2nd Jul 2015 13:53
LONDON (Alliance News) - UK media and communications regulator Ofcom published its review of public service broadcasting in Britain on Wednesday, with a warning that the introduction of retransmission fees may bring extra funding for public sector broadcasters but also may result in more regulation due to the complexity of implementing a new scheme to govern this.
Late in 2014, ITV PLC said major pay-TV broadcasters should pay UK public service broadcasters, which also includes the BBC and Channel 4, fairly for the transmission of their channels and said the government should end what it describes as an effective subsidy for Sky PLC and Virgin Media Inc.
While Ofcom said it agrees that the government could go further in pushing for fees to be paid to the public services broadcasters by the pay-TV companies, the regulator said there would be a number of challenges to this, which would depend on the precise nature of any regulatory change.
In particular, Ofcom is concerned that the nature of any regulatory backstops which would be required to avoid the risk of channels being withheld and going off air. These backstops could involve "significant regulation and result in lengthy analysis by the regulator".
Ofcom also warned that it has concerns about how any new system would ensure that any funds resulting from retransmission fees are invested into programme budgets or into specific public service broadcasting genres, rather than just being passed on to shareholders. That concern is specifically for ITV and Channel 5.
A spokesperson for Sky said the broadcaster was pleased that Ofcom has recognised that retransmission fees would "involve increased regulation with no guarantee of greater investment in content or benefit to viewers".
"The government?s recent consultation is looking for ways to reduce regulation in this area. Given Ofcom?s warning about the challenges, it?s increasingly hard to argue retransmission fees would be the solution," the Sky spokesperson added.
Citigroup said the regulator made three points which indicate it is not actually in favour of introducing the fees. First is that the market has come to 'zero net fees' without any need for regulatory intervention. Second, the changes would require a step change in regulation to ensure channels are not withheld or go off air. And third, there is no guarantee that the money that public service broadcasters would make will not be just passed on to shareholders.
In Citi's view, Ofcom has essentially killed off the change of retransmission fees being introduced, which is disappointing for ITV given investors had high hopes that this would come through.
But Liberum disagreed with Citi's view, arguing Ofcom's statement does not suggest the regulator is against retransmission. Rather it is highlighting the difficulties and roadblocks to introducing such an scheme. Liberum suggested the UK government is leaning towards backing retransmission revenues.
"On retransmission, Ofcom's conclusions seem to be mixed. However, it is worth noting that the government will take the final decision, and there are suggestions it may be moving towards allowing such fees for the five main channels," Liberum said.
Beyond the retransmission fees, Ofcom said its review showed the public sector broadcasting system is currently broadly healthy, though a number of issues still need to be addressed. Increased delivery, including of news, is among the concerns it has raised, particularly for drama on ITV, programming for UK regions, and children's programming provision beyond the BBC.
It also reiterated concerns about the impact on the current public broadcasting system of a widespread shift amongst viewers towards on-demand platforms. The regulator said that should there be an acceleration in the trend towards online and on-demand viewing, the current public sector broadcasting system is likely to struggle to deliver on the intentions set for it by the UK government.
Ofcom added that public sector broadcasters will need room to innovate, with audiences increasingly wanting content which is delivered over multiple devices and which is specifically designed for online consumption. "Audiences are likely to want more than just traditional television content from public service broadcasters, and shortform video or online-first content could potentially serve as an effective way of delivering key PSB purposes," the regulator said.
ITV shares were down 1.4% to 263.50 pence Thursday afternoon, while Sky shares were down 0.6% to 1,053.00 pence.
By Sam Unsted; [email protected]; @SamUAtAlliance
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