72.Under the Communications Act 2003 (‘the Act’), public service broadcasting obligations extend to all BBC television channels and linear channels 3 (ITV, STV and UTV), 4 (Channel 4) and 5 (Channel 5). The obligations do not extend to additional channels (such as ITVBe, E4 or 5STAR) or to on-demand services for ITV, Channel 4 and Channel 5. Subscription video on demand (SVoD) services in the UK, like commercial broadcasters such as Sky, are not subjected to any obligations in terms of the type of content they produce. They have no regional quotas to fulfil and no specific content categories they are obliged to produce in, as is the case for public service broadcasters (PSBs).
73.According to the Act, public service channels are entitled to “such degree of prominence as Ofcom consider appropriate” within the electronic programme guides (EPGs). EPGs are an on-screen menu which allows the viewer to navigate through the channels available on their TV set. The channels which are given prominence on EPGs (including BBC channels, Channel 3 services, Channel 4, Channel 5 and S4C) are outlined within the Act. The Act requires Ofcom to draw up a code to regulate this provision and to review that code “from time to time”. In 2017, the Digital Economy Act added a requirement for Ofcom to report how EPGs provided information about, and access to, PSB channels and video on demand content.
74.In 2019, during its review of prominence, Ofcom made a number of recommendations to Government to ensure PSB content remained easy for viewers to find on internet-connected services and devices. The Act, which essentially pre-dates the widespread availability of TV content online, only covers linear prominence and one key recommendation of Ofcom’s review called for a new legislative framework. Ofcom also recommended that the initial focus should be on internet-connected TVs, including those connected through a set-top box or streaming stick. In December 2020, Dame Melanie Dawes, Chief Executive of Ofcom, told us that whilst Ofcom did not consider the issue of prominence to be “a crisis or a cliff edge”, Ofcom was still concerned that:
the situation has potentially slipped away still further because people are increasingly using smart TVs, smart sticks, and some of the new TVs you can buy do not necessarily have any of the public service broadcasters’ apps on the platform, let alone provided in a prominent way where you can find them easily.
75.In terms of prominence legislation, the BBC says that “updates to prominence legislation [should be] enacted without further delay”, ITV says “public service programming [must maintain] its prominence in the digital, online, on-demand era, and Channel 4 says that “updating and reforming the PSB prominence regime … should remain an urgent priority”. Channel 5 agrees that they should be established “without delay”, and S4C also says that it is “imperative that legislation is passed as soon as possible”. However, in December 2020, Rt Hon John Whittingdale MP, Minister for Media and Data, told us that it was “probably likely” that any legislative change in this area was at least two years away.
76.Not all organisations within the sector agree that legislative changes to prominence are required. For example, Samsung Electronics UK told us that:
Mandatory prominence requirements for PSB players on Smart TVs would generate costs for the sector in the UK, raising prices for consumers and also prevent them from benefiting from the latest technological advancements.
Samsung also notes that any new obligations would need to be applied to all platforms hosting content, not just Smart TVs, to ensure that competition is not “stifled” and Smart TV manufacturers are not disadvantaged. PSB player apps already feature on Samsung’s TV ‘launch bar’ for free because it acknowledges the “economic, creative and societal role that PSBs play in the UK”.
77.Sky also remains unconvinced by calls for extended prominence rules. It told us that “partnerships and commercial incentives tend to drive more effective outcomes than complex legislation”, Sky went on to say that PSB content is already “easily discoverable because we know that is what our customers and audience want”. Amazon also told us that whilst there are no requirements for it to provide PSB players with prominence on its Fire Sticks and Fire TV interfaces, “BBC, ITV and Channel 4 [players] are prominent”.
78.However, Digital UK, the operators of Freeview, told us of the issues facing organisations which try to negotiate with global platforms. Digital UK is regularly engaged in negotiations with platforms and TV manufacturers but told us that “even with its UK scale, it can prove difficult [for Digital UK] to negotiate for PSB prominence on televisions”. This chimes with the findings of research commissioned for Ofcom’s recent Small Screen: Big Debate consultation: “no PSB, with the exception of the BBC, has the ‘must have’ characteristics that are associated with leverage and bargaining power in relation to the global content aggregators”.
79.We are not persuaded by arguments that prominence can be left to the market simply because PSB content is popular and if an organisation such as Freeview, which represents the interests of over 70 TV channels, finds it difficult to negotiate with global platforms and TV manufacturers, it is unlikely that individual PSBs will find it any easier. As we touch on later in the Report, competition policy authorities are currently evolving their approach to platforms and applications with ‘strategic market status’ and how these can act as gatekeepers in online markets with potential for anti-competitive exercise of market power. Manufacturers of TV hardware (and their operating systems and consolidator TV apps) should be thought of in exactly the same way.
80.The Government has been too slow to act on Ofcom’s 2019 recommendations to update prominence legislation. We are frustrated that the Government expects the process to take a further two years; new primary legislation is urgently needed and the media ecology advances far too quickly for the Government to delay any further. We recommend that the Government prioritise new primary legislation to update the Communications Act 2003 and grant PSBs prominence which extends beyond the Electronic Programme Guide. The Government should seek to publish the Bill in draft in the upcoming parliamentary session, ahead of finding time to introduce and enact this legislation before the end of 2022. To ensure that prominence can be extended to online viewing platforms, such as smart TVs, we also recommend that PSB video on demand players be covered by their public service broadcasting remits.
81.Since 2015, the popularity of streaming services in the UK has increased significantly. Netflix had 14.8m subscribers in 2020 and Amazon Prime Video had 9.5m, compared to 4.4m and 1.2m respectively in 2015. At least 60% of households in the UK now subscribe to at least one SVoD service.
82.The streaming services we took oral evidence from during this inquiry had a variety of views on what they contribute to PSB ecology in the UK. YouTube view themselves as a “partner” of PSBs, offering them a “shop window” for their content for a “sufficient amount of money”. Amazon described themselves as having a “very collaborative relationship” with PSBs, and Netflix said it was trying to “constantly support” PSBs and that PSBs were “essential to maintaining and growing the creatively and commercially dynamic production landscape in the UK”. Between 2014 and 2018, co-commissions between SVoDs and broadcasters almost doubled from 16 to 30, in addition to which Netflix also recently released its first natural history co-production with the BBC: ‘Life in Colour’ with Sir David Attenborough.
83.Whilst SVoDs remain “relatively free from regulation” in the UK, they are still able to benefit from some of the horizontal interventions which have been introduced across the industry, such as the High-end Television Tax Relief scheme. They also benefit from the strong independent production sector which has, in the large part, developed and been maintained as a result of the existence of PSBs. The production of UK content still disproportionately falls to PSBs. For example, in 2019 PSBs funded 77% of primary commissions in the UK. PSBs also commission in a full range of genres, whereas SVoDs have made it clear that they do not intend to move beyond scripted dramas and documentaries into genres such as news and current affairs. Without this investment from the PSBs, it is unlikely that the production sector in the UK would be as strong as it is today.
84.In June 2020, Ofcom Chief Executive told us that PSBs needed to look further at their methods of distribution and, instead of “fighting a losing battle of drawing people to the more traditional ways of viewing”, they should go “to where the viewers are” and “strike a deal” with more platforms. However, some submissions to our inquiry have raised an issue with such an approach: that it may be easier said than done. In relation to online advertising, which is examined in further detail later in this Report, we have been told that platforms such as YouTube have standard terms and conditions which PSBs either have to accept, or accept that they simply cannot reach those audiences. Channel 4 told us that if it were to produce a programme and distribute it only on YouTube, with the current arrangements it “would not make enough revenue [ … ] to cover the cost of creating it”.
85.As well as co-producing content with PSBs, SVoDs such as Netflix and Prime Video are also significant customers of the PSBs: it is estimated that there is approximately 1,276 hours of UK PSB content on Netflix alone. In addition, content from the BBC, ITV and Channel 4 made up 3% of catalogues and 8% of viewing across Netflix, Prime Video and NOW TV combined in Q1 2019. According to Ofcom, the ability to access PSB content on platforms such as Netflix creates a “second window” and can drive engagement with younger audiences. For example, 16–34 year olds are more likely to watch BBC content on streaming services rather than through BBC iPlayer. However, Ofcom did note that there was a risk that these viewers would not associate the content with the PSB channel it originated on, which could “negatively affect the extent to which people value the PSB channels”.
86.When asked about the way in which PSB content, hosted on other streaming services, is labelled, Amazon told us that:
All of our content is labelled, and all of the people producing that are accredited. We would obviously expect that in a reciprocal fashion. If you went into Prime Video and looked up BBC shows, they will have a logo as the producer that physically produced that show. It is my understanding that we are accrediting everybody involved with the right branding.
Despite these assurances, it was easy for us to find examples of PSB content which was not labelled or branded clearly. A quick search on Prime Video’s iOS app for ‘ITV’ brings up some programmes with the ITV logo clearly displayed on the title image, the same for some of the Channel 4 content. However, typing ‘BBC’ into the search bar brings up a whole host of well-known BBC programmes, available on Amazon Prime Video, which do not have any obvious BBC branding. We acknowledge that some of the programmes have a small print acknowledgement of the original producers, but question whether this is quite within the spirit of accrediting everyone involved with the right branding. We believe that it is important that PSB originated content is clearly identifiable as such.
87.There are also questions to be raised about platforms and streaming services and their use of viewing data. Platforms are able to harvest data about their audiences but both Amazon and Netflix told us that they do not share any such data about the PSB content being hosted on their sites with Ofcom or the PSB from which the content originated. Amazon said that “there is good sharing of knowledge but [Amazon] don’t share finite numbers”, and Netflix told us that it doesn’t share data “because it would be commercially sensitive”. We do not believe that sharing top line viewer data about PSB-originated content with Ofcom and the relevant the PSB would be commercially sensitive. Streaming services are an important ‘second window’ for PSB content but without viewer data, it is difficult to fully assess the reach of PSBs.
88.We recommend the Government impose two specific requirements in relation to PSB content hosted on other streaming services in new media legislation. First, PSB content should be clearly labelled as such and branded with the logo of the PSB from which the content originated. Secondly, streaming services should be required to share top line viewing data—at the very least, the number of viewers—for PSB content they host with Ofcom and the relevant PSBs to enable full analysis of PSB reach, and the audio-visual landscape as a whole.
89.During the course of this inquiry, the issue of online advertising regulation has been raised on a number of occasions. Commercial PSBs told us that “competition for viewers and advertising spend has dramatically increased with the growing dominance of advertising-funded online digital services” and that “urgent action” is needed to address the inequality of regulation between broadcasters and online platforms. TV advertising revenue in the UK has been gradually falling over the last five years, and it is now estimated that television advertising revenues have fallen by £1bn since 2015. The market also took a significant hit during the Covid-19 pandemic.
90.However, it is challenging for PSBs to generate significant revenue from the sale of advertising on online platforms. Digital UK told us that “the demands that some of these technology giants place on commercial PSBs to share advertising revenue” for their content hosted on platforms is a real threat to PSBs. Indeed, Channel 4 also highlighted its concern that “the unbalanced bargaining relationship between online platforms and content producers” creates a risk to the “sustainability of public value content”. Platforms such as YouTube have standard terms and conditions for any content hosted on their platforms, including PSB content. PSBs need to be on these platforms in order to reach certain audiences but Channel 4 told us that:
The scale, market power and lack of viable alternatives mean that Google and Facebook can also set the terms by which they do business. This means content creators are forced to accept unequitable terms or fail to reach audiences on these platforms.
91.The concerns highlighted to us were echoed in a report published by the Competition and Markets Authority (CMA) in July 2020 which concluded that the Government needed to establish a “pro-competition regulatory regime for online platforms” to “act swiftly to address both the sources of market power and its effects”. Although the CMA did not consider broadcast advertising, the read-across is clear and in October, the Secretary of State told us that regulation of online advertisers would be brought into line with that of broadcasting: “at a time when traditional broadcasters are under revenue pressures, I do not want to accentuate a trend by creating a disparity”.
92.On 27 November 2020, the Government announced that a Digital Markets Unit would be formed to “support the sustainability of the news publishing industry, and help rebalance the relationship between publishers and online platforms”. When asked what success would look like for the Unit, the Minister for Media and Data said:
As long as we can be satisfied that there is a better competitive marketplace operating and that there is not abuse of what is a dominant position by one or two of the major platforms, I think that is a very important part of what needs to be done to support publishing.
The Minister also confirmed that legislation would be needed to regulate online advertising, and that a Digital Markets Bill could be expected within the current Parliament.
93.The CMA report notes that the concerns it raises in relation to dominance of platforms in the online advertising market can lead to “wider social, political and cultural harm through the decline of authoritative and reliable news media”. The ability for platforms like YouTube to control both revenue share from online advertising and also to control the distribution of news (and other content) online affects the viability of news media, reducing their ability to invest in news. In addition, broadcasters and other news providers are unable to control their own content and data, manage traffic to their websites and target advertising. However, these problems extend beyond news to public service broadcasting more generally; as PSBs have to rely more on YouTube and other social media sites to reach younger audiences in particular, advertising revenue from YouTube and other social media platforms becomes more important.
94.We are concerned that the full potential of the Digital Markets Unit is not being realised under its current proposed remit. We recommend that the Government should broaden the Digital Markets Unit’s remit to consider whether the dominance of online platforms gives them undue influence over the ability of consumers to access public service broadcasting content online and through streaming.
95.Where an established media brand is providing programming, it is not right to make the default assumption that YouTube’s contribution to the viewer deciding to watch that programme, and therefore its share of the value chain, is the same as where content is user-generated. For news, this approach would, if allowed to continue, over time erode the ability of PSBs such as ITV and Channel 4 to actually produce quality, well-researched news coverage. The Digital Markets Unit should also consider whether the standard terms and conditions for revenue sharing which are used by some platforms offer a fair return for PSBs in exchange for their content.
96.In November 2019, the BBC and ITV launched an SVoD service called ‘BritBox’ in the UK. The joint venture, which had already launched in North America in 2017, allows subscribers to access content from the broadcasters’ extensive libraries of drama and comedy at a cost of £5.99 per month or £59.99 per year. BritBox has not released any UK subscriber figures but in September 2020, its Managing Director Will Harrison said it was “ahead of [its] plan in terms of subscribers”.
97.BritBox is not the first time that PSBs have tried to collaborate on a commercial level. In 2007, BBC Worldwide, ITV and Channel 4 announced that they planned to collaborate on a video on demand service. Referred to as ‘Project Kangaroo’, it was planned that the service would launch in 2008 but in July of that year, the Office of Fair Trading referred the plans to the Competition Commission due to concerns that Project Kangaroo would stifle competition. In February 2009, it was announced that the Competition Commission had blocked the venture, concluding that such a service “would be too much of a threat to competition in this developing market”. The project was abandoned, and the PSBs continued to build their own individual online offerings.
98.Whilst the BritBox collaboration appears to have been well-received, and Ofcom has already recommended that PSBs collaborate and share knowledge to help them all reach younger audiences, we believe that there is more which can be done. Ofcom’s research shows that users value content being available “under one roof”. Whilst we recognise that the Freeview Play app offers live and on-demand content from Freeview channels, we believe that PSBs should be collaborating to create a ‘one-stop shop’ for their video on demand content. Not only could aggregating PSB content into one easy-to-navigate app encourage users to browse and watch their content more easily, it would also strengthen their position when negotiating with platforms and manufacturers for prominence.
99.Furthermore, research commissioned by Ofcom found that deals between content providers and platforms tend to be struck at an international level, whereby hardware shortcuts and pre-installed apps can be rolled out across several territories. International manufacturers may be “reluctant to make country-specific changes to hardware design”, as would be required for an individual PSB button, so collaborating to create a single on demand player could afford PSBs more bargaining power. That reluctance should not be allowed to relegate the UK PSBs to a less prominent position on hardware than non-PSB commercial content providers who purchase prominence. There is little point in requiring a PSB regime if it can be hidden from view by the actions of hardware providers. We recommend that the Government should make international manufacturers aware of the importance of prominence of PSB content to the UK and its willingness to consider regulation should PSB prominence be undermined by hardware design.
100.The findings of the Competition Commission in 2009 are now outdated, given the rate at which the market has changed and the dominance of global streaming services, and PSBs should be allowed to collaborate so that they have a better chance of competing in the now crowded video on demand market. Whilst we hope that prominence legislation will be extended to online platforms within the next 18 months, the Government’s track record on addressing issues within the media ecology does not fill us with confidence so PSBs should be taking steps to maximise their own bargaining power, and attract audiences, in this digital age. Rather than waiting for the Government to help them, we recommend that PSBs help themselves by exploring options for collaboration on a single video on demand platform, and Ofcom should support PSBs in this endeavour. We call on the competition policy authorities to make clear that, given the evolution of the broadcasting landscape, there is no automatic objection to such collaboration on market dominance grounds.
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203 As an example, popular BBC drama ‘The Fall’ is currently hosted on Amazon Prime Video. If you select this programme, and then select the ‘More details’ tab and scroll down, you come to some small print which states that the studio which produced the programme was ‘RJL Entertainment’ for series 1–2, and ‘BBC 2’ for series 3. There is also no BBC branding - for example, a logo - on any of the imagery.
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218 Qq713–714. Legislation to regulate online advertising would be in addition to the updated legislation we have called for in this Report to replace the Communications Act 2003.
219 Competition & Markets Authority, (1 July 2020), p 9
220 For comparison, the cost of the basic subscription to the top three SVoD services in the UK are as follows: Netflix (£5.99 per month), Prime Video (£7.99 per month/£79 per year), Disney+ (£7.99 per month/£79.90 per year).
223 ‘’Project Kangaroo’ - Final Report’, Competition Commission news release, , 4 February 2009
224 Ofcom, (8 December 2020), p 53
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