Summary of conclusions and recommendations
Public service broadcasting
1.Public service broadcasting remains essential to the UK media and losing it would leave UK society and democracy worse off. Public service broadcasting can bring the nation together in a way in which other media cannot and can ‘raise the level’ of quality, as well as ensuring continued investment in original UK content across a range of programming. An essential feature of public service broadcasting is its universality, free at the point of use after paying the licence fee: both the availability and affordability of public service broadcasters are unmatched by other services. In its forthcoming PSB review, Ofcom should also consider the contribution of content from non-public service broadcasters to public service objectives. (Paragraph 31)
2.Younger audiences are increasingly turning towards SVODs while spending less time watching public service broadcasting. Public service broadcasters face a difficult choice in dividing limited resources between appealing to older and younger viewers with different viewing habits and tastes. However, they must produce content which serves and reflects all audiences in the UK and the legitimacy of the licence fee depends on this. (Paragraph 76)
3.The subscription model incentivises SVODs to produce content which reaches a range of audiences. This is because their success depends on building a catalogue of programmes which—as a whole—appeals to the widest range of potential subscribers, rather than judging success on the size of the audience for a given programme. For this reason, they can take creative risks on individual programmes. They have also made effective use of personalisation. (Paragraph 77)
4.Some witnesses argued passionately that there was a problem with BAME representation in the TV sector, especially at the BBC. They cited employment data, reports of discriminatory practices and poor practices in the commissioning process. We note that the BBC and others are taking steps to address this. We believe that there is not enough data for us to opine on the substance of this issue. Nonetheless, perception is of paramount importance in this context and data show that BAME viewers spend less time watching PSBs than others. (Paragraph 78)
5.As with other areas of the creative sector, the uncertain nature of freelance work and lack of adequate careers guidance present barriers to people from less advantaged backgrounds and BAME people from entering the TV sector. PSBs have a special role to play in lowering such barriers. They should do more to involve people from diverse backgrounds in their commissioning processes and behind the camera. (Paragraph 79)
6.We recommend that Ofcom should report on the diversity of commissioning teams at public service broadcasters to ensure that under-served audiences are represented at all stages of programme development. The Government should empower Ofcom to collect data on the diversity of production crews making programmes for public service broadcasters, whether in-house or independent. (Paragraph 80)
7.An important way in which public service broadcasters can fulfil their remit of appealing to all audiences is through ‘event’ television such as sport, landmark drama and documentary series and live entertainment. At a time of division, public service broadcasters play a role in unifying the country through shared experiences. (Paragraph 93)
8.The listed events regime provides important protection for the availability of major sports events. The Secretary of State for Digital, Culture, Media and Sport should consult sporting bodies, broadcasters and the public with a view to increasing modestly the number of listed events. This could include events such as The Ashes and The Open Golf Championship. We welcome the Government’s plans to add equivalent women’s events and the Paralympic Games to the list. (Paragraph 94)
TV production
9.TV which reflects UK culture is in demand at home and abroad. However, changes in the market may make the future of individual SVODs and TV services uncertain. New entrants complement but cannot replace public service broadcasters, which guarantee continued investment in a wide range of original UK content no matter the state of the global market. (Paragraph 106)
10.It is important that UK TV programmes of cultural significance are preserved for future generations irrespective of whether they are made by a public service broadcaster. The Government should broaden the requirement to provide programmes to and fund the BFI National Archive to non-public service broadcasters and SVODs which produce content in the UK. (Paragraph 109)
11.High-end TV Tax Relief has benefited the UK production sector and encouraged high levels of inward investment. However, there is a serious risk of the sector reaching full capacity and overheating. The health of the independent production sector depends on maintaining the supply of production crews to meet demand. The £1 million threshold for tax relief creates an incentive for productions with a budget over £800,000 to spend more to receive up to £200,000 in tax relief. This makes it less attractive to produce mid-budget drama, which is crucial to the development of skills in the production sector. High-end TV Tax Relief should be tapered in from £800,000 to remove the incentive to spend more to reach a cost of £1 million per hour. (Paragraph 116)
12.The Apprenticeship Levy has failed the creative industries. Its inflexibility leaves significant amounts of money unspent which could otherwise help to address skills shortages in the production sector. We welcome the Government’s pilot with Screenskills but fundamental reform of the Apprenticeship Levy is necessary and urgent. The Government should introduce greater flexibility such as allowing businesses to use the levy to fund training programmes at work and apprentices’ wages, and to pool vouchers through training agencies. (Paragraph 123)
13.The Government should make contributing to the ScreenSkills High-end TV Skills Fund a condition of receiving High-end TV Tax Relief. The Government should consult ScreenSkills on increasing productions’ per centage contribution to the fund. (Paragraph 124)
14.Public service broadcasters are essential to the independent production sector and the Terms of Trade encourage independent production companies to work with them. Their success relies on both PSBs and the production sector being willing to update the Terms of Trade as the market changes. (Paragraph 131)
15.As part of its review of public service broadcasting, Ofcom should consider whether the Terms of Trade unfairly disadvantage public service broadcasters in a competitive market. The Terms of Trade were originally introduced to protect independent production companies from the dominance of public service broadcasters. Given the degree of consolidation in the market, in order to uphold their original purpose of protecting small and medium sized independent production companies, Ofcom should review whether the Terms of Trade should still to apply to larger companies. (Paragraph 132)
16.Public service broadcasters are vulnerable to cost inflation if skills shortages are not addressed, but they can still afford to make high-quality, distinctive British programmes. Public service broadcasters have benefitted from record levels of third-party funding: from co-productions with SVODs, co-productions with non-SVODs and deficit financing. However, we heard concerns from industry figures that third-party funding could decline in future once broadcasters have become dependent on it. Losing this funding would pose a serious danger to public service broadcasters and impair their ability to produce high-quality programmes. It would also damage the independent production sector. In a fast-changing market public service broadcasters’ access to third-party funding for programmes for UK audiences should be kept under review. We do not support proposals for a levy on SVOD subscriptions at this time, but we would expect Ofcom to assess the merits of a levy if the situation changes and to make recommendations accordingly. With the support of the Government, Ofcom should closely monitor emerging data and the impact of similar measures in other jurisdictions. (Paragraph 158)
17.Producing programmes across the UK spreads the economic benefits of TV production and helps to ensure that viewers feel represented. Public service broadcasters have a crucial role in supporting regional production. Progress has been made and centres such as Salford, Cardiff and Glasgow have been highly successful. However, it is important to develop further production beyond metropolitan hubs. Regional production must support production companies whose main office is not in London and involve commissioning decisions being made in the regions and nations themselves. (Paragraph 171)
18.Ofcom should ensure that public service broadcasters uphold the spirit of regional production quotas to aid the development of regional skills and production companies based in different nations and regions. (Paragraph 172)
19.The Government should review regional investment funds to determine how they could be made more flexible to work better for the creative industries. This must be part of a comprehensive strategy to include all regions and nations in the success of the TV production sector and make sure the benefits of growth are spread across the country. (Paragraph 173)
Towards a new PSB compact
20.While the arrival of SVODs has created exciting opportunities for the creative sector and for audiences, particularly in drama, we are concerned by the unpredictability of future developments. PSBs provide a stable investment platform for a diverse range of content, made for UK audiences, and freely available on a reliable over the air platform. While ensuring that they are properly held to account for delivering PSB purposes, the Government should support PSBs in the new technological environment, and think very carefully before imposing any further regulatory or financial burdens which might impinge on their ability to fulfil their public service obligations to viewers. (Paragraph 177)
21.The BBC needs to have the power to innovate at speed without undue regulatory burdens or it risks becoming a minor player in the face of dynamic, well-resourced global competitors. Ofcom should ensure that regulation is sufficiently fast-paced while also protecting the rights of other broadcasters. In return, the BBC should be upfront and open with Ofcom about any proposed changes. (Paragraph 183)
22.The licence fee is the guarantor of the BBC’s financial independence and underpins its unique quality. A subscription model would undermine the fundamental principle of universality that the BBC should be free-to-air. (Paragraph 201)
23.We are concerned that the integrity of the licence fee has been undermined by a succession of settlements which were carried out in secret and which have tended to disadvantage the BBC. The decision on whether to provide free licences to the over-75s is a matter of welfare policy. The BBC should not have been asked to take on this decision, and the BBC should not have accepted it. Responsibility for licences for over-75s should be off the table in future licence fee negotiations. (Paragraph 202)
24.We reaffirm our recommendation that there should be an independent and transparent process for setting the licence fee. To this end, we recommend that the Government should establish an independent body, which we would call the BBC Funding Commission, to oversee the process for setting the licence fee. In the current competitive and fast-moving environment the BBC needs to be properly funded. The BBC Funding Commission should consult widely on the BBC’s role and functions, taking account of all its duties and privileges, and public expectations, before making a recommendation to the Secretary of State. The BBC’s responsibilities to serve both young and old audiences, to compete with big tech and to remain a source of soft power, require a generous settlement. (Paragraph 203)
25.This should be implemented by 2021, in time for the mid-Charter review and the next round of negotiations on the licence fee. We do not propose any changes to the current settlement in the meantime, but we expect that any deficits incurred would be considered by the Funding Commission as part of its review. (Paragraph 204)
26.We recommend that Ofcom should review the adequacy of the broadcast and non-broadcast codes in respect of video advertising with a view to making recommendations to reduce the difference of regulatory burdens between broadcasters and on-demand services. Following the UK’s departure from the EU, the Government should implement provisions of the Audio-visual Media Services Directive on advertising to ensure a level playing field. In doing so, it should make video-sharing platforms responsible for the advertising that they display. (Paragraph 211)
27.Children’s health is of the utmost importance and we share concerns that more needs to be done to reduce childhood obesity. We note the role public service broadcasters play in promoting healthy living and feel that consideration should be given to enhancing this role, including looking at evidence from other countries. However, we do not think that there is sufficient evidence that the proposed ban on high in fat, salt and sugar advertising before the 9pm watershed would significantly reduce childhood obesity. We are concerned that such a blanket ban could undermine the funding model of commercial broadcasting in the UK without delivering significant benefits to children’s health. A ban might also be counterproductive if manufacturers divert advertising spending to fund price promotions. There would be a further risk if the ban is not sufficiently targeted at what would normally be considered ‘junk food’ but it indiscriminately includes products such as olive oil that are part of a healthy diet. (Paragraph 219)
28.However, if evidence emerges to the contrary, the Government should act quickly to implement a ban. In doing so, it should ensure a level playing field between broadcast and online advertising. Any broadcast ban must be matched by measures which have equivalent effect online and the Department for Digital, Culture, Media and Sport should be consulted at all stages of policy development on this issue. (Paragraph 220)
29.The right to be displayed prominently is a key privilege of public service broadcasters. The current regime is centred on linear TV, which will increasingly devalue over time. We believe that it is more important that PSBs are easy to find in a fragmented media environment, not less. We welcome and endorse Ofcom’s recommendation that the prominence regime be updated for the digital age to reflect new ways of accessing content. The Government should introduce legislation to implement a new prominence framework in line with Ofcom’s recommendations. The regime should be based on principles so that it can adapt as technology changes. (Paragraph 238)
30.PSBs must be enabled to maintain a direct relationship with viewers in an on-demand world. PSBs should not be forced to disaggregate programmes if they do not consider it a useful way to reach viewers and their content is not clearly attributed to them. We welcome the BBC’s interest in using artificial intelligence for its public service algorithm. (Paragraph 239)
31.In line with Ofcom’s recommendation, PSB content hubs should be given prominence on platforms provided that PSBs ensure that public value content, such as news, current affairs, and children’s content, are given prominence within their hubs. This reflects the current situation in which PSBs are required to broadcast news during peak times. (Paragraph 240)
32.Free to air and free at the point of use are key attributes of public service broadcasting. PSBs should continue to be required to offer their content across all TV platforms. But we are concerned that the way in which technology can be used to deprive PSBs of advertising revenue suggests a lack of balance in the arrangement. To counter that imbalance, we recommend that Ofcom should be empowered to review the ‘must offer, must carry’ regime to ensure that it is adequate as TV moves online. In particular, it should consider whether TV platforms should be required to pay a reasonable retransmission fee to compensate commercial public service broadcasters. If so, the quantum of the fee should be determined by Ofcom on a periodic basis. (Paragraph 247)
33.Digital terrestrial television (DTT) will remain a major way for people to access linear television. The Government and Ofcom must ensure the continued provision of free spectrum for PSB output through DTT. (Paragraph 251)