In response to the rising popularity of video on-demand services, the House of Lords Select Committee on Communications (“Committee“) has launched an inquiry into the future of public service broadcasting. The Committee notes that public service broadcasters (PSBs) such as the BBC, ITV and Channel 4 face mounting challenges in an age where conventional TV viewing by under-25s has halved since 2010.

Starting at just £5.99 per month – less than half the cost of a TV licence – subscription video on-demand services such as Netflix and Amazon Prime (often referred to in the industry as ‘over-the-top’ or ‘OTT’ services) have emerged as powerful global producers and distributors. The providers of these services command big budgets – being able to spend over £15 million per hour of original content – and are increasingly commissioning UK content, including high-profile programmes such as Netflix’s The Crown.

Meanwhile, PSBs (whose services are mostly free-to-use and whose content budgets therefore tend to be much smaller) are struggling to compete in the face of this subscription-funded surge in high-quality drama and factual content. This is compounded by the decline in viewing figures for public service broadcasting, which is threatening television advertising revenues (on which the commercial PSBs are heavily dependent for funding). Traditional broadcasting no longer boasts the same scale of consumer reach, and PSBs are concerned about maintaining visibility in a fragmented market operating across different platforms.

An additional source of frustration for PSBs is the regulatory disparity between PSBs and on-demand providers. PSBs are obliged to comply with a range of regulatory obligations (deriving both from UK and EU law), including in relation to the volume and type of adverts they show, programming in specific genres, the commissioning of content and the audiences they serve. In contrast, on-demand services are not subject to the same obligations, and are generally free to determine their own content. For example, UK PSBs are currently required to reserve a majority proportion of transmission time for European content whereas on the UK version of Netflix (in respect of which the UK is yet to implement any content quotas), only 15% of content is European and the remainder is mostly of US origin.

It’s not all bad news though: PSBs have sought to respond to the growing popularity of video on-demand services by launching their own free-to-use on-demand platforms, including iPlayer, ITV Hub and All4. The majority of these platforms focus on “catch-up” content (i.e. content which has already been aired on the relevant linear channel) rather than offering extensive libraries, and will still face many of the difficulties currently experienced by conventional public service broadcasting (particularly the budgetary constraints), however a notable exception may (if successful) be found in the plans recently announced by the BBC and ITV to launch a Netflix rival in the UK.

In light of the challenges faced by PSBs, the Committee’s inquiry aims to investigate:

  • whether the popularity of video on-demand services has made the concept of public service broadcasting redundant, in whole or in part;
  • if so, what form public service broadcasting should take in the future and how it could remain financially viable; and
  • what action policy-makers, regulators and PSBs should take.

In its Call for Evidence, the Committee has invited organisations and individuals to submit written evidence by Friday 26 April 2019, and the Committee expects to hear oral evidence from invited witnesses from March to July 2019. The Committee intends to issue a report in the autumn, and the Government has undertaken to respond in writing to reports from select committees.

This inquiry signals a potentially significant turning point in the UK regulatory approach to public service broadcasting. There have been calls for some time now (predominantly from traditional broadcasters) to ‘level the playing field’ between PSBs and OTT providers from a regulatory perspective (in the hope that this will make it easier in some respects for PSBs to compete). Any such move in the UK would (notwithstanding Brexit) be consistent with broader changes happening at an EU level (such as the introduction of a European works quota for on-demand services, which is due to be implemented in EU member states by September 2020). However the inquiry launched earlier this month appears to take this thinking a step further by officially tabling the idea of a more fundamental re-shaping of the PSB remit in the UK.

Authors

James Balfour
James Balfour
Associate, Digital TMT and Sourcing, London
+44 20 7466 7582

Hayley Brady
Hayley Brady
Consultant, Head of Media and Digital, London
+44 20 7466 2079