Memorandum submitted by the Satellite
and Cable Broadcasters' Group (SCBG)
The SCBG is the trade association for satellite
and cable programme providers who are independent of one of the
main terrestrial broadcasters. Its members are responsible for
over 100 channels in the UK and in addition broadcast many more
services from the UK to continental Europe and beyond. Many member
companies are pan-European broadcasters, producing and commissioning
content for different national markets.
SCBG channels provide citizens and consumers
with programmes and services for a diverse range of audiences
across a wide range of genres and audiences, including entertainment,
factual, educational, history, music, nature, art and science.
Our member companies make and show programmes for children and
young people, and for ethnic minorities in their own languages.
SCBG members' channels are available in almost 50% of UK homes,
and together have a combined audience share approaching 20% of
all UK television viewing.
Satellite and cable broadcasters operate in
an extremely competitive and volatile environment, without privileged
access to scarce Government-controlled spectrum or to the must-carry
status afforded to terrestrial networks. They are therefore unable
to attract mass advertising revenues, and—with a couple
of notable exceptions—do not benefit from public funding.
Satellite and cable broadcasting has been the
fastest growing sector in the UK television industry, now employing
over 6,000 people in the UK with revenues of nearly £5 billion.
1. EXECUTIVE
SUMMARY
The Satellite and Cable Broadcasters' Group
(SCBG) welcomes the opportunity to make this submission to the
Culture, Media and Sport Select Committee's inquiry on public
service media content. SCBG represents the views of a wide range
of businesses that run a diversity of television channels—run
independently of the incumbent terrestrial broadcasters and largely
without public support or subsidy.
Our understanding is that this inquiry seeks
to examine how a well-functioning and competitive broadcasting
environment in the UK can be maintained, while at the same time
sustaining a plurality of public service broadcasting ("PSB").
Our primary concern is to ensure that citizens and consumers benefit
from strong, fair competition between providers of quality content,
on whatever platform, and on whichever device. Any regulatory
or public policy interventions aimed at sustaining certain types
of content and certain types of provider must be made in the context
of this fundamental principle.
Our main arguments in this paper can be summarised
as follows:
— The promise of a "digital
Britain" is a wealth of choice and diversity—but current
broadcasting policy unduly favours the incumbent terrestrial broadcasters,
thus denying audiences the benefits of fair competition;
— It is now time to look very
carefully at the current criteria of PSB content and to tighten
them in order to provide clarity that would avoid further confusion
about what really constitutes PSB content and quality;
— With its new charter and licence
fee settlement, the BBC will remain the cornerstone of PSB provision—but
must live up to the promises it has made during the Charter Review
process regarding distinctiveness, the rigour of its governance
structures; and its sensitivity to its competitors;
— Research commissioned for SCBG
by David Graham Associates clearly demonstrates that genres traditionally
held to PSB content are increasingly broadcast and viewed outside
the subsidy system;
— Commercial multi-channel broadcasters
do not only invest a great deal into public service programming,
but also add range, diversity and new delivery platforms for this
content. In order for that to continue, there must be sufficient
investment incentives in the market and a tight control of the
incumbent terrestrial operators;
— Further public support for the
legacy commercial PSBs is no longer justifiable—and they
must be placed on the same competitive footing as other channels;
— Public support in new media
platforms will risk disincentivising the development of such services
from existing commercial operators. In the absence of any evidence
of market failure, policy should aim to harness the power of competition
to deliver diversity to audiences, rather than relying on further
public intervention.
2. INTRODUCTION
The Committee will be aware of the tumultuous
change that has affected the broadcasting industry in recent years—and
will acknowledge that it is now unrecognisable from the industry
of only a decade ago. Change will continue even up to switchover
and beyond, which has the potential to dramatically increase choice
and diversity for consumers, allowing more and more audiences
access to a wider range of output—both paid-for, and free-to-air.
A key concern of SCBG is to ensure that this radically re-shaped
playing field is substantially more level than the one it replaces.
According to Ofcom's own research, [1]the
proportion of households in the UK receiving digital television
services on their primary TV set in September 2006 was 73.3%.
Almost 45% of households subscribe to a pay-TV service (such as
Sky or ntl:Telewest), with many of these homes also converting
second and third TV sets via digital terrestrial set-top box.
Although digital terrestrial ("Freeview")
has been hailed as the TV success story of recent years, the Ofcom
research still demonstrates the power of pay-TV services to drive
digital take-up. Viewers continue to value the variety of choice
that cable and satellite offer—especially those niche channels
that are available exclusively on pay-TV. It is therefore vital
for policymakers to acknowledge the importance of these channels,
especially in the context of PSB, as we argue later. It is inevitable
that the shift from limited choice in a terrestrial environment
to a much wider choice in a multichannel home (whether the forty
channels of Freeview, or the four hundred channels of Sky Digital)
leads to a fragmentation of the market. As Ofcom rightly concluded
in its first review of PSB, this fragmentation means that audiences
for traditional public service genres and for the incumbent terrestrial
broadcasters decreases. It is a fact that the digital marketplace
now provides a multiplicity of targeted, specialist offerings
that appeal to the individual tastes and preferences of audiences—with
whole channels dedicated to satisfying particular tastes, interests,
cultures or demographics. Viewers are voting with their remote
controls, and are gradually turning away from the old model of
mass-market PSB programming on the five terrestrial channels.
During the first statutory Ofcom review of Public
Service Broadcasting, SCBG argued that this migration from mass
to niche represented an opportunity to rethink the policy frameworks
underpinning PSB, so that they went with the grain of this viewer-led
change, rather than attempting to work against it.
3. DEFINING PUBLIC
SERVICE BROADCASTING
SCBG believes that any consideration of PSB
must begin from a clear definition of what constitutes public
service content. Only then can a clear assessment be made about
how it can best be delivered. We believe that it is time to look
very carefully at the current criteria, and to tighten them in
order to provide clarity that would avoid further confusion about
what really constitutes PSB content and quality.
According to Ofcom's final statement on its
statutory Public Service Broadcasting review the following mix
of purposes and characteristics constitute the new definition
of PSB: [2]
PSB purposes
— To inform ourselves and others
and to increase our understanding of the world through news, information
and analysis of current events and ideas.
— To stimulate our interest in
and knowledge of arts, science, history and other topics through
content that is accessible and can encourage informal learning.
— To reflect and strengthen our
cultural identity through original programming at UK, national
and regional level, on occasion bringing audiences together for
shared experiences.
— To make us aware of different
cultures and alternative viewpoints, through programmes that reflect
the lives of other people and other communities, both within the
UK and elsewhere.
PSB characteristics
— High quality—well funded
and well produced.
— Original—new UK content,
rather than repeats or acquisitions.
— Innovative—breaking new
ideas or re-inventing exciting approaches, rather than copying
old ones.
— Challenging—making viewers
think.
— Engaging—remaining accessible
and enjoyed by viewers.
— Widely available—if content
is publicly funded, a large majority of citizens need to be given
the chance to watch it.
We believe that these criteria are difficult
to measure, but it is vital to use a framework for this to—as
objectively as possible—define PSB from non-PSB content.
Our concern is that objectivity is sometimes lost, with these
principles interpreted in ways that naturally favour the incumbent
terrestrial broadcasters, and exclude PSB content available from
non-traditional sources. It is therefore essential that sound
objective methods of monitoring content are deployed when looking
at the content of all broadcasters in this market.
In our view, it would make sense to regard Ofcom's
purposes and characteristics as a series of socially desirable
objectives, which are currently being achieved in many ways and
by many different providers. While there may be some specific
"merit good" services which comprise a small and specific
subset and which might genuinely justify public intervention,
PSB policy should actually be about encouraging what is happening
already, stimulating more of it, and monitoring strengths and
weaknesses in the supply.
4. THE BBC
We agree that the BBC should remain strong,
independent and the cornerstone of public service broadcasting
in the UK.
Throughout the Charter Review process, we made
it clear that—in return for over £3.5 billion of public
money—the BBC's output should be distinctive from commercially
funded services, and that there should be strict scrutiny of how
the BBC is governed and how it prioritises the investment of its
public funding. The careful balance of popular entertainment and
PSB is the defining condition of the BBC, and—as it has
done before—it must vary its offering in order to maintain
the perceived value of the fee.
SCBG welcomes the new principles that were outlined
in the Charter and Agreement around the systems and processes
that the new BBC Trust will use to determine public value, and
sustain the distinctiveness of the BBC's services. We were particularly
keen to ensure that the BBC's competitors could enjoy much greater
certainty about the limits of the BBC's ambitions in any number
of areas—and the introduction of the Service Licence regime
and Public Value Test is to be welcomed.
However, we will be watching carefully to ensure
that the promises made by the BBC during Charter Review are met
in full. Our members have already digested the BBC's "Creative
Future" strategy, which envisages swathes of new activity
in a number of areas in which we are already active. As the BBC's
new services are developed and as current ones evolve, we will
hold the BBC Trust to the high standards to which it has committed.
5. PUBLIC FUNDING
FOR OTHER
BROADCASTERS
The BBC's near monopoly of public funding inevitably
influences the capacity of other players in the market to deliver
programmes of range, diversity and quality. It is true—however—that
the steady march of digital switchover is likely to reduce the
BBC's reach over time. As Ofcom points out, this is also true
for the commercial PSBs who have previously been the only source
of PSB plurality. Today, almost two million viewers never watch
the public service broadcasters during a specific month. [3]Moreover,
data of viewing of PSB channels as a proportion of total viewing
over the last five years shows a steady decrease, with the PSB
channels accounting for 80.4% of total viewing in 2002, dropping
to 75.3% in 2006. [4]In
multi-channel homes, where viewers have access to the majority
of commercial digital channels, many of whom are members of SCBG,
viewing of PSB programming on these channels is significant, with
70% of viewing to children's programming, 52% of documentaries
viewing, and 47% of viewing to UK/ROW-originated films occurring
on commercial digital channels. [5]
Research commissioned for SCBG from David Graham
Associates demonstrates that genres traditionally held to be PSB
content are increasingly broadcast and viewed outside the subsidy
system. In fact, commercial digital channels are the dominant
providers of large swathes of PSB programming, offering significant
amounts of content that meets PSB objectives and characteristics
as defined by Ofcom. They also uniquely address particular groups
and communities of viewers.
Some programming and channels supplied without
public intervention already contribute to PSB purposes but many
more of them fulfil characteristics such as high production values,
innovation and originality. Many channels are contributing by
serving minority cultural or ethnic interests, engaging audiences
groups such as 16-24-year-olds that are increasingly disenfranchised
from mainstream PSB programming, or developing new on-screen and
production talent.
Commercial multi-channel broadcasters are also
adding range, diversity and specialist interest services despite
the entry of the terrestrial digital networks as direct competitors
in many areas—a development that has had a significant economic
impact and affected not only the investment capability of new
commercial channels but also their scheduling and programming
decisions.
The research commissioned by SCBG shows the
following striking examples:
Total of PSB Programming across Channel
Groups
| Hours of PSB Programming, October 2006:
| | | |
|
| Genre | BBC Terrestrial
| Commercial Terrestrial | BBC Digital
| ITV, C4, Five Digital | Commercial Digital
|
| Arts | 16 | 17
| 35 | 3 | 843
|
| Children's | 156 | 177
| 645 | 760 | 6,459
|
| Current Affairs | 90 |
65 | 800 | 0
| 311 |
| Documentaries | 140 | 162
| 193 | 309 | 9,419
|
| Films: UK/ROW | 21 | 49
| 9 | 264 | 1,807
|
| News/Weather | 243 | 125
| 613 | 10 | 751
|
| Source: DGA Metrics. |
| | | |
|
| % of PSB Programming, October 2006:
| | | |
|
| Genre | BBC Terrestrial
| Commercial Terrestrial | BBC Digital
| ITV, C4, Five Digital | Commercial Digital
|
| Arts | 2% | 2%
| 4% | 0% | 92%
|
| Children's | 2% | 2%
| 8% | 9% | 79%
|
| Current Affairs | 7% |
5% | 63% | 0%
| 25% |
| Documentaries | 1% | 2%
| 2% | 3% | 92%
|
| Films: UK/ROW | 1% | 2%
| 0% | 12% | 84%
|
| News/Weather | 14% | 7%
| 35% | 1% | 43%
|
Source: DGA Metrics.
|
| | |
| |
The analysis reveals that, for the majority of genres, commercial
digital channels provide more PSB programming than either the
BBC (including its digital services) or the advertiser-funded
terrestrial channels. 92% of arts programming is shown on commercial
digital channels such as Artsworld, 79% of children's programming
airs on channels like Nickelodeon, and 92% of documentary or factual
entertainment hours were shown on channels such as Discovery.
In addition, 84% of all UK/ROW-originated films were shown on
commercial digital channels. These also provided 43% of all news
programming. Current affairs is the only genre in which the BBC
(including its digital channels) provides the majority of programming
hours.
Our conclusion is that SCBG members—and other private
sector broadcasters—are offering significant innovation
and efficiency gains in the way PSB is delivered. This provides
a real alternative to approaches reliant on pumping more public
funds into broadcasting or establishing new PSB institutions.
We therefore believe that there is a growing role for multi-channel
in providing competition to strengthen and extend the appeal of
PSB in future. We believe there are gaps in public service provision
where new delivery platforms, beyond the main terrestrial channels,
are offering real benefits and added value, for example by accessing
a particular demographic, improving value for money and adding
pressure for innovation.
We believe that future policy in this area should build on
such foundations. If Ofcom—or other policymakers—believe
that there are gaps in PSB provision, or that there is residual
programming that is felt to be socially desirable, then it is
commercial digital broadcasters that are ideally placed to secure
its optimal distribution. It is through this sector that new public
service growth could come, if it is permitted, incentivised, and
not faced either by an over-mighty BBC or new publicly-funded
institutional interventions.
Indeed, Ofcom's own suggestion in its 2005 PSB review said
that the contribution of commercial multi-channel broadcasters
to public purposes should be "recognised and incentivised".
Although phase three of that review acknowledged the contribution
of commercial digital channels to PSB and promised that Ofcom
would "consider ways in which some of the benefits of PSB
status [...] could be conferred on existing multichannel services
if they are considered to make a significant contribution to PSB
purposes and characteristics", to the best of our knowledge,
this idea has not been pursued further.
This approach has already been recognised by Government in
its direct funding of The Community Channel and Teachers' TV (both
members of SCBG). Public service can be as efficiently delivered
by small specialist channels with dedicated remits as by giant
organisations and dominant brands. Future public service broadcasting
policy must take account of this, rather than fight against it,
and foster the ability of independent broadcasters to deliver
valuable programmes cost-effectively to those audiences who have
chosen to watch them.
Based on this, we believe there should be a thorough analysis
of the many alternatives to public funding that have already been
proposed but insufficiently examined. These alternatives include
a number of other mechanisms for contestability in public funding,
including the Public Service Broadcasting Commission model outlined
by Lord Burns' panel in its report to the DCMS in 2005.
6. THE PRIVILEGES
OF PSBS
Within the context of these PSB criteria, SCBG questions
how far the commercial PSBs currently deliver them in their schedules—on
either their main channels, or on their spin-off digital networks.
It is clear to us that their public service contribution is disappearing
but their public service privileges remain.
The old model—as articulated well by Ofcom during its
review—extracted PSB obligations from commercial broadcasters
by granting particular advantages to them in return. Our concern
is that these advantages will not be eroded at the time of digital
switchover. Shorn of the majority of their PSB obligations, the
commercial PSBs will retain many of the advantages previously
afforded to them under the old pact.
One key benefit derived from PSB status was access to valuable
digital terrestrial spectrum at cost price. As we have progressed
towards switchover, this "digital real estate" has become
more and more valuable, yet the existing PSBs have been able to
launch channel after channel without any requirement to meet the
public purposes or characteristics outlined by Ofcom. Indeed,
many of the recently-launched services compete directly for audiences
and advertising with SCBG member companies, who enjoy no such
subsidy.
However, as stated above, many satellite and cable broadcasters
provide PSB content to a large proportion of the public and this
should be recognised. In addition, there are channels such as
Teachers' TV and the Community Channel which should be able to
benefit from DTT spectrum, but because of restrains on resources
cannot get on to the platform and thus achieve 24 hour coverage.
Such broadcasters are free to air and clearly have a public service
remit yet are disadvantaged because of the dominance of the entrenched
and expanded PSBs where most of the DTT capacity is taken up by
their commercial spin-offs failing to provide PSB content to a
greater extent than any of their commercial rivals.
Another especially pernicious example of the advantages of
being a legacy PSB is the ability to cross-promote between their
mass-audience terrestrial channel and their wholly commercial
multi-channel spin-offs. The value of the terrestrials' cross-promotional
airtime is enormous—and dwarfs any investment that any of
our members could make in advertising our channels in commercial
airtime. Consequently, the digital world will remain as unequal
as the analogue one it replaces.
7. PUBLIC SERVICE
BROADCASTING AND
NEW MEDIA
The challenges brought by digital are compelling broadcasters
to boost their online offerings, and to launch on-demand services
that cater to audiences' increasing desire for control over their
viewing.
The diverse membership of the SCBG means that its members
already offer online distribution across all genres of content,
from children's animation on mobile handsets to the delivery of
non-linear news services. The phenomenon of "user generated
content" has also stimulated innovative new services. Online
offers valuable opportunities for many companies to extend their
brands beyond conventional content distribution with ancillary
services, such as branded games and podcasting. Broadcasters also
provide consumers with opportunities to interact with each other,
and to feedback directly to the channels, through chat rooms and
e-mail. Some are also offering business-to business services,
such as financial news, which are likely to represent a significant
portion of the market for paid for content.
SCBG members are following very closely the launch of the
BBC's on-demand iPlayer, and are assessing the extent to which
it will affect their activities. If approved by the BBC Trust
(which is currently considering the outcome of Ofcom's market
impact assessment), the iPlayer will position the BBC as a significant
player in the broadband market, and will be a formidable competitor
to other online content providers. Many SCBG members believe that
the BBC's plans disincentivise them to invest in on-demand services,
since all of the BBC's content will be available for free. We
therefore welcome Ofcom's rigorous approach and its suggestions
that the parameters of the iPlayer need to be limited in order
not to stifle competition. [6]
SCBG members have responded individually to the Public Value
Assessment consultation process and we do not seek to summarise
their various positions here, but all agree that the approval
process must pay due attention to the views of those companies
who are building new businesses in this space. In particular,
the future evolution of the iPlayer must be subject to rigorous
oversight by the Trust. Any further new uses for the iPlayer must
be subject to a new Ofcom Market Impact Assessment and trust Public
Value Assessment and not be allowed through as varieties to an
existing service. The BBC Trust licence must state the precise
limits for each BBC service and any extension to this must be
subject to rigorous review.
The BBC is—of course—not the only PSB involved
in new media activity. Channel Four has recently launched its
"4OD" video-on-demand service, and ITV will soon launch
its Broadband offering. All in all, the PSBs have succeeded in
establishing leading positions in this emerging market, thanks
to the leverage afforded by their privileged positions in analogue
television.
8. THE VIABILITY
OF EXISTING
FUNDING MODELS
As the inquiry's terms of reference do not include the issue
of the BBC licence fee, and the licence fee settlement is concluded,
we will not address this issue in this submission. We would however
note that the BBC's ability to retain an adequate level of support
for public funding will, as ever, remain down to its ability to
present a value mix that generates enough public support. This
makes the BBC's ability to deliver PSB highly contingent on many
factors that are uncertain and impossible to predict with accuracy.
Channel 4's funding model is currently the focus of an Ofcom
review. Channel 4's belief is that it faces an imminent funding
gap, which will need to be filled in some way. The corporation
had previously lobbied for direct funding from the BBC licence
fee, but this has since evolved into a less specific demand for
support via indirect means—such as more gifted or subsidised
spectrum.
It is not clear to us where Channel 4's financial difficulties
lie. Its ability to pay more than £40 million for the latest
series of US import "Desperate Housewives" would appear
to be prima facie evidence of a healthy balance sheet. In recent
years, Channel 4 has been uniquely successful in an otherwise
difficult market for TV advertising. It is unclear to us how Channel
4's public service obligations—which were previously the
source of its unique market position and audience appeal—are
now a burden that needs relieving through further public subsidy.
We await Ofcom's initial conclusions with interest.
9. THE PUBLIC
SERVICE PUBLISHER
As SCBG understands it, the PSP is conceived as a new institution
that will fund and deliver public service content in an online
world. It is an attempt to ensure that as audiences move away
from traditional modes of distribution and into the new media,
PSB content is still available to them.
Ofcom published its latest thinking on the PSP on 24 January
2007 and we will examine it very carefully before responding to
the consultation. However, we would make a number of points of
principle in advance of our submission to Ofcom.
SCBG expresses a number of reservations about the proposal,
based on our natural bias against public intervention wherever
necessary. As we have argued above, the existence of a publicly
funded competitor inevitably affects investment decisions and
commercial strategy—and wherever possible, we believe that
competition is the optimal way of achieving public policy outcomes.
The very fact that Ofcom is even contemplating such a proposal
will serve to disincentivice commercial companies from investing
in new media ventures.
While we agree that plurality should be at the heart of any
public service broadcasting policy, we question whether this is
best delivered by creating an entirely new publicly sponsored
and publicly funded institution. As we have noted above, not only
are commercial multi-channel broadcasters already active in a
wide range of PSB genres, they are also pioneering new distribution
technologies and building relationships with audiences via non-linear
as well as linear means. To reiterate a point made earlier: policy
should take account of provision already in the market, and work
with the grain rather than against it.
Moreover, we would be especially concerned if any new PSP
were established under the umbrella of one of the existing PSBs.
Such an approach would perpetuate the privileged position of these
broadcasters, and would not contribute to plurality. Ofcom should
consider how best to adopt a channel and platform neutral approach
to this issue. Were a new source of funding for PSB content to
be available, many SCBG members would welcome the opportunity
to compete fairly for commissioning and distribution opportunities.
While the idea of a PSP deserves greater consideration, we
urge Ofcom to consider very carefully whether it is the best answer
to the challenges that Ofcom has identified. Without clear evidence
of a market failure in PSB-style content in new media, it will
be hard to justify.
10. CONCLUSION
It is inevitable, regardless of Royal Charters or Acts of
Parliament, that public service broadcasting in the digital age
will consist of a wide plurality of providers serving audiences
via a plurality of media. On commercial multi-channel television
there is already more Mozart than on the BBC; more health advice
than on Channel Four; more news—independent and impartial—than
on ITV1, and more documentaries than on any of these channels.
In fact, the commercial multi-channel broadcasters have provided
to the UK public large volumes of the types of programming that
match Ofcom's PSB criteria, and have done so without public subsidy
or regulatory requirement. These channels provide real choice
and plurality to the market. Choice and competition should therefore
be at the heart of any broadcasting policy, and include recognition
of the contribution the independent sector has made and can make.
However, the independent sector can only continue to invest in
this market if there are enough incentives for them to do so.
Ofcom as an evidence-based regulator should acknowledge the
investment in PSB programming by the independent sector when looking
at the future of public service broadcasting and assessing the
need for another PSB entity in this market. Ofcom's remit to promote
fair competition can only be achieved by tough scrutiny of the
incumbent operators in the market.
Regarding the BBC, we expect the BBC Trust to deliver a clear
benefit to the licence payers by keeping the BBC services truly
distinctive from the offerings by the commercial operators.
Most arguments in this paper have been put to Ofcom at numerous
occasions, but we are yet to see any shift in its thinking on
these crucial issues. We therefore call on the Select Committee
to encourage investment incentives for independent broadcasters,
promote fair competition and acknowledge the contribution already
made by SCBG members to public service media content.
1
Digital Progress Report, Digital TV Q3 2006, 20 December 2006. Back
2
Ofcom review of public service television broadcasting Phase
3, issued on 8 February 2005. Back
3
See Table 1 in Appendix. Back
4
See Table 2 in Appendix. Back
5
See Table 3 in Appendix. Back
6
Ofcom's Market Impact Assessment published on 23 January 2007. Back
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