Public service broadcasting: as vital as ever
Chapter 1: Introduction
Background
1.The ways in which we consume television, and how it is supplied to us, are changing. Twenty years ago most people relied on five free-to-air terrestrial channels provided by public service broadcasters (PSBs) with a statutory public service remit. The output of commercial broadcasters was available to only a minority of viewers who subscribed to Sky or cable services. Since then choice has increased dramatically. In 1998 the Broadcasters’ Audience Research Bureau (an independent body which monitors viewing figures) reported on 57 channels, while in 2018 it reported on 342.2 Television was generally watched at the time of broadcast—recording on VHS was the exception. The introduction of technology such as the digital video recorder (such as TiVo) and internet-enabled catch-up services has enabled viewers to watch TV when it suits them. For some, especially many young people, watching so-called ‘linear’ TV in real-time is now the exception rather than the norm. Viewers also watch content on a range of devices including smartphones, laptops and tablets.
2.Since at least 2007, when the BBC launched its iPlayer, many have anticipated the death of linear television. In fact, linear has so far been remarkably resilient.3 It is still the most popular way to consume television. A large proportion of the population, particularly many older people, watch nothing else. The phenomenon of ‘event television’ remains, including sporting fixtures, royal weddings and the final episodes of reality TV competitions, and makes it unlikely that linear television will disappear soon. Nonetheless, in the past few years average linear viewing has declined. As Figure 1 shows, much non-linear viewing is accounted for by recorded and on-demand viewing of traditional broadcaster television. A slightly smaller share is taken by YouTube, Google’s advertising-funded video-sharing platform, whose output predominantly comprises short-form user-generated content.
3.Subscription streaming services (known as subscription video on demand or SVOD services) account for a smaller share but their popularity has grown rapidly since 2012. In that year Netflix’s streaming service was launched in the UK, while Amazon Prime Video arrived the following year. This trend is driven primarily by younger people. While viewing of traditional broadcaster TV has not changed much for over-65s, it has halved for under 25s since 2010.4 Figures 1 and 2 show that 16–34-year olds watch half as much live TV and twice as much SVOD content as average.
Figure 1: Viewing habits of all users aged over 16
Source: Ofcom, Media Nations: UK 2019 (7 August 2019): https://www.ofcom.org.uk/__data/assets/pdf_file/0019/160714/media-nations-2019-uk-report.pdf [accessed 9 August 2019]
Figure 2: Viewing habits of 16–34 year-olds
Source: Ofcom, Media Nations: UK 2019 (7 August 2019): https://www.ofcom.org.uk/__data/assets/pdf_file/0019/160714/media-nations-2019-uk-report.pdf [accessed 9 August 2019]
4.There has been sharp growth in the take-up of SVOD services over the last few years (see Figure 3). Between 2015 and 2018 the number of UK homes with access to an SVOD service doubled.5 Forty-eight per cent of UK households have access to an SVOD.6 Over 11.5 million households (41 per cent) subscribe to Netflix, the most used service. The next most popular, Amazon Prime, has almost 6 million subscribers.7
Source: Ofcom, Media Nations: UK 2019 (7 August 2019): https://www.ofcom.org.uk/__data/assets/pdf_file/0019/160714/media-nations-2019-uk-report.pdf [accessed 9 August 2019]
5.In 2013 Netflix released House of Cards, the first original production that it commissioned. Since then Netflix’s budget for content has grown massively. Worldwide, it spent $15 billion on content in 2018 and it is expected to spend $18 billion in 2019.8 Netflix and Amazon can spend as much as £15 million per hour on production. This dwarfs what the UK’s PSBs can afford.
6.This investment has helped to sustain a boom in television production9 which began in the United States in the early 2000s with programmes such as The Sopranos, The Wire, Breaking Bad and more recently Game of Thrones. This period is characterised by high-quality writing, the use of techniques that were once reserved for cinema, considerable studio investment in production, and the rise in prestige of television as an artform (for example, film actors moving to TV). Programmes often have international appeal and are sold around the world. The UK is both a beneficiary and an agent of this creative boom as it is an attractive venue for filming and has a talented workforce. Programmes are often the product of collaboration by different parties around the world. For example, Chernobyl, a mini-series about the nuclear power disaster, was produced by HBO, the US cable company, in association with Sky, the UK pay-TV company. Many of its cast were British as was one of its executive producers, Jane Featherstone.
7.Netflix is the largest of the SVODs with 150 million subscribers in 190 countries,10 but the market for streaming services is rapidly changing. The number of subscribers continues to grow but there is greater competition. Apple’s SVOD service, Apple TV+. launched in the UK on 1 November 2019. The emergence of digital media giants collectively known as the FAANGs (Facebook, Apple, Amazon, Netflix and Google)11 has already caused consolidation among traditional media companies in the US. Disney bought Fox, AT&T bought TimeWarner, and Comcast bought NBCUniversal and Sky. Newly enlarged, Disney and NBCUniversal are launching their own SVOD services in due course. Unlike the FAANGs these will be able to rely on content accumulated over decades. In providing their own services, content providers are seeking a direct relationship with consumers, cutting out intermediary platforms. This direct relationship might help them generate more value from their intellectual property (IP) and gather data about their viewers. Some IP owners have withdrawn secondary rights to programmes which had been available on Netflix in favour of their own services. However, it is uncertain how long the proliferation of services will last as many will be unwilling to pay for multiple subscriptions. Other digital markets have been captured by ‘winner takes all’ (or at least most) companies, and it is possible that the streaming market may follow suit after further consolidation.12
Supplementary written evidence from Sir David Clementi (PSB0063) citing IHS Markit Technology, now part of Informa Tech, Derived from TV & Online Video Intelligence Service, 2019. Results are not an endorsement of any service. Any reliance on these results is at the third-party’s own risk.
Our inquiry
8.We set out to investigate the implications of these developments for the UK TV sector.13 This sector has long been a success story thanks to the UK’s thriving “mixed ecology”—a mutually reinforcing system of specialist skills, labour, production companies, broadcasters and other assets which are supported by both public and private investment. This ecology is integral and critical to the wider creative industries. It nurtures creative and other skills used in film making, and it is a vehicle for exhibiting British talent to an international audience. PSBs are at the heart of this ecology (see Box 1). Ofcom, the regulator for both broadcasting and streaming services,14 explained that PSBs ensure the provision of:
“trusted and impartial news, UK-originated content that speaks to the different communities and nations of the UK, and distinctive programmes. PSB helps to ensure that certain types of programmes get made—arts, religion, classical music, and original children’s TV—that would be less well provided for if left to the market alone. Another key principle is universality, namely that PSB programmes should be available to everyone, free at the point of use.”15
Public service broadcasters drive innovation and investment in the sector and provide a benchmark of high-quality programming. They generate soft power internationally by exhibiting UK culture for a global audience. In return PSBs have special privileges, for example to make them easy to find by viewers. The balance of rights and responsibilities is known as the ‘PSB compact’.
Box 1: Public service broadcasters
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PSBs include the BBC, ITV, Channel 4 and Channel 5, which operate throughout the UK, and STV, S4C and UTV, which operate in Scotland, Wales and Northern Ireland respectively. Except for the BBC, PSB responsibilities primarily apply to the main channel.16 Duties of PSBs include:
Section 265 of the Communications Act 2003 makes provision about the public service remit of Channel 317 and Channel 5, and separately Channel 4. The BBC’s remit is set out in its Charter. Ofcom is responsible for ensuring compliance with these duties. It has a duty to review public service broadcasting every five years. |
9.While public service broadcasting encompasses a diverse range of media—including radio and online—our inquiry focused on two areas which were highlighted by witnesses as under particular pressure from SVODs: drama and factual programmes on television. Drama and factual programmes account for 71 per cent of Netflix’s library and 74 per cent of Amazon’s, compared with less than 20 per cent on the PSB channels.18 We address other areas where they are relevant, but do not examine every area of public service broadcasting in detail.
10.At the outset of our inquiry we were struck by the amount that SVODs can afford to spend per hour of programming. Much of their output is of high quality. The increase in private investment in production led us to question whether there was still a need for public service broadcasting, at least as regards drama, factual and other forms of entertainment programming. We set out to investigate how public service broadcasters might be reformed or better supported.
11.In Chapter 2 we examine whether the public service remit of PSBs is still needed, and how well the PSBs fulfil their remits. The PSBs are not the only parties affected by the changing media environment. In our inquiry we also sought to understand how public policy could better support the wider ecology, including independent production companies and commercial broadcasters. In Chapter 3 we examine the production sector. Finally, in Chapter 4 we consider how to make the regulation and funding of public service broadcasters fit for the future.
12.We heard from a range of interested parties across the TV sector, including trade associations, creatives such as producers and directors, commercial broadcasters, pay-TV providers, hardware producers, SVODs and PSBs. We also heard from academics, media analysts, Ofcom and the Government. We wanted to hear from a broad section of the public on how well they feel that they are served and to hear first-hand how viewing is changing. Therefore, we met a group of 16–17-year-olds from a visiting school, conducted an online survey and visited Glasgow where we held a roundtable discussion with local residents. We are grateful to everyone who contributed. We also thank Professor Steve Barnett, Professor of Communications at the University of Westminster, who provided expert advice.
2 At the time of writing this was the most recent year for which figures were available. BARB, ‘TV since 1981’: https://www.barb.co.uk/resources/tv-facts/tv-since-1981/2018/reported/ [accessed 10 September 2019]
4 Ibid.
6 Enders Analysis, ‘SVOD subscriber trends: who is buying and how many subs’ (23 October 2019): https://www.endersanalysis.com/content/publication/svod-subscriber-trends-who-buying-and-how-many-subs [accessed 4 November 2019]
7 Ofcom, Media Nations: UK 2019 (7 August 2019), p 59: https://www.ofcom.org.uk/__data/assets/pdf_file/0019/160714/media-nations-2019-uk-report.pdf [accessed 9 August 2019]
8 Written evidence from Clinton’s Solicitors (PSB0029). These figures represent the total spent on new content including original content and rights to content commissioned by others. According to one estimate, Netflix Originals account for just 10 per cent of its catalogue.
10 Written evidence from Netflix (PSB0041). YouTube has an even greater share of viewers and hours watched.
11 The FAANGs have diverse business models and are at different stages of developing media operations.
13 See Appendix 3 for our call for evidence. For much of the period of inquiry, the Committee was known as the Communications Committee. Its name was changed on 29 October 2019 to the Communications and Digital Committee.
14 Under the European Audiovisual Media Services Directive broadcasters and SVOD services are regulated by the regulator of the member state in which they are established (the ‘country of origin principle’). Netflix is regulated by the Dutch regulator as it is based in the Netherlands.
16 Channel 4 has duties which apply to its whole portfolio of channels.
17 STV holds the Channel 3 licence in Scotland and ITV in the rest of the UK.
18 Ofcom, Media Nations: UK 2019 (7 August 2019), p 69: https://www.ofcom.org.uk/__data/assets/pdf_file/0019/160714/media-nations-2019-uk-report.pdf [accessed 9 August 2019]