Summary
The way in which we watch television is changing. Twenty years ago, most people relied on five free-to-air terrestrial channels provided by public service broadcasters (PSBs).1 These broadcasters now face competition from hundreds of other channels and online services. Subscription video on demand services (SVODs) such as Netflix and Amazon Prime have enjoyed rapid success. They have made available thousands of hours of content at relatively low prices and offer each viewer a personalised experience. Almost half of UK households now subscribe to an SVOD, while YouTube is also a major competitor.
This is at a time of widespread distrust of news, with digital technology playing an increasing role in public life. SVODs operate globally and have enormous resources, leading to concern that PSBs are priced out of the market for making high-quality television—limiting their ability to create drama and documentaries which reflect, examine and promote the culture of the UK. We sought to understand the contemporary role of public service broadcasters, the financial pressures that they face, and whether the PSB compact—the obligations they take on in exchange for privileges—is fit for the age of the video on demand.
Our evidence overwhelmingly indicated that public service broadcasting is as important as ever to our democracy and culture, as well as to the UK’s image on the world stage. A wide range of witnesses and contributors told us how the PSBs help to inform our understanding of the world, reflect the UK’s cultural identity and represent a range of people and viewpoints. They contribute to the economic health of the UK and support the wider creative industries. Although other channels and services offer high-quality UK programmes, the availability and affordability of public service broadcasters through digital terrestrial television remains unmatched. Their availability allows them to provide ‘event television’: moments which bring the nation together such as major sports events and landmark drama and documentary series. To strengthen this, we recommend that the Government should review the listed events regime to extend the availability of significant sports events on free to air television.
Despite this broad support, we found that PSBs are struggling to achieve their mission to serve all audiences in the face of increased competition and changing viewing habits. They are not serving younger people and people from BAME backgrounds well enough. Viewing of BBC channels by 16–34-year-olds has halved since 2010; this group spends only two minutes watching BBC iPlayer each day, compared with 40 minutes on Netflix. BAME viewers spend less time watching public service broadcasters than the average. PSBs’ legitimacy depends on serving these groups better in future. To do this, PSBs must be willing to take creative risks and do more to involve people from different backgrounds in the development and making of programmes. To this end, we recommend that Ofcom should be empowered to gather data on the diversity of commissioners and production crews making programmes for PSBs to promote transparency.
We also heard concerns about representation of the nations and regions of the UK. Investment in TV production is still too heavily concentrated in London and many viewers believe that London and the South East, as well as ‘hub’ locations such as Glasgow and Cardiff are overrepresented at the expense of other areas. Although progress has been made and new entrants have made high-budget series outside the capital, the economic benefits of investment have not spread widely enough. Public service broadcasters are obliged to commission a certain percentage of programmes outside the M25 in the regions and nations of the UK. This is crucial to building a skills base in different areas and ensuring that viewers see their locality represented on screen, but Ofcom must ensure that PSBs uphold the spirit of these obligations. The best way to support production in the regions and nations is to invest more in returning, rather than one-off series and to commission production companies with headquarters outside London.
The UK TV production sector has enjoyed impressive growth in recent years, including in exporting programmes around the world. SVODs and other commissioners such as HBO and AMC have driven significant investment, encouraged by the High-End TV Tax Relief. However, public service broadcasters remain essential to the UK production sector and play a crucial role in the ‘mixed ecology’, a mutually reinforcing system of specialist skills and talent development. They spend considerably more than SVODs and other broadcasters on original UK programmes. New entrants complement but cannot replace them.
The average per-hour budgets of high-end drama series have increased over the last five years. The health of the independent production sector depends on maintaining the supply of production crews to meet increased demand. There is a serious risk of the sector reaching full capacity and overheating. The Government should address skills shortages in the sector through urgent reform of the Apprenticeship Levy and changes to the High-End TV Tax Relief. Public service broadcasters are especially vulnerable to further cost inflation. We support the continuation of the regulated Terms of Trade between PSBs and independent production companies but recommend that they should be reviewed to reflect better their original purpose of protecting small and medium sized production companies rather than large international companies.
Fundamental to the health of the PSBs is how they are funded. If public service broadcasters are to continue to serve us and to afford to make world-class programmes, they must remain financially viable. In our view, PSBs, especially the BBC, should not be given further responsibilities without a corresponding rise in income. We are concerned that the integrity of the licence fee as the guarantor of the BBC’s financial independence has been undermined. In particular, the Government should not have asked the BBC to accept responsibility for over-75s’ licences, nor should the BBC have agreed to take it on. A new, independent and transparent process for setting the licence fee is necessary. We recommend the establishment of a new body called the BBC Funding Commission, which should be in place in 2021 in time for the next round of licence fee negotiations. Commercial public service broadcasters also face challenges. As conventional TV viewing decreases, particularly among younger audiences, the value of TV advertising will come under increasing pressure from online advertising. Differences in the regulation of broadcast and non-broadcast advertising should be reviewed and the Government should think very carefully before imposing further regulatory burdens on broadcast advertising.
The obligations public service broadcasters take on and the privileges they receive in return must be balanced. However, we heard that in a competitive environment the PSBs’ traditional privileges were becoming less valuable. Most importantly, public service broadcasters have historically received mandated prominence: listed as the first five channels on the electronic programme guide. We support Ofcom’s proposals to update this principle for the digital age so that it also covers on demand viewing. Digital terrestrial television will remain essential for many viewers who cannot afford or do not have access to internet or pay TV, and public service broadcasters’ free access to spectrum must continue to be guaranteed. Given the pace of change in the market, Ofcom should review whether TV platforms should be required to pay commercial public service broadcasters a retransmission fee for carrying their channels.
If the UK is to continue to be a world leader in the creative industries, public service broadcasters must be enabled to thrive in the digital world. They provide a stable flow of investment for a wide range of content, made for UK audiences, and available to all. They must be held to account for their obligations, afforded full access to the commensurate privileges, and supported to ensure that the important work they do remains financially viable in an ever-more competitive environment.
1 BBC One and BBC Two, Channel 3 (licensed by ITV in England, STV in Scotland and UTV in Northern Ireland), Channel 4, Channel 5 and S4C.