky(throughSkyNewsandtheArts
Channel),theDiscoveryNetworkandthesocialnetworkingsiteBebo(whichhasmadea
smallinvestmentinoriginalcontent),themajorityofcommercialmediaplayersintheUK
investlittleifanythinginoriginalUKcontent.
However,overfourfifthsofrespondentstotheOfcomsurveyagreedthat‘itisimportantfor
themaintelevisionchannelstoprovideprogrammesthataremadeintheUKandreflectlife
intheUK’(Ofcom2009).Inaddition,thesuccessstoriesofthedigitalmediaworld
undoubtedlygainvaluefrompublicservicecontent.
Forinstance,bothYouTubeandGoogleVideoprovideaccesstopublicservicecontent,
createdandinvestedinbypublicserviceproviders.AquicksearchofYouTubeUKreveals
thatoriginalprogrammessuchas‘MidsomerMurders’(ITV),‘TrialandRetribution’(ITV),
‘LarkRisetoCandleford’(BBC1),‘Wallander’(BBC1),‘Skins’(Channel4)andthe‘ITCrowd’
(Channel4)canbeseeninfullonYouTubeortheGooglevideoservice.
Equally,ahugesellingpointofsuperfastormobilebroadbandisthe‘anytime,anywhere’
accesstoone’sfavouritemusic,filmsandtelevisionprogrammes.Inthiscontext,theriseof
copyrightinfringementhasbeenthesubjectofhugedebateoverthepastfewyears,andis
likelytocontinueintothefuture.Leavingthisthornyissuetooneside,itremainsafactthat
contentproducedasaresultofinvestmentbyPSBproviders(alongsideotheraudio-visual
content,ofcourse)isastrongandattractivereasonforpeopletopayforbroadband
subscriptionservices,whethermobileorfixed.
Forexample,whileVirginTV’scablecustomerswatchedmorethan500millionitemsof
broadbandcontentlastyear,theBBC’siPlayeraccountedforalmost20percentof
programmeswatched(Sweney2009c).
Elsewhere,theBBCiPlayer,availableonseveralsmartphonesincludingtheiPhoneandthe
NokiaN97,hasbeenattributedwithboostingthesuccessofmobiletelevisionanddriving
uptake.BBCwebsitesarethemostvisitedafterGooglebyBritain’s5.7millionsmartphone
users(Khan2009).
Despitethepromiseofuser-generatedcontent,mostmediaconsumerscontinuetovalue
‘quality’,andthereforeexpensive,productions(Deloitte2009).User-generatedcontent
clearlyhasaroletoplayinadigitalmediaage–itcanempowerpeople,givecitizensspace
tohavetheirsay,andencourageandstimulatecreativity–butitisneverlikelytoreplacea
demandforqualitydrama,comedy,newsandcurrentaffairs.
Conclusion
TheeconomicchallengesfacingtheUKmediaindustryshouldnotunderplayed.Theyresult
inpartfromthecurrenteconomicclimate,butarealsoduetoanumberofsector-specific
factors,includingtechnologicalandbehaviouralchange.The‘multiplier’effectofallthese
factorscombinedmeansthatmanyplayerswithinthemediaindustryfaceextremely
challengingtimesintheyearstocome.
Certainelementsofthemediaindustrycontinuetogainrevenue,buttheincreasein
spendingonsubscriptionservicesisunlikelytohelpfree-to-airpublicservicecontent.
ThechallengesfacingPSBareacute,andshouldnotbeconsideredinisolationfromthe
trendsaffectingtherestoftheindustry.Adeclineincontentinvestmentacrosstheboardis
likelytomeanthatPSB–inparticular,apluralityofPSBprovision–willbecomemore,not
less,important.
Clearly,difficultdecisionsneedtobemadetoensurethatlevelsofpublicserviceare
maintainedandtheUK’smediacontinuestomeettheneedsanddesiresofUKcitizens.In
thefollowingsection,weoutlinethepolicycontextwithinwhichoptionsarebeingproposed,
andwithinwhichdecisionswillultimatelybetaken.Wethengoontohighlightthepotential
ofoneparticularsolution–industrylevies–asamechanismfortransferringincomefrom
somericherpartsofthemediaintofundingpublicservicecontentthatbenefitseveryone–
commercialplayers,PSBproviders,citizensandsocietyasawhole.
4.Thecurrentpolicycontext
PSBhasbeenthefocusofsignificantattentionoverthepastyearwithpolicyreviewstaking
placeinGovernment(BERR2009)andOfcom(2009).Thissectionbrieflysummarisesthese
andprovidesarecenthistoricalcontexttosetoutthepolicycontextwithinwhichdecisions
aboutthefutureofPSBarebeingmootedandwillbetaken.
Itfocusesonfourkeydocuments:
•TheCommunicationsAct2003
•Ofcom’sfirstreviewofpublicservicebroadcasting(Ofcom2004)
•Ofcom’ssecondreviewofpublicservicebroadcasting(Ofcom2009)
•TheDigitalBritainreview(BERR2009)
Eachoftheseisdescribedbelow.
TheCommunicationsAct2003
In2003,theCommunicationsActestablishedaconvergedregulatorforaconvergingmedia
market,intheformoftheOfficeofCommunications(Ofcom).Thisbodybroughttogether
thefivepre-existingregulators–Oftel,theRadiocommunicationsAgency,theRadio
Authority,theIndependentTelevisionCommission(ITC),andtheBroadcastingStandards
Commission(BSC).
TheCommunicationsActsetoutaframeworkforcontinuedpublicinterventioninorderto
preservePSBinachangingtechnologicalenvironment,anddefinedwhattypesof
programmesshouldcontinuetobeproduced.Itmadesomemovestostrengthencommercial
broadcasters,byderegulatingownershiprestrictionsandreducingcontentregulation.
However,itstatedthatallterrestrialbroadcasterscontinuedtobetiedtostructuralsupport
fortheUKproductionsectorintermsofquotasforUKoriginalproduction,regional
productionandindependentproduction.
TheActalsosetoutOfcom’sdutiesinrelationtoPSB,providingtheregulatorwithtwo
statutoryobjectives:
•Toreviewhowwelltheexistingpublicservicebroadcastersaremeetingthepurposes
ofPSB
•Tomakerecommendationstomaintainandstrengthenthequalityofpublicservice
broadcastingintheUK.
Ofcom’sreviewsofpublicservicebroadcasting
Inordertomeetthestatutoryobjectivessetoutabove,Ofcomhasundertakentworeviews
ofPSBsincetheCommunicationsActcameintoforce,asdescribedbelow.
Thefirstreview
Thefirstreviewtookplacein2004,andlaunchedaseriesofconsultationsseekingtodefine
theprinciplesofPSB,fromwhichthefourprinciplesmentionedinSection1emerged.This
firstreviewmademanyargumentsthatarestillconsideredpertinenttoday:
•ThatterrestrialPSBwasunlikelytosurvivedigitalswitchover,asthevalueoflicences
forITVandFivedeclineandthefundingmodelforChannel4becameincreasingly
threatened
•Thatwithoutaction,theBBCwaslikelytobecomethesoleproviderofPSB
•ThatinnovationinthePSBsectorwaslacking–particularlywhenlookingathow
terrestrialchannelshadrespondedtotechnologicalchanges.
Oneofitskeyproposalswastheideaofa‘publicservicepublisher’:afundthatcouldbe
distributedtocreatorsofpublicservicecontentonlinetoprovidecompetitiontotheBBC
andspurinnovationinonlineenvironments(Ofcom2007b).
Thesecondreview
Ofcomisobligedtoundertakearevieweveryfiveyears,butitbroughtforwardthetimingof
itssecondreviewbyayear,inresponsetotherapidnatureofchangewithinthemedia
landscape.Assuch,thissecondreviewtookplaceagainstabackdropofgrowingurgency.
Duringthereviewprocess,ITVthreatenedtosurrenderitsterrestriallicenceearly,ina
campaigntohaveitspublicserviceobligationsreduced,whileChannel4madeincreasingly
alarmingpredictionsregardingitsfuture.
Inphase1ofthesecondreview,Ofcomoutlinedfourdifferentmodelsofapublicservice
landscape,asfollows:
•Model1 –Maintainingthestatusquo(withdecliningpublicserviceresponsibilities
forcommercialPSBprovidersoradditionalfundingtosupportthosewhichremain
highpublicpriorities)
•Model2 –RelyingsolelyontheBBC
•Model3 –TheBBCandChannel4actingasthemainprovidersofPSB,withlimited
fundingavailableforotherservicesdeliveredbyalternativeproviders
•Model4 –AreducedBBC,withcontestablefundingforallotherpublicservice
provision.
Thefirstofthesefourmodels,elsewherelabelled‘evolution’,gainedmostsupportfrom
responsestotheconsultation.However,thisoptionwouldrequirebridgingasignificant
fundinggaptomaintaincurrentlevelsofPSBprovision.Ofcom’sreviewoutlinedthe
followingfouroptionsforfunding:
•Directpublicfunding,includingdirecttaxation
•Openinguplicence-feefundingorBBCassetstootherproviders(oftenreferredtoas
‘top-slicing’)
•Regulatoryassets,includingprivilegedaccesstospectrumandincreasedadvertising
minutage
•Industrylevies.
Duringthereviewprocess,theBBCputforwarditsownproposals,whichincludedsharing
technologysuchasiPlayerandpremisesfortheproductionofregionalnews,andwaiving
thefeesitcurrentlychargesforpublishingtelevisionlistings–proposalsthatitestimated
couldbeworthupto£120million(BBC2008).TheseproposalswerebackedbyITV,which
was,atthetimeofwriting,intheprocessofdrawingupaprovisionalagreementwiththe
BBCdesignedtomakeregionalnews‘muchmorecost-efficient’(McNally2009).The
proposalswerealsocautiouslywelcomebyChannel4.However,itisunlikelythattheyalone
wouldbesufficienttobridgethefundinggapandprovidethefundsrequiredforcontinued
provisionofPSBatcurrentlevels.
OfcomconcludeditssecondreviewwiththepublicationofPhase3:Puttingtheviewerfirst
(Ofcom2009).Themainrecommendationsandfindingstoemergefromthiscanbe
summarisedasfollows:
•TheBBCshouldremainthecornerstoneofpublicservicebroadcastingintheUK,and
shouldtakeonaroleofpioneeringthedevelopmentandtake-upofcontentacross
newplatforms.
•Theideaof‘top-slicing’theBBC’sfundingforprogrammesandservicesshouldnot
bepursued.However,thelicencefeeswitchoversurplus,allocatedtotheBBCtodrive
forwardtheprocessofdigitaltake-upandswitchover,continuestobeacredible
optionforbridgingthefundinggap.
•Toensureplurality,asecondorganisationshouldbeestablishedalongsidetheBBC.
Thisorganisationshouldhaveasustainableeconomicmodelandwithastrongpublic
serviceroleembeddedatitscore,andshouldbebasedonpartnerships,jointventures
orevenmergersbetweenChannel4andotherorganisationssuchasBBCWorldwide
orFive.
•ThereshouldbeanimmediatereductioninpublicserviceobligationsforITVbut,
goingforward,commerciallyownednetworksshouldretainamodestbutimportant
publicservicecommitment.
Thereviewprocessisnowcomplete,butOfcomstillhassubstantialfurtherworktotake
forward,including:
•FurtheranalysisoftheproposalsputforwardbytheBBCtoshareinfrastructureand
expertiseinordertobridgethefundinggap(so-called‘partnershipproposals’)
•ImmediateconsiderationsregardingexactlywhereandbywhatextentITV’slicence
obligationswillbereduced
•FurtherexplorationofthesuggestedpartnershipmodelsinvolvingChannel4.
Ofcom’sreviewprocesswascomplicatedbythefactthatagovernmentreview,Digital
Britain,ransimultaneouslytoitsfinalstages,anditsinterimreportalsomade
recommendationsforthefutureofPSB,describedbelow.
TheDigitalBritainreview
TheDigitalBritainreviewwassetupbytheUKGovernmentinlate2008andsponsoredby
theDepartmentforCulture,MediaandSport(DCMS)andtheDepartmentforBusiness,
EnterpriseandRegulatoryReform(BERR).ItisheadedbyformerchairofOfcom,Lord
Carter.
Itsoriginalremitincludedevaluatingtheimpactofdigitalisationandthenewtechnologies
onpublicservicebroadcastingassetsandpublicservicelicences,bothintheUKasawhole,
andinthenationsandregions.Thiswouldbecarriedoutalongsideavastrangeofother
activities,includingexaminingoptionsformaximisingparticipationandlevelsofbroadband
serviceacrosstheUK,internetsafetyandmedialiteracy,andintellectualpropertyandthe
problemofpiracyonline.
AninterimreportwaspublishedinlateJanuary2009,shortlyafterthepublicationof
Ofcom’sstatementonthefutureofPSB(BERR2009).Thekeyinterimrecommendationsare
asfollows:
•Beforethepublicationofthefinalreport,thecaseshouldbeconsideredforpublic
incentivestoenablefurthernext-generationbroadbanddeployment.Onesuggestion
involvesusingthelicencefeeswitchoversurplusforthispurpose.
•Beforethepublicationofthefinalreport,toestablishwhetheralong-term
sustainablesecondpublicserviceorganisationcanbedefinedanddesigned.Suchan
organisationwoulddrawinpartonChannel4’sassetsbuthaveare-castremit.The
reviewshouldbeginbylookingatpossiblepartnershipswithpublicsectorbodies–
forexample,betweenChannel4andBBCWorldwide–butshouldnotruleoutother
optionsorsolutions,includingpartnershipswithprivateorganisationssuchasFive.
Thefinalreportisdueinspring2009.
Conclusion
Whilediscussionsanddebatehavetakensignificantstepsforwardinsofarasdefiniteoptions
forthefuturearenowproposedandbeingdebated,therestillremainsmuchtodecidewhen
itcomestothefutureofPSB.WiththepublicationofOfcom’ssecondreviewandthe
interimreportfromtheDigitalBritainreview,governmentandParliamenthaveanumberof
recommendationsonwhichtobuild.Butultimatelyitislikelythatnewlegislationwillbe
required,andtheprospectofanewCommunicationsActremains.
TheneedforadditionalfundstosupportthePSBsystemisclear,andtheoptionoftop-
slicingtheBBClicencefeeislargelydiscounted:Ofcom,theGovernmentandthe
ConservativePartyhavealldeclaredthattheyareagainstthisoption.Alternativesolutions
havebeenproposed(mostnotably,partnershipsbetweenChannel4andFiveandChannel4
andBBCWorldwiderespectively),buttheexactmannerinwhichthesewouldbridgethe
fundinggapremainsunresolved.Boththesepartnershipproposalsinvolveinherentrisks,and
itisnotyetclearhowfareithercouldgotoprovidealong-termsolutiontothestructural
changesthatpresentthegreatestchallengestoPSBintheUK.
However,thereisonesolutionthattosomeseemsobviousbutthathasattractedlittle
attentionwithinthedebatesofar:industrylevies.Inthenextsectionwesetoutsomebrief
modelstoillustratehowsuchasolutioncouldwork.
5.Thepotentialofindustrylevies
ThesizeofthefundinggapestimatedbyOfcomthatwillbepresentifwearetomaintain
currentlevelsofPSBissignificant.WehaveseenthatthefinancialchallengesforPSBare
largeandlikelytoremainsoastechnologicalchangecontinuestooccurandcompetition
continuestogrow.Ifwearetomaintaincurrentlevelsofpublicservicebroadcasting,new
fundsneedtobereleasedtobridgethisfundinggapfrom2012,butdebatecontinuesabout
wheretosourcethesefunds.Onepossiblesolutioncouldbetosetindustrylevies.
PublicopinionresearchconductedforthePSBreview(Ofcom2008)foundthatregulatory
assetsandleviesweregenerallyconsideredplausiblesolutions,withtheotheroption–direct
taxation–theleastpopularoption.Leviesarenotnew:levyschemesexisteffectivelyin
someformorotheracrossEuropeandinothercountriessuchasCanada.
Inthissectionweconsiderarangeoftypesoflevy,someofwhichareinuseinother
countries,alongsideothersthatwouldrepresentanewstyleofpublicservicefunding.The
sectionincorporatescasestudiesofothercountriesthatuselevysystemstofundpublic
servicemediatoillustratehowsuchschemesworkinpractice.Italsopresentsaseriesof
figures,whichareintendedtodemonstratehowlevysystemscould,anddo,work.Thereare
severaldifferentpermutationsthatcouldbeputintopracticetoclosepartorallofthe
fundinggapidentifiedbyOfcom.
Theleviesconsideredherearethoseseton:
•Recordingequipmentorblankmedia
•Retransmission
•Directmedia
•Newmedia.
Eachoftheseisdescribedbelow.
Recordingequipmentorblankmedialevies
Inordertocompensatecopyrightholdersforcopiesmadewithinfair-useorfair-dealing
guidelines(inotherwords,nottocompensateforillegalfile-sharingorcopying),many
countriesinEuropehaveintroducedsmallsalestaxesorleviesplacedonrecording
equipmentorblankmedia.
Thenewestpieceofequipmenttowhichsuchalevycouldbeaddedisapersonalvideo
recorder(PVR),whichallowsconsumerstorecordprogrammesfromtelevisiontoadigital
harddrivetowatchatalaterdate(commonlycalledtime-shifting).
TheUKisoneofthefewcountriesinEuropenottohavesuchatax.
Estimatedyieldfromrecordingequipmentorblankmedialevies
WeuseddatafromtheUKExpenditureandFoodSurvey(EFS–seeAppendix1fora
detaileddescriptionoftheEFSdata)toestimatetotalannualexpenditureonthefollowing
categoriesofgoodsthatwouldbesuitablecandidatesfortheimpositionofalevy:recording
equipment,blankmediaandcomputerequipment.Thesearedetailedbelow.
Recordingequipment
ThecategoriesofrecordingequipmentonwhichinformationisavailableintheEFScomprise:
•Videocassetterecorders(VCRs)
•DVDplayers/recorders
•DigitalTVdecoders
•Audioequipment(forexample,CDplayersandrecordersandhard-diskaudio
recorders).
WiththeexceptionofVCRs,noneofthesecategoriesofgoodsis100percentmadeupof
‘recordingequipment’,assomeDVDplayers,digitalTVdecodersandaudioequipmentitems
havenorecordingfunction.HowevertheEFSdoesnotcollectseparatedatafor(for
example)DVDplayersasopposedtoDVDrecorders,sothesearethemostdisaggregated
categoriesthatwecanusewiththedataavailable.
Figure5.1,below,showsaggregatetotalexpenditurefortheyears2002–06inclusivefor
eachoftheseitems,asestimatedusingtheEFSdata.(TheresultsfromtheEFSare
reweightedand‘grossedup’tonationalaggregatelevelstomakethemcompatiblewiththe
otherstatisticspresentedinthisreport.)
Figure5.1:
Estimated audio equipment VCR
aggregate digital TV decoders DVD player/recorder

expenditureon total recording equipment
2000
recording(and
playback) 1800
Estimated total expenditure, £ m (April 2008 prices)
equipment,UK, 1600
2002–06
1400
Source:
Expenditureand 1200
FoodSurvey 1000
800
600
400
200
0
2002 2003 2004 2005 2006
Year
ExpenditureonVCRshasbeenonadownwardtrendsincethefirstdatapointusedhere,in
2002/03.By2005theobsolescenceoftheVCRmeantthatexpenditureonnewVCRswas
negligible.ExpenditureondigitalTVdecodersisrelativelystable,atalowlevelofaround
£100millionperyear.ExpenditureonDVDplayersandrecordersroserapidlybetween2003
(thefirstyeartheywererecordedasaseparateitemofexpenditureintheEFS)and2005,
butthendroppedtoaround£200millionin2006.Expenditureonaudioequipmenthas
beenontheincrease,particularlybetween2005and2006.
Theestimatedyieldfromalevyonrecordingequipmentdependsverymuchonwhatitems
areincludedinthelevy.Totalexpenditureonaudioandvideorecordingandplayback
hardwarehasbeenroughlystable,atbetween£1.5billionand£1.6billionperyear(inreal
terms)since2004.Ifalevywereintroducedonthiswiderangeofhardware,a1percent
levyontheretailpricewouldraiseamaximumofaround£16million.However,itwould
probablybedifficulttosecurepoliticalacceptabilityforalevythiswidelydefined,because
muchaudiohardware(andsomevideohardware,albeitadecreasingproportion)isplayback-
only–inotherwords,ithasnorecordingfunctionality.
Ifahardwarelevywereconfinedtovideoproducts(ratherthanaudioproducts)only,the
potentialyieldwouldbemuchlower.In2006,totalexpenditureonDVDrecordersand
players,digitalTVdecodersandVCRswasonlyaround£285million.Hencea1percentlevy
onvideohardwarealonewouldraiselessthan£3millionifexpenditurecontinuedatthis
level.However,spendingonvideohardwarein2006wasaround40percentlowerthanin
2004.Thiswasprobablyduetoseveralfactors,includingdecreasinghardwarecosts,
increaseduseofPCstorecordvideo(apointwereturntobelow),andincreaseduseof
digitalvideodownloads.Ifthesetrendscontinue,thefuturerevenuestreamfromalevyon
videorecordinghardwarelooksverylimited.
Blankmedia
InformationisavailableintheEFSonthefollowingtypesofblankmedia:
•Audiomedia(forexample,CDs,minidisks,cassettesandvinyl)
•DVDs(blankandpre-recorded)
•Videocassettes(blankandpre-recorded).
Figure5.2,below,showscalculationsofaggregatespendingoneachtypeofblankmedia,
derivedinthesamewayasforFigure5.1.
Figure5.2:
Estimated audio media video cassettes
aggregate DVDs total media

expenditureon 3500
recording(and
Estimated total expenditure, £m (April 2008 prices)
playback) 3000
equipment,UK,
2500
2002–06
Source: 2000
Expenditureand
FoodSurvey 1500
1000
500
0
2002 2003 2004 2005 2006
Year
Figure5.2showsthatexpenditureonvideocassettesfellfrom2003,andby2005had
reachednegligiblelevels.ExpenditureonaudiomediaandonDVDmediahasfallenmore
slowly(dataforDVDmediaareavailablefromtheEFSonlyafter2004).Totallingexpenditure
acrossallthreemediatypesfor2005and2006suggeststhatoverallexpenditurereduced
fromaround£3.2billionin2005to£2.6billionin2006.Becauseoftheexpansioninthe
marketforaudioandvideostorage,andrecordingdevicesthatusesolid-statemedia(such
asiPodsandsimilarMP3devices,hard-diskvideorecorders,andsystemsbasedaround
computers),itislikelythatthemarketforblankmediaofthetypesshowninFigure5.2will
shrinkfurtherinfutureyears.
A1percentlevyonsalesofallmediacoveredintheEFS(bothblankandpre-recorded)
wouldhaveraisedaround£26millionin2006(inApril2008prices).However,thisisan
overestimateofthepotentialrevenuefromalevyonblankmedia,astheEFSfiguresinclude
bothblankandpre-recordedmedia.Moreover,itislikelythatsalesofblankmediawillfallin
futureyears,reducingtheyieldfromalevystillfurther.
Computerequipment
Giventhatpersonalcomputers(whetherlaptopordesktop)arebeingusedmoreandmore
fordownloadingandviewingbroadcastmediacontentnowadays,wenowlookatfigures
fromtheEFSforexpenditureoncomputersandcomputercomponentsoverthelastfew
years.ThisdataisshowninFigure5.3,below.
Figure5.3:
5000
Estimated
aggregate
Estimated total expenditure, £m (April 2008 prices)
4500
expenditureon 4000
computer
3500
equipment,UK,
2002–06 3000
Source: 2500
Expenditureand
2000
FoodSurvey
1500
1000
500
0
2002 2003 2004 2005 2006
Year
Figure5.3showsthatin2005and2006,expenditureoncomputersandcomputer
componentsandperipheralsintheUKwasaround£2.3billionincurrentprices.A1percent
levyoncomputerproductswouldraisearound£23million.Oneadvantageofalevyon
computersisthat,withtheincreasingimportanceofdigitaldownloadsasavehicleforthe
deliveryofbroadcastmediacontent,spendingonPCsandothercomputersislikelytostay
highinrealtermsintheyearsforwardto2013,comparedwithsomeothercategoriesof
expenditureexaminedhere,whicharemorelikelytofall.However,noteverybodywhoowns
acomputerwilluseitforviewingbroadcastvideoorlisteningtobroadcastaudio,sointhis
senseitcouldbearguedthatacomputerlevywouldtargetthewrongconsumerstoalarge
extent.
Whileblankmediataxeshaveprovedsuccessful,revenuesareindeclinealongwithsalesof
relevantequipment.Also,suchlevieshavetypicallybeenreservedforcompensatingrights
holders,anditisunlikelythatasystemwouldbeintroducedwithoutservingthissame
particularpurpose.Thisisespeciallythecasegiventhelevelofconcernregardingtheimpact
ofpiracyontheUK’swidercreativeindustries(particularlythemusicindustry).
Nonetheless,consideringthecaseofthecopyrightindustries,therearesignsthatthe
Governmentissomewhatsympathetictotheideaofcontributionstothecostofdealing
withpiracyfromthoseindustriesthat–manyhaveargued–indirectlyenableorbenefit
fromit(namely,internetserviceproviderssellingbroadbandsubscriptionsthatenable
downloadsofillegalcontent).TheinterimreportoftheDigitalBritainreviewhascommitted
toexploringthepossibilityfordistributorsandrightsholderstofundanewapproachtocivil
enforcementofcopyright‘tofacilitateandco-ordinateanindustryresponsetothis
challenge’(BERR2009).Thustheideaofindustry-wide(andindustry-funded)solutionsto
problemsthatthreatenthecontinuedwell-beingoftheUK’screativeindustries,whether
music,filmorPSB,shouldnotbeoutofthequestion.
Whileablankmedialevyisunlikelytodelivercontinuedfundingintothefuture,andif
introducedwouldmostlikelytobehypothecatedforcompensatingrightsholders,itprovides
anillustrationofaschemethathasexistedforsometimeinmanyothercountries.Italso
introducestheprincipleofindustrycontributingcollectivelytoaddressamarketfailure.
Retransmissionlevies
TheretransmissionofaudiovisualworksisgovernedbytheBernConvention,theEuropean
Directive93/83/EECandnationalcopyrightlaw.Anyentitythatretransmitsaprotected
workinthecontextofitseconomicactivitymustobtaintherightsholder’sauthorisationto
doso.TheEUDirectiveandnationallawsaddthatarightsholdermustcalluponacollecting
society’sservicesinsteadofexercisinghisorherrightsindividuallythroughretransmission
operators(althoughintheUK,suchlawsdonotapply).AcrossEurope,thesystemis
organisedbyAGICOA,whichcollected99.3millioninretransmissionleviesin2007.
Retransmissionleviesareusedin30Europeancountries,andapplytocableandsatellite
platformsthatbroadcastcopyrightmaterialforwhichnodirectfeeispaidtotheoriginal
contentprovider.AUKequivalentwouldbeSkyorVirginMedia,whichbroadcastmaterial
createdbytheBBC,Channel4orITVbutdonotpayforthecontent.Accordingtothelatest
availabledata,Skyhas9.07millionsubscribers(Sky2008)andVirgin3.57million(Virgin
Media2008).Basedonthesefigures,anannual£5flat-ratelevypersubscriberwouldraise
around£45millionfromSkyandaround£18millionfromVirgin–atotalof£63million.
Table5.1:Incomesecuredfromretransmissionleviesworldwide,inEuros
TheNetherlands 25,480,546 Slovenia 437,005
Germany 15,887,794 Slovakia 217,933
Belgium 14,122,751 Iceland 102,211
Ireland 6,191,116 Serbia 99,062
Poland 5,361,796 Bulgaria 95,687
Denmark 3,756,875 Lithuania 94,946
Spain 3,000,000 Estonia 83,369
Switzerland 2,690,460 Latvia 60,104
Sweden 1,927,641 Bosnia 50,894
Romania 1,618,287 Macedonia 35,916
Portugal 1,138,012 Albania 15,750
Special‘authors’share’ 961,091 SouthAfrica 15,000
Austria 716,370 Canada 11,500
Hungary 682,662 Ukraine 7,981
Luxembourg 533,079
Itisworthnotinginthiscontextthatsubscriptionincomehasexceededtelevisionadvertising
incomeforthepastfiveyears,andthatthegapbetweenthetworevenuescontinuesto
grow.In2007,subscriptionrevenuegrewby6.4percent,to£4.3billion.Meanwhile,TV
advertiserrevenuerose2.2percentto£3.5billionover2007followinganequivalentdecline
in2006(Ofcom2008b).WhilesubscriptionservicesandpayTVmayseemtobenefitfrom
thedigitalswitchover,commercialfree-to-airPSBprovidersaresuffering.
Directmedialevies
Directmedialeviesarechargedonrevenuefromorganisationssuchasbroadcasters,cinemas
orvideolabels.ThismodelisinplaceinFrance,whereCNC(CentreNationaldela
Cinématographie,broadlyequivalenttoourUKFilmCouncil)isfinancedthroughleviesof
thiskind.ThesystemprovidesCNCwitharound500millionayeartofundtheproduction
ofFrench-languagefilm.
AlevysystemsuchasthisintheUKwouldworkonthesamejustificationofthe
retransmissionlevysystem,butwouldbeataxonrevenueratherthansubscribers.Thetax
couldapplytopay-TVrevenues,forexample.
Table5.2demonstratesthebroadcasterrevenuefroma1percentlevyonpayTVintheUK,
basedonassessmentsfromtheUK’stwomajorpayTVbroadcasters.
Table5.2:Estimatedyieldfromleviesonbroadcasterrevenue
Broadcaster 2007revenue(£m) Estimatedyieldfrom1%levy(£m)
Satellite/cable:
BSkyB 4,551 45
VirginMedia 2,486 25
(consumercabledivision)
Total 7,037 70
Countrycasestudy1:PublicservicebroadcastinginCanada
Canadaprovidesoneexampleofacountrythatusesindustryleviestofundpublicservicebroadcasting.
TheCanadianBroadcastingCorporation(CBC)/RadioCanadaisCanada’snationalpublicservicebroadcaster.It
offers29servicesonradio,televisionandtheinternet.CBChasaspecificremitsetoutunderthe1991
BroadcastingAct,andaparticularemphasisonbroadcastingservicescontainingcontentthatisdistinctively
Canadian.CBCisfundedthroughacombinationofdirectgovernmentfunding,licencefeeandadvertising.
PublicservicebroadcastingisalsoprovidedbytheAboriginalPeople’sTelevisionNetwork(APTN)andtheCable
PublicAffairsChannel(CPAC),alongsideeducationalcontentbroadcastbyCanadianprovincialbroadcasterssuch
asTVOntario.Fundingfortheseadditionalbroadcasterscomesfromavarietyofmechanisms,includingindustry
levies.CPACisfundedbywhatisineffectavoluntaryindustrylevy:coverageoftheCanadianparliamentis
carriedbycableoperatorsinCanada,butreceivesnogovernmentfunding.
In1996,CanadaestablishedtheCanadianTelevisionFund(CTF).Thisisapublic–privatepartnershipbetween
satelliteservices,cablecompaniesandtheGovernmentofCanadafocusedtowardscreating‘highquality,
distinctiveprogrammingfortelevision.’Inessence,theCTFservestoensurethateachelementoftheCanadian
broadcastingsystem‘contribute[s]inanappropriatemannertothecreationandpresentationofCanadian
programming’(CanadianBroadcastingAct1991).
TheCTFreceivesitsfundingfromtwoprimarysources:theDepartmentofCanadianHeritage,andbroadcasting
distributionundertakings.Inaddition,theCTFreceivesrevenuefromrecoupmentonproductioninvestments
madethroughitsEquityInvestmentProgram.UnderlicenceagreementswiththeCanadianRadio-televisionand
TelecommunicationsCommission,broadcastingdistributionundertakingsarerequiredtocontributeupto5per
centoftheirgrossbroadcastingrevenuetoCanadianprogramming,with1.5–5percenttobecontributedto
productionfunds,ofwhichatleast80percentmustbedirectedtotheCTF.
In2007/08,CTFproductionfundingcontributionstotalledCA$242million.Contributionsweremadeto466
televisionproductionsamountingtomorethan2,200hoursoforiginalcontent(CTF2008).Overits12-year
history,theCTFhascontributed$2.7billiontosupportover5,400productions.Thishasresultedinthecreation
ofmorethan27,000hoursofhigh-qualitytelevisionforCanadians,andhastriggeredmorethan$9billionin
productionvolumeacrossthecountry.
Newmedialevies
AsimilarsystemtodirectmedialeviescouldbeappliedtoUKnewmedia–forexample,by
applyingataxtointernetserviceprovidersandmobilephoneoperators,sothatanadditional
levyispaidalongsidemonthlysubscriptionorasapercentageofrevenue.Suchleviesare
notinwideoperationacrosstheworld,largelyduetotherelativelynewnatureofsuch
technologiesandthepolicyacrossnationsofencouragingtake-up,particularlyof
broadband.
However,asdigitalmediamovesintomaturity,thisoptionmaybereviewedmoreclosely.For
example,inFrance,PresidentSarkozyhasannouncedtheremovalofadvertisingfrompublic
televisionchannels.Therevenuepreviouslyraisedthroughadvertisingrevenueistobe
replacedbytaxescollectedfrominternet,mobilephoneandcommercialbroadcasting
companies.Sarkozy’sproposalsarethatthelevyontherevenuesoftelephoneandInternet
operatorswouldbe‘0.9percent,and3percentforprivatechannels’.Thelevyisexpected
tomakeuptheshortfallof800milliononceadvertisingisphasedout.
Newmedialeviescouldeithertaketheformofper-subscriberlevies,thatis,asurchargepaid
perpayinguseroftheservice,orofapercentagetaxonannualrevenue.Wesetoutincome
generatedbasedonthreedifferentexamples:per-subscriberleviesonbroadbandinternet
provision,per-subscriberleviesonsubscriptionstomobilephoneswithinternetcapabilities,
andleviesonannualrevenueofmobilephoneproviders.
Per-subscriberleviesonbroadbandinternetprovision
FiguresfromtheOfficeforNationalStatistics(ONS)forAugust2008suggestthataround
14.2millionhouseholdsnowhavebroadbandaccessintheirhomes(ONS2008a).Basedon
thesefigures,anannualflat-ratelevyof£5persubscriberwouldraise£71million.
Countrycasestudy2:PublicservicebroadcastinginFinland
Finland’sstate-ownedbroadcasterYleisradioOy(YLE)hasabroadpublicserviceremit,withastrongemphasis
onnews,educationalandculturaloutput.Inform,YLElooselyresemblestheBBC,operatingfivemainnational
televisionchannels.Twoarebothanalogueanddigitalfree-to-air,whiletheotherthreearedigital-onlyfree-to-
air.Italsooperatessevenmainanaloguestationsthatbroadcastawiderangeofpublicservicecontent.
Additionalpublicservicecontentisbroadcastbynineothercommercialradiobroadcasters.Thesehavespecific
remitstocaterforclassicalmusic,jazzmusic,youthmusic,Finnishpopularmusic,religiousprogramming,
Russianlanguageprogramming,andLaplandtourism.
Fundingforpublicservicebroadcastingisdrawnfromtwomainsources:adirectlicencefeepaidforbycitizens,
whichcontributesthelargestshare,andanindustrylevypaidbycommercialbroadcastersinFinland.Underthe
latter,broadcastersareobligedtopayaprogressiveproportionoftheirrevenuefrombroadcastingoperations
(advertisingandsponsorship).
Followinglegislationin2002,theindustrylevyisduetobephasedoutby2010,withanexpectationthat
commercialoperatorspayfortheintroductionofdigitalinfrastructure.However,itprovidesaninteresting
exampleofaprogressiveindustrylevy,withthescaleoffeesasfollows:
Broadcasterturnover(in1,000) Licencefeeatlowerlimit(in1,000) Licencefeeoverlimit%levy
3,400–5,000 0 5
5,000–6,700 84 7.5
6,700–10,100 210 10
10,100+ 547 12.25
Per-subscriberleviesonmobilephoneinternetusage
The2008reportMobileLife,producedbyCarphoneWarehouseandresearchedbythe
LondonSchoolofEconomics,suggestedthataround15percentofmobilephoneusershad
usedtheirphonetowatchTVordownloadmusicorvideoclipsfromtheinternet.Giventhat
around95percentofpeopleintheUK(includingchildren)ownamobilephone,andthat
thecurrentpopulationoftheUKisaround61million(ONS2008b),anannuallevyof£5on
mobilephonesthatareusedtoaccessmusic,videoortelevisionwouldraisearound£43
millionperyear.However,asuseofmobilephonestoaccesstheinternetisincreasing
rapidly,thepotentialyieldfromameasurelikethisislikelytorisesharplyoverthenextfew
years.
Leviesonrevenueofmobilephoneproviders
IntheUK,a1percentlevyonUKmobileoperatorswouldyieldtheamountsshowninTable
5.3.
Clearly,levieshavethepotentialtointroducefairlyextrafundsintoasystemthatis
strugglingbutvaluedbyUKcitizens,andthatitselfcontributestotheeconomicsuccessof
thewidermediaecosystem.Whileatfirstglancethisoptionmaynotappearpolitically
attractive,theUKwouldnotbebreakingnewground:leviesexistinothercountriesacross
theworld,andareanestablishedmechanismforfundingcontentandmediaservices.
Table5.3:Estimatedyieldonlevyfrommobilephoneoperatorrevenues
Mobilephoneoperator 2007revenue(£m) Estimatedyieldfrom1%levy(£m)
02 £5,500 £55
Orange £4,919 £49
T-Mobile £3,575 £36
3 £1,591 £16
Vodafone £5,124 £51
Total £208
Note:thecolumn‘2007revenue’showsannualrevenueconvertedfromEurotosterlingusingtheexchangerate
inJanuary2008of0.743to£1
Datasources:02– www.o2.com/investor/press_release_14157.asp
Orange – www.orange.com/en_EN/group/global_footprint/countries/uk/uk-fi.html
T-mobile – www.annualreport2007.telekom.de/gb07/backstage_04/documentpool/en/en.pdf
3 – www.irasia.com/listco/hk/hutchison/announcement/a25330-e_2007hwlresultsann.pdf
Vodafone – www.vodafone.com/etc/medialib/attachments/agm_2008.Par.77336.File.dat/2008_Annual
_Report_FINAL.pdf
Analysis:pluggingthePSBfundinggapusinglevies
Table5.4,below,bringstogetherthedifferentfundingmechanismsdiscussedhere.Thishas
beendonebytakingthe£235millionPSBfundinggappredictedbyOfcomasemerging
betweentheintroductionoftheCommunicationsActin2003anddigitalswitchoverin2012,
andthenworkingoutwhatratewouldbeneededtoplugthefundinggapcompletelyusing
eachkindoflevy.IftheGovernmentchosetofollowthiscourseofaction,acombinationof
leviescouldbeused.
Somecautionshouldbeexercisedininterpretingtheseresults,aswehaveuseddatafrom
themostrecentavailableestimatesofexpenditure,revenue,numberofsubscribersandso
on,andhavenotattemptedforwardextrapolation.Thisisparticularlyimportantinthecase
oftheprojectedyieldfromalevyonaudioorvideomedia(whichislikelytofallsignificantly
by2013,necessitatingahigherpercentagelevyrate)andtheyieldfromanannuallevyon
internet-enabledmobilephones(likelytoincreasesharplyby2013,whichwouldmeanthe
samerevenuecouldberaisedwithalowerlevypersubscriber).
Additionally,wehavenotallowedforanybehaviouraleffectsfromtheintroductionofthese
levies.Forexample,iftheincreaseinthepriceofaudioorvideorecordingequipment(asthe
resultofintroducingalevy)ledtoameasurabledeclineinthequantityofequipmentsold,
thiswouldreducetheyieldfromthelevy.However,wehavefewreliableestimatesofthe
responseofquantitytoprice–the‘elasticity’,tousetheeconomists’technicalterm–for
thesegoods,sohavechosentoassumenobehaviouraleffectsasafirstapproximation.
Table5.4:Estimatedlevelofleviestobridgefundinggap
Typeoflevy %orlevypersubscriberrequiredto
raise£235million
Levyonaudio/videorecordingequipment 14.7%
(underwidestdefinition)
Levyonaudio/videomedia(alltypes) 9%
AnnualretransmissionlevyonSky/Virginsubscribers £19persubscriber
Directmedialevyonsatelliteandcablebroadcasters 3.4%
Directmedialevyonmobilephonenetworks 1.1%
AnnuallevyonbroadbandISPsubscriptions £16.50persubscriber
Annuallevyonmobilephonecontractswith £27persubscriber
internetusage
Conclusion
Leviescontinuetopresentapossiblesolutiontobridgingthefundinggapinorderto
maintaincurrentlevelsofPSB.Thereareinherentpoliticaldifficulties:anadditionaltaxis
unlikelytobereceivedenthusiasticallybythoseindustriestowhichitapplies.However,in
exploringthisoptiontheUKwouldhardlybebreakingnewground:leviesexistinother
countriesacrosstheworld,andareanestablishedmechanismforfundingcontentandmedia
services.
Asnotedabove,thefigurespresentedinthissectionareintendedtobeillustrative.Different
ratescouldbeapplied,andleviescouldexistalongsideothermechanismsforsecuringextra
fundingforPSBtosecureitsfutureoverthelongterm.Asinternetadvertisingrevenues
increase,taxesappliedtothismayprovideasourceofextrarevenue.However,inthe
mediumterm,thetrendappearstobetowardsincomegenerationbysubscriptionservices.
Inthenextsectionwelookatthevaluethatregulatoryassetswillcontinuetoprovide,and
howthesecouldbeexploitedtomaximisetheirvaluetoPSBproviders.
6.Thevalueofregulatoryassets
Asmentionedpreviously,PSBprovidershavehistoricallybeenpartfundedby‘regulatory
assets’,thatis,giftedanaloguespectrum.Whilethiswilldeclineinvaluewithdigital
switchover,somevaluewillremaininthesystem.Maximisingthisvalueisanobviousand
non-controversialsolution(orpartsolution)tothefundingcrisisfacingcommercialPSB
providers.
Regulatoryassetsarecommonlydividedintotwocategories:
•PrivilegedaccesstoDigitalTerrestrialTelevision(DTV)spectrum
•Otherassets,suchasprominenceonelectronicprogrammeguides(EPGs)(for
instanceSky’son-screentelevisionguidewhichliststerrestrialPSBproviders–BBC1
and2,ITV,Channel4andFiveasnumbers1,2,3,4and5respectively),relaxed
advertisingminutagerulesallowingforlongerormorefrequentadvertisingbreaks
duringtelevisionprogrammesandmust-carrystatusoncable,meaningthatcable
providersmustcontinuetodeliverPSBchannelstosubscribers.
Ofcomhasestimatedthatregulatoryassetswillhaveavalueofaround£185millionin
2012/13.Beyondthistimeframe,itishesitanttomakefurtherestimatesbecauseof
uncertaintyaroundthewidermediaenvironment.
UnderModel3describedonp23above(inwhichtheBBCandChannel4actasthemain
providersofPSB,withfundingavailableforotherproviders),thespectrumrightsandother
regulatoryassetscurrentlysharedacrossBBC,Channel4,ITVandFivewouldbetransferred
toBBCandChannel4toenhancetheirpublicservicepropositions.However,giventhatITV
andFivearelikelytoretainsomepublicserviceobligations,astraighttransferralofassetsis
unlikely.Instead,weconsiderwhereregulatoryassetshavepotentialtoenhancepublic
servicemodelsinotherways.
Inadditiontoretainedregulatoryassets,thereisalsothepotentialoftransferringsupport
fromreleasedregulatoryassets–particularlythosecurrentlyatthecentreofthedigital
dividendreview.
DigitalTerrestrialTelevision(DTT)spectrum
Whilethedigitalswitchovermeansthatthevalueofaccesstobroadcastspectrumisin
decline,itisanticipatedthatprivilegedaccesstoDTTwillretainsomevalueforPSBproviders.
OfcomestimatesthatthevalueofgiftedspectrumallocatedtothecommercialPSBproviders
(primarilyITVplc,stv,UTV,Channel4andFive)willbearound£120millionin2012/13
(Ofcom2008).ThisvalueisretainedinpartbythefactthattheDTTmultiplexcapacity
allocatedtocommercialPSBproviderswillreach98.5percentoftheUKpopulationatthe
timeofthedigitalswitchover,comparedto90percentforcommercialDTTmultiplexes.
Itisdifficulttoconfidentlyandabsolutelyassessthevalueofspectrumpost-switchover.
However,thereareanumberofpolicyinitiativesthatcouldhavesomeimpactonthevalue
forPSBproviders,andforcitizensintheUK.
AlongsideitsPSBreview,OfcomhasbeenconductingtheDigitalDividendReviewinorder
todecidehowreleasedspectrumshouldbeallocatedoncedigitalswitchoverhasoccurred
(Ofcom2006).IndicationsarethatOfcomintendstofollowaprocessofmarketauctionsas
themostefficientwaytodeterminespectrumuse.
However,theBBCandothershavecalledforatleastonethirdofthereleasedspectrumto
bereserved,sothatPSBproviderscandevelopfree-to-airHigherDefinition(HD)services.
Theyhavearguedthattherewillnotbeenoughcapacityonthesixexistingmultiplexes,
evenafterswitchover,tocarrythecriticalmassofHDserviceswithoutremovingexisting
services–andthereisnobusinessmodelforfree-to-airHDontheDTTplatform.
Withoutthis,thevalueoftheFreeviewdigitalplatformislikelytodecrease.BBCresearch
estimatesthatthesocialvaluelostthroughtheunavailabilityofHDservicesonDTTcould
rangefrom£5.4billionto£15.6billion(BBC2007).
Therehasalsobeendiscussionaboutthepossibilityoftransferringaproportionofincome
receivedifthespectrumreleasedupondigitalswitchoverwereauctioned.Thisoptionhasa
certainneatnesstoit,asitultimatelyinvolvessupportingPSBbytransferringincomegained
fromreleasingassetspreviouslyusedtoupholdPSBprovision.Certainly,thereleased
spectrumislikelytobeimmenselyvaluabletoanumberofindustriesandservices–not
least,mobilebroadband.Incomefromspectrumauctions(forinstance,the3Gauction)has
typicallybeenreceivedbytheTreasury.Nonetheless,itistechnicallyandpoliticallypossible
tohypothecatesomeportiontowardfuturefundingofPSB.Thiswouldalsorepresentaone-
off‘windfall’payment,which–whilewelcome–maynotdomuchforsecuringthelong-
termfutureofPSB.
Alongsidethis,therehasbeenongoingdebateabouttheproposedadministeredincentive
pricing(AIP)scheme.AIPiscurrentlyappliedtospectrumusedbybusinessradio,public
wirelessnetworks,scanningtelemetry,point-to-pointfixedlinks,satelliteservices,the
MinistryofDefenceandemergencyservices–butnottobroadcasting.Therearesignificant
concernsabouttheproposaloftheintroductionofAIPtobroadcasting,andaboutthe
associateddemiseofgiftedspectrum,offeredasanincentiveforcontinuedPSBoutput.
ResponsestoPhase1ofOfcom’sPSBReview2 (Ofcom2008a)showedsupportforwaiving
costsofaccessingspectrumunderAIP.Withoutsuchawaiver,thisoptionislikelytoput
furtherfinancialpressureonPSBprovidersatatimewhentheyarealreadyfacingsignificant
challenges.
Thejuryisstilloutonthevalueofregulatoryassets–particularlybecauseitisdifficultto
judgethemarketvalueofspectrumpost-switchover.Ultimately,regulatoryassetsare
unlikelytobeconsideredasolutionbythemselves:theyaremorelikelytobeofferedin
additiontootheroptions.
Whilethetruevalueofregulatoryassetsremainsuncertain,itisimperativethatconsultations
thathaveanimpactonthefuturefinancialstabilityofUKPSBprovidersdonotoperate
independentlyoftheongoingreviews,andthattheimpactonPSBprovidersofany
regulatorydecisionsisfullyconsidered,andsetoutasaPSBimpactassessment.
Otherassets
OfcomhasestimatedthevalueofEPGprominencetobesomewhereintheregionof£30
million.However,aswithotherregulatoryassets,thisfigureisdifficulttocalculate.What
preciselyconstitutes‘dueprominence’isdefinedbytheprovideroftheEPG,andmany
audiencesseekoutcontentregardlessofitsplaceintheEPG.Itisinproviders’intereststo
maketheEPGasnavigableaspossible–Sky’sEPGsystemisseenasavaluableassetforthe
providerinhelpingSkycustomerseasilynegotiatethewealthofcontentavailableviatheir
systems.
Incontrast,must-carryobligationsarethoughttohavenegligiblevalue,giventhatmost
cableandsatelliteproviderswillcarrythecommercialPSBprovidersinanycase,duetotheir
audiencepopularity.Itisunlikelythatcustomerswouldwishtosignuptoaservicethatdid
notofferITV,Channel4andFive,forexample.
Finally,weturntothequestionofwhethertoenablecommercialPSBproviderstoincrease
theiradvertisingscreentime.Thisoption,raisedinaconsultationdocumentfromOfcom
publishedinMarch2008,isseenasneitherpopularnorasasustainablelong-termsolution
(Ofcom2008f).Theproblemsofadvertising-fundedmediaarealreadybeingstarklyfeltin
themidstofthecreditcrisis,evenamongplatformsthatdonothaverulestomeet(for
instance,newspaperspublishingandonlineadvertising)intermsofquotasofadverts
strugglingtoraisesignificantrevenue.Addingextracapacitymayservesimplytoreducethe
overallcostofadvertisinginbroadcastenvironments,justasinternetadvertisingis
comparativelysignificantlycheaper.
Theabilitytooffermoreadvertisingslotswilldolittletocounterthecompetitionemerging
fromtheonlinesector–particularlygivenitspotentialtooffermoretargetedadvertisingto
usersandtobeinstantlyscaledupinseveralareas(although,aspreviouslyacknowledged,
introducingfurtheradvertisingminutageforonlinetelevisionviewingisproblematic).
Currentanalysisindicatesthatadvertisingspaceisincreasingatsucharatethatthecostof
advertising,particularlyonline,iscomingdown.Thereforeitisunlikelythatincreasedlevels
ofadvertisingwillbeabletoholdoffthiscompetition–northattherevenueexpected
wouldnecessarilybegained.
Conclusion
AsOfcomacknowledges,regulatoryassetswillcontinuetohavevaluepost-switchover,
althoughprovidingestimatesbeyondthispointisextremelyproblematic.
Thereisstrongsupportforcontinueduseofregulatoryassetstoprovidefinancialassistance
forPSB.TheintroductionofadministeredincentivepricingatatimewhenPSBprovidersare
facingsignificantfinancialstruggleswouldseemcounter-intuitive,onlyprovidingextra
pressurewhereitiscurrentlyleastneeded.
Thepossibilityofenablingincreasedrevenuetobegeneratedthroughadvertisingshouldbe
treatedcautiously.Theshiftsinadvertisingincomearestructural,significantandlikelytobe
longterm.Putsimply,theinternetoffersopportunities–intermsofsophisticationandscale
–thatbroadcastcontentsimplycannotmatch.Evenwhenprovidingcontentonline,PSB
providersareunlikelytobeabletoreapanadvantagefromonlineadvertising,giventhelack
ofenthusiasmforadvertisementsduringonlinetelevisionviewing.
Ultimately,itislikelythatregulatoryassetswillcontinuetoplayacrucialroleinsupporting
PSBfortheforeseeablefuture.Itisimperativethatassociatedwork,particularlyaroundthe
digitaldividendreview,doesnotthreatenthispotential.However,furthersubsidieswillbe
required–so,again,governmentandParliamentmustturntoconsiderwhereadditional
fundingmaybefoundtosupportthelevelofPSBthatUKcitizenswant.
7.Conclusion
DespitethemanychangestotheUKmedialandscape,publicservicebroadcastingcontinues
toplayavaluablepartinUKlife–bothforourcitizens’well-beingandtothenational
economy.
Digitalswitchoverandtheongoingprocessoftechnologicalchangehaveputsignificant
financialpressureontheUK’sPSBbroadcastersandthesepressuresarelikelytogrowover
thenextfewyears.
AsthetraditionalmodeloffundingPSBisunderthreat,thekeychallengefacing
policymakersandthoseconcernedwithensuringthefuturehealthofPSBisfindingnew
waystofundpublicserviceactivities.
WehaveillustratedtwopossiblesolutionsaimedatincreasingincometoPSBactivities:
industryleviesandcontinuingtoexploitthemaximumvaluefromregulatoryassets.There
maybeothers.However,itisclearthattheimmediatethreatstoPSB,andtothewiderUK
medialandscape,aresevereandlikelytobelongterm.Asaresult,solutionswillthemselves
needtobelongterminnature,andmaylookvastlydifferentfromthefundingmechanisms
wehaveutilisedpreviously.Atfirstglance,leviesmaynotappearpoliticallypopular,but
thereisastrongrationaleforconsideringthemasaseriousoption.
Ifwevalueourpublicservicehistoryandfuture,itisimperativethatwetakestepstoprotect
andpromoteit.Thesemaynotalwaysbeuniversallysupported,particularlybysomeindustry
sectors.However,attheheartofthisdebateisthedesiretoensureafuturemediaoffering
thatistothebenefitofallcitizensandsociety.Withsuchhighstakes,itisperhaps
unsurprisingthatsolutionsanddecisionswillneedtobecorrespondinglybold.
References
BanerjeeIandSeneviratneK(2006)PublicServiceBroadcastingintheAgeofGlobalization,4a
BarwisePandPearsonA(2006)PVRsandAdvertisingExposure:Avideoethnographicstudy,London:
LondonBusinessSchool
BBC(2007)BBCResponsetoOfcom’sDigitalDividendReview,London:BBC
BBC(2008)PartnershipProposalsFromtheBBCExecutive:TheBBCTrust’sapproachtoevaluation,
London:BBC
BBC(2009)BBCMissionandPurposes,London:BBC,availableat:www.bbc.co.uk/info/purpose/
BeckettC(2008)‘Twoyearsofcarnage:EmilyBellontheGreatCrashandtheMedia’,director’sblog,
London:POLIS,availableat:www.charliebeckett.org/?p=864
Beveridge(1951)ReportoftheBroadcastingCommittee1949(TheBeveridgeCommittee)
CanadaTelevisionFund(2008)AnnualReport,CTF,availableatwww.ctf-
fct.ca/assets/AR0708/en/AR_0708.html
Channel4(2008)Nexton4, London:Channel4
DaviesN(2008)FlatEarthNews,London:ChattoandWIndus
Deloitte(2009)Technology,MediaandTelecommunicationsTrendsfor2009, London:Deloitte
DepartmentforCulture,MediaandSport(2009)CreativeIndustries’EconomicExports,London:
DCMS
DTZ/WelshEconomicResearchUnit(2007) TheEconomicImpactofS4ContheWelshEconomy
2002–2006, Cardiff:S4C
EIAA(2006)‘Socialnetworkingtodrivenextwaveofinternetusage’,pressrelease,EIAA]
ElliottP(1972) TheMakingofaTelevisionSeries,London:Constable
ErnstandYoung(2009) MediaandEntertainment...ByNumbers, London:ErnstandYoung
GitlinT(1985)InsidePrimeTime,NewYork:Pantheon
HartA(1988)MakingtheRealWorld:Astudyofatelevisionseries, Cambridge:CambridgeUniversity
Press
HolmwoodL(2009)‘ITVis“scrappingforitslife”,admitsbroadcaster’scommercialboss’,The
Guardian,12February2009,availableat:www.guardian.co.uk/media/2009/feb/12/itv-
scrapping-for-its-life
IpsosMORI(2008) TheAudience’sViewofPublicServiceBroadcasting,London:Ofcom
KarpS(2007)‘Newspaperonlinevs.printadrevenue:the10%problem’,Publishing2.0,17July
2008,availableat:http://publishing2.com/2007/07/17/newspaper-online-vs-print-ad-revenue-
the-10-problem
KhanU(2009)‘TelevisiononmobilephonesboostedbysuccessofiPlayer’,TheDailyTelegraph,10
February2009,availableat:www.telegraph.co.uk/culture/tvandradio/4569133/Television-on-
mobile-phones-boosted-by-success-of-iPlayer.html
McNallyP(2009)‘ITVbacksproposaltosharenewsfacilitieswithBBC’,PressGazette, 13January
2009,availableat:www.pressgazette.co.uk/story.asp?storycode=42804
MeekerM(2008)‘Viewoftheworldin50slides’,presentationatWeb2.0Summit,California,
November5–7,availableat:www.techcrunch.com/2008/11/06/mary-meekers-view-of-the-
world-in-50-slide
MTMLondon(2008a)TheAvailabilityofPublicServiceContentOnline,London:Ofcom
MTMLondon(2008b)EstimatingtheValueofPublicServiceContentOnline,London:Ofcom
MurdockG(1999)‘Rightsandrepresentations’inGripsrudJ(ed)TelevisionandCommonKnowledge,
London:Routledge
Ofcom(2004) OfcomReviewofPublicServiceBroadcasting:Meetingthedigitalchallenge,London:
Ofcom
Ofcom(2004b)OfcomReviewofPublicServiceBroadcasting:Meetingthedigitalchallenge,Volume2,
Supportingdocuments, London:Ofcom
Ofcom(2007)NewNews,FutureNews,London:Ofcom
Ofcom(2007b) Anewapproachtopublicserviceinthedigitalmediaage, London:Ofcom
Ofcom(2007c)DigitalDividendReview,London:Ofcom
Ofcom(2008a)PSBReview2,Phase1:Thedigitalopportunity,London:Ofcom
Ofcom(2008b) PSBReview2,Phase2:Preparingforthedigitalfuture,London:Ofcom
Ofcom(2008c)TheInternationalCommunicationsMarket2008,London:Ofcom
Ofcom(2008d)TheCommunicationsMarket2008,London:Ofcom
Ofcom(2008e)PSBReview2:Phase1,Annex6PSBResearchFindings,London:Ofcom
Ofcom(2008f)Reviewoftelevisionadvertisingandteleshoppingregulation,London:ofcom
Ofcom(2009)PSBReview2,Phase3:Puttingtheviewerfirst,London,Ofcom
OliverandOhlbaumAssociates(2006)UKTVContentintheDigitalAge:AnOliverandOhlbaum
ReportforPACT,London:OliverandOhlbaum
ONS(2008a),‘Internetaccess’,onlinestatisticalsummary,London:ONS,availableat:
www.statistics.gov.uk/CCI/nugget.asp?ID=8
ONS(2008b),‘Populationestimates’,onlinestatisticalsummary,London:ONS,availableat:
www.statistics.gov.uk/cci/nugget.asp?id=6
PACTandUKTI(2008)TelevisionExportSurvey, London:PACT
PwC(2007)TheImpactofChannel4ontheUKIndependentSector,CreativeIndustriesandthe
Economy,London:Channel4
PwC(2008)StudyIntotheEconomicImpactoftheBBContheUK,London:BBC
SabbaghD(2009)‘Televisionbyinternetgetsunderourskins’,TheTimes,11February2009,
availableat:http://business.timesonline.co.uk/tol/business/industry_
sectors/media/article5704817.ece
SilverstoneR(1994)TelevisionandEverydayLife,Oxford:Routledge
Sky(2008a)InterimManagementStatementandResultsfortheThreeMonthsEnded30September
2008, London:BritishSkyBroadcastingGroupplc,availableat:
http://corporate.sky.com/documents/pdf/latest_results/interim_results_30_september_2008
SweneyM(2008b)‘NewsCorptomakemorejobcutsafterprofitsfallby30%’,TheGuardian,7
November2009,availableat:www.guardian.co.uk/media/2008/nov/07/news-corporation-
rupert-murdoch
SweneyM(2009a)‘AdslumpsettocontinueforITVandcommercialbroadcasters’,TheGuardian,12
February2009,availableat:www.guardian.co.uk/media/2009/feb/12/end-to-tv-ad-gloom-not-
imminent
SweneyM(2009b)‘BBCiPlayerboostVirginMediavideodownloads’,TheGuardian,12February
2009,availableat:www.guardian.co.uk/media/2009/feb/12/bbc-iplayer-virgin-media
Thinkbox(2009)‘TVviewingupnearly1houraweektomatchrecordhigh’,pressrelease,3February
2009,availableat:www.thinkbox.tv/server/show/ConWebDoc.1677
VirginMedia(2008),‘VirginMediareportsthirdquarter2008results’,pressrelease,London:Virgin
Media,availableat:http://media.corporate-
ir.net/media_files/irol/13/135485/quarterly/FINAL_VM_Q308_Press_Release.pdf
Appendix1:theExpenditureandFoodSurvey(EFS)data
TheEFSisanannualcross-sectionalsurveyofaround7,000UKhouseholdswhichcollects
dataoneachhousehold’sexpenditureusingdiariesfilledinoveratwo-weekperiod.We
usedthisinformationtoestimatetotalannualexpenditurebyUKhouseholdsoneach
categoryofaudioorvideoequipmentandmediausedinthisreport.
Fortheyears2002to2005inclusive,theEFSwascollectedona‘financialyear’basis.This
meansthat,forexample,theyearreferredtoas‘2004’inthisreportactuallyrunsfromApril
2004toMarch2005.In2006theEFSchangedtoacalendaryearreportingbasis.Hence,
the‘2005’and‘2006’yearsinthisreportactuallyoverlapbythreemonths.However,when
calculatingtheyieldfromtheleviesmodelledinthisreportweuseonlythe2006calendar
yeardata.

Mind The Funding Gap: The Potential of Industry Levies For Continued Funding of Public Service Broadcasting

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Mind The Funding Gap: The Potential of Industry Levies For Continued Funding of Public Service Broadcasting

Загружено:

Авторское право:

Доступные форматы

WWW.IPPR.

aggregate digital TV decoders DVD player/recorder

aggregate DVDs total media

Вам также может понравиться