The future of public service broadcasting Contents

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2Public service broadcasting: still relevant?

The role of linear broadcasting

14.It is received wisdom that linear broadcasting is yesterday’s technology, and that legislators and regulators need to adapt to an environment in which content is accessed on demand through a range of devices. But the evidence from many contributors to this inquiry, and the Covid-19 experience, somewhat confounds this picture.

15.Broadcast TV viewing figures have been falling in recent years as the emergence of global streaming services, such as Netflix, YouTube and Amazon Prime Video, has increased choice. In 2019, average viewing of broadcast TV per person, per day fell by 5%, with similar falls having already taken place in 2017 and 2018.21 Whilst Covid-19 temporarily reversed the long-term decline in viewing, by June 2020 combined PSB (public service broadcaster) viewing share had fallen back down to its lowest levels since August 2019.22

16.However, linear broadcasting remains an important service to certain groups in society. For example, Ofcom reported that in 2018, over-75s watched an average of 349 minutes of broadcast TV a day compared to 25–34 year olds who watched 122 minutes a day.23 In 2019 AgeUK found that 225,000 older people in the UK can go a whole week without speaking to anyone,24 and there is general consensus that access to broadcast television helps combat loneliness and isolation.25 Despite the long-term decline in viewing, we recognise that linear television remains crucial to certain audiences.

Universality and accessibility

17.One of the key principles of public service broadcasting is that programming is universally available, free to everyone in the country at the point of consumption. According to Ofcom Chief Executive, Dame Melanie Dawes:

universality is a core part of what makes public service broadcasting valuable. It is that ability to reach out to many audiences, and the availability of content for all people in the UK, free at the point of coming to air.26

Many submissions to our inquiry have also highlighted the importance of universality. Enders Analysis told us that “universality of access and ease of that access is integral to the PSB mission”,27 the Media, Communication and Cultural Studies Association told us that universality “remains an essential feature of PSB in the UK”,28 and Together TV said that “universality of access is key for our social, democratic and educational aspirations–as important as access to our roads and rail, to our schools, hospitals and town halls”.29

Broadcast vs online delivery

18.Broadcast television is currently transmitted via Freeview, the biggest TV platform in the UK, to approximately 18m homes.30 The Freeview service was originally solely delivered as broadcast TV via aerial but now also offers ‘Freeview Play’ which gives audiences with internet-connected devices access to live and on-demand programmes from Freeview channels.31 Approximately 85% of people still watch broadcast content every week,32 but overall television viewing habits are undoubtably changing. Netflix currently has in excess of 12m subscribers in the UK,33 Prime Video has 9.5m, Disney+ has 3.4m and Now TV has 1.9m.34

19.At some point in the future it seems likely that public service broadcasting will be delivered (or at least universally accessible) via the internet, but that is not the reality we confront today. According to Ofcom, approximately 190,000 premises in the UK do not have access to a “decent” broadband service, either from a fixed connection or from a wireless network.35 This means that whilst the majority of people in the UK theoretically have access to a broadband connection which would enable them to access to online TV services, there are still a significant number of households which do not. Last year, whilst undertaking an inquiry into broadband, we found that “significant variations in [broadband] coverage between residential and commercial properties, rural and urban areas, and the UK’s nations remain”.36 This is not a problem which will be solved any time soon: the Government has recently revised its target for nationwide gigabit-capable broadband coverage by 2025 down to just 85%.37

20.Furthermore, it is estimated that 11.3m people in the UK do not have the basic digital skills required to “thrive” in today’s increasingly digital world,38 and there are approximately 7.5% of UK adults who have never been online.39 Arqiva told us that it is estimated that as many as 1.8m households could lose television and public service broadcasting services if they were entirely internet-based.40

21.Whilst some internet service providers such as BT have told us that the Government should be looking to “facilitate a transition to an IP-delivered universal basic TV service”,41 Virgin Media warns that:

A wholly internet-based television service considerably increases the pressure on broadband networks, and in turn requires significant investment into network capacity by broadband providers.

[ … ]

If the whole PSB system were to move to a wholly internet-based service, broadband providers would see [ … ] considerable demand and pressure on their networks much more frequently.42

22.A universally accessible online service might not be deliverable at present, but the fact remains that overall, audiences are increasingly accessing content online. Ofcom have made it clear that PSBs need to cater to those online audiences, whilst also continuing to provide a sufficient linear offering.43 However, retaining linear provision whilst also increasing and improving on-demand provision to compete with global players with deep pockets requires resources.

23.PSBs continue to face budgetary constraints.44 The diminishing return of the licence fee as a result of increasing evasion and changes to the age-related concession is putting pressure on the BBC, and the long-term decline of TV advertising has impacted all of the commercial PSBs. These pressures have further been exacerbated by the Covid-19 pandemic as it continued throughout 2020. For example, the BBC is having to make savings of £125m this year as a result of the Covid-19 pandemic.45 Channel 4 had to cut its commissioning budget by £150m at the beginning of the pandemic due to a significant drop in the advertising market,46 and ITV introduced a range of cost-saving measures including salary reductions and bonus scheme suspensions.47 With the exception of the BBC, all of the PSBs also utilised the Government’s furlough scheme.48 When asked how PSBs should be increasing their online offering whilst maintaining their linear provision, all within the context of diminishing budgets, Dame Melanie Dawes said that PSBs needed to:

continue riding both horses and provide the more traditional broadcast services on which many people continue to rely, while also catering increasingly for the fact that newer audiences, in particular, do not want to view in that way. It does mean they have to double run.49

24.Universality is at the heart of public service broadcasting and should remain so. Linear broadcast television by PSBs remains important and with delays to full fibre broadband rollout, a wholly online public service broadcasting system allowing for universal access is not yet viable. During the current period of transition, whilst a significant amount of content is being made available online, the interests of consumers who rely on linear TV must be preserved. Ofcom continues to tell PSBs to do more with less, but does not detail how they expect this to be done. Expectations for, and the remits of, public service broadcasters have to be realistic in relation to the available funding. If budgets are going to continue to decline in real terms, the Government should review the expectations set for PSBs.

Impact of Covid-19

25.The Covid-19 pandemic has had a significant impact on the entire UK broadcasting industry. The Department for Digital, Culture, Media and Sport described this period as one “of unprecedented challenges for the [broadcasting] sector”, causing “significant financial and practical impacts” across the entire industry.50 When the pandemic first hit, production on many popular shows such as EastEnders and Coronation Street stopped, and all PSBs reduced the number of episodes aired each week to ensure the programmes could stay on air for longer.51 Large gaps also appeared in broadcasters’ schedules with the disappearance of live sport.52

26.Alongside an increase in repeat programming (described by the BBC as a mixed schedule including “some of the classics”),53 broadcasters also had to innovate: production methods were adapted and broadcasters like Channel 4 reported that they were making programming “cheaper and faster”.54 For example, a number of Jamie Oliver’s ‘Keep Cooking and Carry On’ episodes were filmed during the first ‘lockdown’ on his iPhone, without a camera crew, from his own kitchen.55

27.During the lockdown period, public service broadcasting was used by the Government to provide daily news conferences. These briefings were broadcast live on BBC One and played a big role in disseminating important information about the Covid-19 pandemic and relevant restrictions. The lockdown announcement on 23 March 2020 alone averaged 28m viewers overall, and 18.8m viewers tuned in live to BBC One to listen to the Prime Minister explain how lockdown plans would be eased on 10 May 2020.56 Access to news and up-to-date information via broadcast PSB content was, and continues to be, particularly important for older people who are less likely to have access to the internet: “While virtually all (99%) of young adults use the internet, less than half (47%) of over 75s are online.”57

28.Beyond providing access to important information, broadcast TV has also brought the nation together, creating shared experiences and delivering key public health information.58 The top two programmes in 2020 in terms of viewing figures were Prime Ministerial statements about lockdown restrictions: the Prime Minister’s statement on easing lockdown on 10 May 2020 received 18,753,000 views on BBC One, and the statement announcing the first lockdown on 23 March 2020 received 14,612,000 views on BBC One. However, it was not just BBC news specials which brought the nation together; of the ten most viewed programmes in 2020, three were episodes of ITV’s Britain’s Got Talent.59 The Covid-19 pandemic has highlighted the role that PSB content can play in bringing the country together creating shared national experiences and providing access to topical, UK-specific information and entertainment.

The role of news

29.The UK has a wide range of news providers: commercial PSBs, the BBC and other broadcasters, such as Sky, provide a choice of broadcast news, and new entrants to the market in recent months demonstrates an appetite for plurality. Some submissions have emphasised the importance of a “plural, trusted and vigorous media” to a “functioning democracy”,60 and that by “creating more informed citizens”, public service broadcasting can make a “significant contribution to democracy”.61 The issue of universal access to this information has also been raised,62 as well as the view that countries around the world which have “strong public service broadcasters have more informed populations” than those which are more reliant on commercial news providers.63

30.Ofcom found that “trusted and accurate” news was considered to be the most important feature of public service broadcasting.64 Each PSB fights hard for the mantle of “most trusted” in its news provision, and the survey evidence varies. In December 2020 Ofcom confirmed that levels of trust in broadcasters’ news provisions are “consistent” at around 70%,65 and Table 1 provides a breakdown of how each PSB was rated in Ofcom’s News Consumption: 2020 report:

Table 1: Attributes of TV sources (2020)

% of regular users rating each source highly (7–10)

	BBC TV	ITV	Channel 4	Channel 5
Is trustworthy	71%	71%	70%	65%

Source: Ofcom, News Consumption in the UK: 2020 (13 August 2020), p 73

In contrast, news from social media platforms performed worst in terms of trustworthiness: Facebook, Twitter and Instagram all scored between 32% and 39%.66

31.Even before the Covid-19 pandemic, TV news provision by PSBs was among the “most used, and trusted, sources of reliable news and information across all ages”.67 However, during the pandemic, the number of people accessing broadcast news expanded significantly: average daily news viewing (across all channels) increased by over 90% in March 2020 compared to the previous year.68 Whilst is important to note that viewers have also been turning to other broadcasters during the pandemic, for example, Sky News saw a “more than 200% increase in viewing” at the end of March 2020,69 and the Government told us that the BBC in particular was found to be the most “sought-after source of news”.70

32.Furthermore, during the Covid-19 pandemic and the rise of associated ‘fake news’ and misinformation, highlighted in depth in our Report ‘Misinformation in the Covid-19 Infodemic’, the value of news provision by PSBs has been further emphasised.71 Dr Caitriona Noonan, Senior Lecturer, Media and Communication in the School of Journalism, Media and Cultural Studies at Cardiff University, told us that “one of the things that has been illustrated during Covid is how much people trust the public service broadcasters in relation to news”.72

33.In addition to their usual news provision, most of which have continued throughout the pandemic, some PSBs went further: Channel 4 announced that it would dedicate £10m to producing shows about the impact of the coronavirus pandemic,73 and its FactCheck service has published many articles relating to the pandemic. In addition, BBC piloted an online tool, a chat bot, on Facebook Messenger to allow users to find accurate answers to their questions about coronavirus restrictions in addition to the latest advice and news. The bot drew on BBC News journalism and, where possible, responded to the specific question being asked. The bot could also provide relevant answers from the NHS website and the devolved nations’ health authorities, and could direct people to relevant articles from BBC News.74

34.The launch of the BBC’s chat bot service was prompted by an inability for the BBC to reach agreement on Google and Amazon’s use of BBC content on their respective smart speakers. At the beginning of the pandemic, the BBC and those platforms held talks to ensure that smart speaker users had access to accurate and impartial information about the pandemic. However, the BBC told us that an agreement could not be reached due to the lack of editorial oversight which would be afforded to the BBC by the platforms:

We were worried that if we did not have the ability to get questions from the public and then did not have the ability to choose ourselves what information to offer up, it could undermine our news values and our reputation for impartiality and accuracy. We tried to work with them to have a way within their systems of us having that editorial oversight. We were not able to do that75

35.The pandemic has reinforced the critical importance of free and easy access to trusted news sources. At a time of crisis, audiences have shown that they value the PSBs. PSBs have played a role in tackling the spread of misinformation online, and broadcast news specials have played a crucial role is disseminating essential information to the general population. However, in the case of Amazon and Google’s refusal to allow the BBC editorial oversight of its Covid-19 content and information hosted on their smart speakers, it would appear that these platforms have prioritised control of information over journalistic integrity.

Regional News

36.Whilst trust and impartiality have been outlined to us as important aspects of the news provisions by PSBs,76 some submissions have highlighted concerns about the decline in local and regional news provision, both by ITV and by the BBC. Voice of the Listener and Viewer told us that:

representation of the regions and nations of the UK will and must be maintained by the PSBs [but] recent reports that the BBC plans to reduce local and regional news and programming—thus mirroring the decline of ITV—do not give rise to confidence.77

37.Others feel that the local news and radio structure which currently exists “fails to deliver meaningful representation”.78 Following the BBC’s announcement that it would be cutting 450 jobs in News (a figure which later rose to 900 jobs from News and Nations & Regions),79 we put it to Tim Davie, the new Director-General, that in some cases, the audiences that local news and current affairs content is being broadcast to is over 200 miles away from where it is being produced.80 When we asked Mr Davie how local relevance was going to be improved in the light of further cuts, he told us that some of the local reporting “deserves a wider audience” and that there was “a case for concentrating [the BBC’s] current affairs resources on slightly less hours to get more audience and bigger investigations”.81

38.When we raised the issue of regional news with Dame Carolyn McCall, Chief Executive of ITV, she told us that “regional news is very heavily loss-making” for ITV, primarily because it isn’t able to take any advertising due to time constraints.82 ITV told us that it is the most regionally-specific out of all the news broadcasters83 but to avoid following in the BBC’s footsteps with cuts to its News division, other areas of the PSB compact84 need to be updated as soon as possible to ensure that “the benefits of being a PSB equal the responsibilities”.85 Whilst ITV said that it was “very, very proud” of its regional news offering,86 other organisations are not quite so positive about the Channel 3 news licence arrangements. For example, Sky told us that the current arrangement whereby the Channel 3 licence holder is required to provide competition to the BBC’s regional news provision “provides little incentive to create a truly distinctive or innovative service”.87 Instead, Sky suggest that a ‘franchise model’ should be adopted whereby “an award process could be held for the service, open to all, with clear specification of the core requirements, and with a defined duration for the franchise (for example, for five years).”88

39.The Covid-19 pandemic also emphasised the importance of local news, both on a regional level and on a national one, particularly when it comes to devolved issues such as health. In our session with Tim Davie in September 2020, we expressed our concerns at the way in which national news coverage of restrictions, which continue to vary from nation to nation across the UK, had caused confusion:

it is extremely frustrating to repeatedly hear news coverage saying things like, “The Health Secretary has announced new guidelines.” It is causing great confusion for people across the country, across the nations, and it is vital that broadcasters respect and distinguish between the devolved nations’ approach to the coronavirus.89

40.The pandemic has reinforced the importance of local and regional-specific news provision. The provision of news to Nations and Regions should not suffer further as a result of budgetary restraints. We perceive a real risk to the provision of regional-specific news programming, and we are adamant that the quality, and relevance to local people, of programming for the Nations and Regions must not be further jeopardised. Regional news programming must be representative of, and relevant to, the audiences it is broadcast to. We recommend that Ofcom undertake a review into the quality and relevance of the local and regional news provision, to be reported on before the new BBC Charter negotiations begin.

Reaching younger audiences

41.Viewing of broadcast TV is declining and has been for a number of years, but the most pronounced drop in viewing time is among the younger age groups.90 Whilst Covid-19 lockdowns had a significant impact on viewing (viewing by adults aged 16–34 increased by almost two hours per day in April 2020 compared to the 2019 average) the general trend over the last few years has been that of decline whilst the time they spend watching YouTube and subscription video on demand (SVoD) services continues to rise.91 The decline in broadcast TV viewing is more pronounced in the 16–24 age bracket: in 2019, 16–34 viewing stood at 1 hour 31 minutes (down 18% on 2018) whereas 16–24 viewing stood at 1 hour 10 minutes (down 22% on 2018).92 The decline is even more stark when you look at it over a longer period: in 2019, 16–34 year olds watched 78 minutes less broadcast TV than in 2010.93 Younger adults are also moving a lot of their solo viewing to other devices.94

42.Ofcom told us that, as declines continue, “it is becoming increasingly challenging for the broadcasters to deliver a full range of content to all audiences” but notes that “the PSB channels’ provision of original UK content still far outweighs what is available on other services”.95 However, this does not escape the fact that younger audiences “feel much less connection” to PSBs96 and that, for example, 16–34s are more likely to watch BBC content on a streaming service than on iPlayer.97 Despite those aged 16–24 spending almost an hour and half a day on YouTube, PSBs still primarily deliver their on-demand content via their own streaming services.98 Ofcom’s research shows that young people recognise the importance of public service broadcasting but that some struggle to see the personal value to them as an audience.99

43.There has already been some innovation by the PSBs to reach and retain younger audiences. For example, ITV launched a news service called “The Rundown” for 12–17 year olds on Instagram, Snapchat and Facebook which had 17m views in April 2020.100 ITV said that it needed to be “creative and proactive about being on all sorts of different channels”101 and has also increased its short-form content on ITV Hub to encourage better engagement with 16–34 year olds.102 ITV estimates that 80% of all 16–34 year olds in the UK are registered on ITV Hub and attributes this to both targeted campaigns and to the content itself.103

44.Channel 4 told us that, in terms of news, it has been distributing content on YouTube, Facebook, Twitter and Snapchat and has made a “really conscious decision” to invest in going where young people already are.104 Alex Mahon, Chief Executive of Channel 4, told us that the key to attracting younger audiences to the broadcaster was to find them on the platforms they use and “make sure they know it is from Channel 4 so that they recognise [the] brand”.105

45.James Purnell, then Director, Radio & Education at the BBC, told us in June 2020 that the BBC needed to “modernise” its services in order to “serve younger audiences better”.106 However, Tim Davie only mentioned younger audiences once in his first speech upon taking on the role of BBC Director-General.107 When we asked him whether this signalled a change in priorities for the BBC, he said that reaching underserved audiences, including younger audiences, remained a priority but that:

It is not just about making youth output; it is about making sure that what we choose on the news, how we deliver our natural history offer, our comedy offer, is relevant and based on things that people of all ages can engage with.108

46.According to the Office for National Statistics, in 10 years’ time people born after 1996 (the earliest that someone in the 16–24 age bracket today could have been born) will represent 41% of the UK’s population.109 In order to improve their reach, Ofcom has suggested that PSBs should share insights on how they “reach audiences through less traditional platforms, such as social media and what has and hasn’t worked in those spaces may help to pool knowledge and reach younger audiences in particular.”110

47.The key issue, as we see it, is whether PSBs should be doing more to go where audiences are, putting content on platforms for audiences to watch there, or whether they should be trying to drive younger audiences to use their services. The former strategy comes with significant risk—commercial broadcasters earn a lot less money when their content is on third party platforms, and all PSBs risk losing a certain level of brand attribution. In addition, viewing on third party platforms might not currently be counted as reach, depending on how PSBs are evaluated. The latter strategy may not be successful given the established popularity and power of the platforms, but PSBs have also been somewhat hampered in their ability to innovate in the provision of their online services by regulation. For example, in accordance with its Charter, the BBC Board must undertake a Public Interest Test (PIT) whenever the BBC wishes to make material changes to its public services. The PIT requires the BBC to demonstrate that the value of the changes in question outweighs any potential adverse effects on the BBC’s competitors. The most recent PIT took place in 2019 when the BBC made changes to its iPlayer service to make programmes available online for longer.111 Hurdles such as the PIT inhibit the ability of PSBs to be agile and innovate at speed in order to compete with other online services.

48.Reaching younger audiences now, and building relationships with them, is of the utmost importance if PSBs are going to remain popular and sustainable in the long-term. They way in which people access content, particularly those under the age of 35, is rapidly changing and the Covid-19 pandemic has accelerated that change. Young audience behaviour is an indicator of future trends and PSBs are at risk of losing touch with under 35s. Unless PSBs do more to attract younger audiences, the core principle of universality that underpins their existence will be threatened. For these efforts to be successful, we recommend that changes be made to the regulatory structure to enable PSBs to innovate more rapidly and easily, and to be able to better compete online.

Provision for children

49.When the Communications Act 2003 came into force, it removed PSB quotas for children’s provision. Professor Jeanette Steemers, Professor of Culture, Media and Creative Industries at King’s College London, told us that the issue was “compounded by a ban on advertising for ‘junk’ food around children’s broadcast content in 2007” and that provision by commercial PSBs “waned” as a result.112 Professor Steemers told us that investment dwindled from £116m in 2006 to £70m in 2017, leaving the BBC as “virtually the only commissioner of UK originated children’s content”.113 In 2018, Ofcom conducted a review of children’s content across PSB TV and online portfolios. It identified a number of areas of concern across ITV, Channel 4 and Channel 5 programming, including a “lack of original, high-quality programmes [ … ] for older children”, a limited range of programmes to “help children to understand the world around them”, and a limited range of “original high-quality children’s programmes [ … ] that allow UK children to see their lives, in all its diversity, reflected on screen”.114

50.As a result of Ofcom’s findings, the PSBs concerned agreed to step up their provisions. Channel 5 committed to increasing the budget for its children’s offering, Milkshake!, by 100% and significantly increase the number of episodes it produced.115 Channel 4, which has a remit to appeal to older children, committed to develop a “new, digital-first service for 13–16s” which would focus on a new YouTube channel and would “include new commissions especially for teenagers”.116 ITV, which targets 6–12 year olds, committed to increase its budget for CITV by almost 10% and “develop a new online news and current affairs offering for 12–15s”.117

51.The decline in provision for children also prompted a horizontal intervention from Government. The Young Audiences Content Fund (YACF), established by the Government as a three-year pilot Contestable Fund in 2017, committed up to £60m to “stimulate the provision and plurality of public service-original UK content”.118 The fund, which is administrated by the BFI, has been well-received and The Children’s Media Foundation told us that:

there is some evidence that [the YACF] is starting to change the attitudes of the commercial PSBs, from seeing children’s programming as not sufficiently profitable to acknowledging its value to society and also to them, as a way of establishing brand recognition with their future audience.119

52.We are pleased that Ofcom highlighted the deficits in children’s programming across the PSB portfolios in 2018 and consider it vitally important that it continues to keep PSB performance in this area under regular review. We recommend that the Government evaluate the success of the Young Audiences Content Fund against its goals and extend the scheme if it is found to be increasing the investment in original content for children in the UK.

During the Covid-19 pandemic

53.When we asked ITV whether it had been increasing its provision of educational content during the period of school closures in 2020, it told us that it had looked “very seriously” at what it could provide but that it had “no education archive [and] nothing to draw on”.120 Some other broadcasters did provide some educational content. For example, Sky told us that “within three days of the lockdown, [it] also launched an extensive educational collection segmented into the curriculum-based learning groups via Sky Kids.”121

54.However, the main provision of educational content came from the BBC. At the beginning of the Covid-19 pandemic, the BBC announced that it would be launching its biggest ever educational offering to support the learning of children across the country whilst schools were closed.122 Following the first full week of UK school closures, BBC Bitesize had a weekly average of 4.8m unique visitors—approximately 198% higher than the same week in 2019123 and in June 2020, James Purnell told us that the BBC had “150 lessons online every week [ … ] over 14 weeks”.124

55.The vast majority of the BBC’s resources were only available online. James Purnell told us that the BBC tried putting lessons on the Red Button TV service but that audience levels were so low that they were “not even recording any audience on the system”.125 In January 2021 following another round of nation-wide school closures, the BBC moved some of its educational content onto linear TV. Starting in mid-January, the BBC offered a three-hour block of primary school programming on CBBC each day, and at least two hours of GCSE content on BBC Two every day.126 The BBC also continued to put ‘Bitesize Daily’ content, both for primary- and secondary-age children, on the Red Button and on iPlayer.

56.We recognise that the BBC has provided a record amount of educational resources during the Covid-19 pandemic, and particularly during the periods that schools across the country have been closed. Whilst this is a key example of the value the BBC provides, it took too long for the BBC to make more of its content available on TV. We applaud the work that the BBC has done to provide these resources but encourage it to continue making more of its content available by means other than the internet to ensure more equal access.

The TV licence fee

Decriminalisation of TV licence fee evasion

57.In the UK, any household watching or recording broadcast TV, or streaming programmes via iPlayer, is required to have a TV licence. A colour TV licence currently costs £157.50 a year127 and is set to rise to £159 a year from 1 April 2021.128 A single property only requires one TV licence to cover TV sets, computers, laptops, tablets, smart phones and any other device which can receive a TV signal. A TV licence is not required to watch SVoDs such as Netflix or Amazon Prime Video, or non-BBC programmes on online catch-up services such as All 4 or ITV Hub.129

58.In October 2014, David Perry QC was appointed by the then Secretary of State for Culture, Media and Sport to conduct an “independent review of the enforcement regime for television licence evasion”.130 The review was published in 2015 and the principal conclusion was that the “current system of criminal deterrence and prosecution should be maintained”.131 In February 2020, the Government announced the launch of an open consultation on decriminalising TV licence evasion, with the intention of ensuring “a proportionate and fair approach to licence fee penalties and payments is in place, which protects the most vulnerable in our society”.132 The consultation closed on 1 April 2020.

59.In March 2020, the BBC reiterated its opposition to decriminalisation and estimated that such a move would initially cost £300m, and over £1bn over the rest of the current BBC Charter period to 2027. The BBC put this down to “higher evasion by licence fee payers and higher transition and operation costs”.133 When we heard from the BBC in September 2020, the new Director-General said:

The BBC’s position is, I think, crystal clear on this, and it is endorsed by the Perry report and numerous bits of analysis. Regardless of any broader debates about the licence fee, as it is currently configured, I think this system is logically hard to beat. [ … ] The decriminalisation proposal, frankly, just does not pass the logic test.134

60.In October 2020, the Secretary of State for Digital, Culture, Media and Sport told us that the Government response to the consultation would be published “in relatively short order”.135 When asked if it would happen before the end of 2020, the Secretary of State said “Yes, I stand by that”.136 In December 2020, Minister for Media and Data Rt Hon John Whittingdale MP told us that he “would like to see it published before Christmas”.137 Unfortunately, this did not happen, and the Government response was only published on 21 January 2021.138 The Government response, however, was not a solid conclusion on the matter. Instead of setting out clear next steps, either to decriminalise evasion or leave the system as it is, the Government said that “the issue or decriminalisation will remain under active consideration” whilst it carries out further work to “understand the impact of alternative enforcement schemes”.139 The Government also said that it would “take forward these considerations in the broader context of the next licence fee settlement”.140

61.It took the Government almost 10 months to respond to the consultation on decriminalisation of TV licence fee evasion. Delays of this nature by the Government in reforming other areas of broadcasting, such as prominence, would be of significant concern. Of more concern was that the long-delayed response simply provided further uncertainty. The issue of decriminalisation could be used as a bargaining tool by the Government during the ongoing licence fee settlement negotiations with the BBC and S4C, and thereby undermine one of the core principles of public service broadcasting: that it should be removed from Government interference. We call on the Government to provide assurances that the issue of decriminalisation will not be used as a bargaining tool during the ongoing licence fee settlement negotiations with the BBC and S4C. We also recommend that the Government conclude its further work on enforcement schemes, and publish its findings, by the end of the current parliamentary session.

Licence fee non-payment

62.There is a wide spectrum of opinions when it comes to the TV licence fee. In 2019, the UK TV licence fee was ranked 6th highest in Europe, though lower than other European countries with similar national broadcast funding systems such as Denmark, Norway and Sweden.141 Licence fee evasion in the UK is currently between 6.5% and 7.5%.142 The BBC set itself a target of a 5.9% evasion rate by March 2021 but, in September last year, acknowledged that there was a risk that this target would not be reached.143

63.In September 2020, the BBC told us that, compared to other countries, the UK was in a “very strong position” and that “our evasion rate is low”, but that the BBC was “slightly behind target”.144 The BBC has also predicted that the increasing rate of evasion, which has been ongoing for a number of years, will continue until at least 2022–23.145 In its analysis of the 2019–20 evasion figures, the BBC noted that the factors within its model for calculating the evasion rate could not account for over half of the year-on-year increase in evasion. It concluded that this unexplained rise reflects “an increase in the pace of change in the media market in 2019–20 and the impact this has on viewer behaviour (such as increasingly consuming content via [SVoD] services)”.146

64.The continued rise in TV licence non-payment in the UK is a cause for concern, as is the fact that the BBC’s target of a 5.9% evasion rate by March 2021 will be missed by a significant margin. We are also concerned that the failure to resolve definitively speculation about decriminalisation of TV licence fee evasion could exacerbate the situation and recommend that the Government provides some certainty on this matter as soon as possible.

Funding models

65.We recognise the problems associated with the licence fee and, in the annex to this Report, explore the existing alternatives. None of these are sufficiently attractive to justify recommending, for the next Charter period, that they replace the current licence fee model, not least given the disruption and expense of doing so and on balance, the licence fee remains the preferred option for that period. The Government either needs to come out with a strong alternative to the licence fee that it can put to Parliament, or strongly support the current model for at least the next Charter period (2028 - 2038) and actively aid the BBC in driving down evasion.

The production sector

66.The strong, varied public service broadcasting ecology in the UK has played a significant role in the growth of the production sector in the UK. PSBs have been described as underpinning the wider creative economy and whilst SVoDs are beginning to invest more in production in the UK, the number of UK-originated content hours is hardly comparable. In 2019, PSBs provided approximately 32,000 hours of UK-originated content, whereas Netflix and Amazon Prime combined provided 164 hours.147 PSBs also produce and commission UK content in a wide range of genres whereas SVoDs tend to focus on high-end drama and documentary. Netflix told us that one of the main reasons it has chosen to invest in the UK was because of the impact of the BBC in “building the profile of the UK creatively, in nurturing talent [and in] investment in production”.148

Terms of Trade

67.With the introduction of the Communications Act 2003, the way was paved for the introduction of ‘Terms of Trade’ (ToT) agreements. ToT are a code of practice, of sorts, between PSBs and independent producers in the UK. The ToT meant that, for the first time, independent producers could retain the rights to their programmes, thus enabling them to generate additional revenue from their Intellectual Property beyond their original commission. The ToT only apply to ‘true indie’ production companies such as those which are wholly independent, not owned by a PSB or US studio, or part of a ‘super indie’ group.149

68.Prior to the ToT being introduced, the indie sector was “highly fragmented” and highly dependent on the PSBs, and independent producers had little scope to negotiate production fees.150 The ToT have played a huge role in the growth of the UK independent production sector: in 2003, it was estimated that the sector was worth £850m but today, according to Pact, the sector is estimated to be worth in excess of £3bn.151

69.The ToT arrangements currently only apply to PSBs in the UK. SVoDs, which are becoming major players in the market, are not subject to the same rules, and similar arguments that were historically made about the imbalance of power between PSBs and the production sector are now being made about SVoDs.152 However, SVoDs have a fundamentally different business model when it comes to commissioning content: they have bigger budgets, and secure exclusive rights to content with large upfront fees to production companies in exchange for the intellectual property assets. For example Michaela Coel, creator and star of the BBC series I May Destroy You, has spoken out about how she turned down a $1m offer from Netflix for the show because it would have required her to relinquish all of her rights to the content.153 When we questioned Netflix about this in September, it told us that it was not a blanket policy to insist on acquiring 100% of the intellectual property rights of all the shows fit commissions.154

70.Whilst a possible next step to address the imbalance could be to apply ToT to SVoDs as well as PSBs, CREATe (UK Copyright and Creative Economy Centre) cautions that:

[ … ] given that offering subscribers access to bundles of exclusive content on a multi-territory basis is at the heart of the VoD model, allowing producers to retain control of secondary rights presents significant challenges to a coherent and effective windowing strategy by the platform owners. It is plain, therefore, that simply attempting to transpose existing ‘terms of trade’ onto VoDs is both unwise and unworkable. It may well lead to VoD investment into new production leaving the UK.155

Professor Philip Schlesinger, Professor in Cultural Theory at Glasgow University and Deputy Director of CREATe, also told us that whilst it is unlikely that relationships between PSBs and independent production companies could be replicated with SVoDs, “there are still questions about what rights should be handed over in receipt of a one-off payment on the purchase of the production”.156

71.Current requirements on PSBs have generated a thriving production economy that has attracted the attention of streaming services, but the rise of video on demand is putting pressure on the Terms of Trade. Subscription video on demand services should invest in the production ecology as well as benefit from it, but any move to reform the Terms of Trade must take into account the diverging business models of the different commissioners in the UK production ecology.