Memorandum by ITV Network Ltd, Channel
4 Television Corporation and Channel 5 Broadcasting Ltd
ITV, Channel 4 and Five are the three commercial
public service broadcasters (PSBs) in the UK. Between us we spend
nearly £1.7 billion on programmes every year, the great majority
of it on original UK programming. We have significant commitments
to the provision of news, current affairs, regional programming,
children's programmes, arts, religion, science, history, documentary,
drama and comedy.
30 OCTOBER 2006
Although we are competitors for audiences and
revenues, we have common concerns about the existing Television
Without Frontiers (TVWF) Directive and the proposal to amend it
via the Audio-Visual Media Services (AVMS) Directive. It is on
that basis that we are jointly submitting this memorandum.
We welcome the inquiry being undertaken by the
House of Lords Sub-Committee into the proposed Directive, and
are glad of the opportunity to submit evidence to it. In this
short paper we comment firstly on the background to the new Directive
and its appropriateness to the current position of television,
and in the process attempt to address the first two sets of questions
posed by the Sub-Committee. We then go on to discuss the specific
issues raised in the third set of questions.
THE NEED
FOR A
REVISED DIRECTIVE
The Television Without Frontiers Directive has
been the principal EU instrument for regulating television since
1989. But the television landscape has changed hugely in the last
17 years, and despite some amendment the Directive belongs to
another era. The traditional model for regulating commercial broadcasting
involved granting a limited number of licences, guaranteeing limited
competition in return for prescriptive regulation. Such regulation
has been both positive (such as requiring investment in European
production) and negative (such as limiting the amount, nature
and scheduling of advertising). This has been justified on the
basis of protecting the interests of viewers who had limited channel
choice.
But today market entry is straightforward and
cheap and viewers have almost unlimited choice. In short, the
supporting assumptions of traditional television regulation are
breaking down. It is important to understand in this context that
the advertising revenues of the commercial PSBs are under real
pressure from two main directions: increased channel choice and
new media.
Today over 70 per cent of households in the
UK have multichannel television via the Sky, cable and Freeview
platforms. This has meant a fragmentation of viewing, as audiences
have ever more choice from an increasing number of channels, and
as a result advertising revenues for the public service broadcasters
are coming under increasing pressure. A growing proportion of
TV advertising revenues are now going to digital channels which
typically have much lower levels of original content and rely
to a greater extent on repeats and acquired content.
The growth of broadband and mobile telephony
is leading to the development of new media platforms that provide
a great variety of audio-visual content, funded at least in part
by advertising. This means television is facing competition from
a greater range of sources than ever before: the US studios' distribution
arms, new media players with a global reach (eg Google and Yahoo!)
and other companies with no historical connection to television
or content at all (Wal Mart and Tesco have both recently announced
plans for online delivery of content). Online and mobile activity
is competing with television for viewers' time and advertisers'
budgets. So far we see few signs that these new entrants will
invest much in original European content; and at present they
face no restrictions on online advertising or product placement
similar to those on television.
As broadcasters we are responding to these changes
by developing our own new businesses. But we believe it is also
in our viewers' interests that the Directive be updated, since
the alternative would be for the existing highly restrictive Directive
to continue to apply to traditional television while the new media
that compete increasingly with television remain unregulated and
unrestricted—an increasingly unlevel playing field.
Our main concern as broadcasters is to ensure
our ability to compete effectively with new entrants in the tough
new markets of the future and to continue to generate the revenues
that will pay for the high quality programming on which we have
built our businesses and our reputations.
Over 90 per cent of our funding comes from
advertising revenue. For over 50 years UK viewers, whether rich
or poor and wherever they lived, have benefited from advertiser-funded
television providing them with quality programmes free of charge.
We wish to continue to provide such rich and varied schedules,
in spite of the increasingly competitive environment in which
we have to operate. But to do that we need a more flexible Directive,
with far fewer detailed controls over how we raise revenues, that
also treats all television-like services on a comparable basis.
We also believe the new Directive must address
the audio-visual landscape that lies ahead, not just the one that
exists today. The Directive is likely to be in force well into
the second decade of this century, and so needs to be based on
a full appreciation of trends towards greater choice and competition,
the continuing emergence of new platforms and the likely convergence
between traditional television and internet-based content.
DEFINING THE
NATURE OF
THE REGULATED
SERVICES
We support the draft Directive's distinction
between linear and non-linear services. Our main concern is that
new services which have the characteristics of television should
be regulated like television. So services where a provider decides
whether and when programmes are transmitted or made available
according to a schedule setting out when a particular programme
will be available, and where the objective intention of the service
provider is that all viewers will receive that programme at the
same time, are to all intents and purposes television services.
This would be true whether services are provided via traditional
television platforms, via IPTV, or via mobile television, and
whether they are encrypted or unencrypted.
It has been suggested that online transmission
of individual live events such as sports matches or music concerts
should not be classified as linear services. But an event relayed
live (by whatever technical means) is provided at a single point
in time decided and publicised by a service provider, with the
intention that all viewers receive it at the same time and so
by definition should be treated like other linear services. In
particular, such services should not be able to evade the rules
on listed events or on advertising when they are essentially forms
of television service.
We believe that one of the strengths of the
linear/non-linear distinction is that it is technology neutral,
and so should survive the proliferation of new ways of delivering
television content in future.
JURISDICTION AND
COUNTRY OF
ORIGIN
We strongly support the maintenance of the Country
of Origin principle, which has underpinned the existing Directive
and should be maintained in the new one. We would be seriously
concerned by any dilution or scaling back of this principle, as
that could easily lead to confusion about where regulatory responsibility
for a service lies. The UK has a strong and rigorous regulatory
system that we are obliged to comply with. It would be costly,
burdensome and bureaucratic if in addition we had to comply with
the regulations of other territories in which our service could
be received.
REGULATORY APPROACH
As television broadcasters we are used to complying
with the terms of the licences issued to us by our regulator.
However, we recognise that in appropriate circumstances co-regulation
and self-regulation can provide effective alternative models for
compliance with legislative requirements.
Over the last two years we have had experience
of the new co-regulatory arrangements for broadcast advertising
content, which we believe are working well, have the trust of
our viewers, and have benefited from the involvement of the advertising
industry.
However, we find the reference in the draft
Directive to the inter-institutional agreement on co-regulation
unhelpful, as its inclusion may require unnecessary changes to
existing regulatory regimes that are working satisfactorily and
inhibit the development of appropriate self- and co-regulatory
arrangements in other areas (examples include the Advertising
Standards Authority in its regulation of non-broadcast advertising,
and the Association of TV on Demand (ATVOD), set up to cover television
video-on-demand services).
ADVERTISING AND
COMMERCIAL COMMUNICATIONS
Our primary concern is to remove the restrictive
and intrusive rules about advertising contained in the current
Directive, so that we have greater flexibility in future to raise
the revenues we need to finance our investment in programming.
Although the draft Directive goes some way in this direction,
it does not go far enough and in one important respect is extremely
retrogressive.
We welcome the removal in the draft Directive
of the 15 per cent daily limit on advertising time and of the
"20 minute rule", which rigidly prescribes how much
time must elapse between commercial breaks and hence prevents
broadcasters experimenting with more flexible break patterns.
But we strongly oppose the introduction of a
"35 minute rule" for news programmes, children's programmes
and films. This rule would prevent half hour news and children's
programmes from continuing to carry a centre break—even
though in the UK such programmes as ITV's nightly evening news
have had centre breaks for decades, with no complaints from viewers.
The rule would make very little difference in practice to the
current restriction on how many breaks can be taken during a film.
The primary effect of a "35 minute rule"
would be to make broadcasters less likely to invest in such programming
in the future. News and children's programmes are amongst the
least commercially viable genres at present—severely restricting
the amount of revenue we can raise around them in increasingly
competitive markets would render them even more marginal. It would
also mean that a channel like Channel 4's Film4 free-to-air channel—which
currently devotes 40 per cent of its schedule to British, European
and other world cinema titles—would come under increasing
pressure to rely on more mainstream—"blockbuster"
titles, without a meaningful relaxation of this rule.
We would also like to see the deletion of the
rule that isolated spots can only be shown exceptionally. We do
not see this rule serving any useful purpose, and it will inhibit
broadcasters from experimenting with alternative break patterns
that might prove more attractive to viewers. In addition, the
rule could inhibit the development of viable new media businesses
such as mobile TV.
In principle we welcome the proposal in the
draft Directive to allow product placement for the first time,
with appropriate safeguards. We believe product placement can
help broadcasters maintain the attractiveness of television to
advertisers, as part of our overall advertising proposition, and
hence strengthen our ability to continue investing in original
content. But we also believe that product placement must be carefully
regulated so our viewers are aware it is taking place and it does
not interfere with the editorial integrity of our programmes nor
appear unduly prominent.
Although we broadly welcome the provisions in
the draft Directive, we have some reservations about aspects of
the way in which they are framed. Although it is essential for
viewers to be made aware of product placement, we do not believe
they necessarily need to be informed at the beginning of each
programme; the specific manner in which transparency is achieved
should not be specified in the Directive but left to Member States
to determine. And the Directive should be amended to ensure that
product placement rules extend neither to prop placement (which
is permitted already in the UK under the Ofcom Broadcasting Code)
nor to acquired content (since acquiring broadcasters can have
little control or knowledge over the inclusion of product placement
in such programmes; again, this is recognised already in the Ofcom
Broadcasting Code).
PROTECTION OF
MINORS AND
HUMAN DIGNITY
We question to what extent the sort of proscriptive
content regulation with which we are familiar as broadcasters
can be applied easily to the wide range of non-linear services
available on the internet.
MEDIA PLURALITY
AND CULTURAL
DIVERSITY
Each of us exceeds the existing European production
quotas, but primarily because we are in the business of satisfying
the tastes and preferences of UK viewers (and have had sufficient
revenues historically to compete on this basis) rather than in
response to regulation. The increasing proliferation of consumer
choice is likely to make it more difficult to enforce production
quotas on content providers.
October 2006
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