Ofcom published its third review of public service television broadcasting on Wednesday, 2 July. Ofcom is required to review the performance of public service broadcasters periodically. Its last review was published in 2009. This third review focusses on the opportunities and threats arising from the growth in internet use.

The review looks at the BBC, ITV, STV, UTV, Channel 4, Channel 5 and S4C. It examines how well they have been fulfilling their public service broadcasting (PSB) purpose of providing television programmes dealing with a wide range of subjects, of a high standard and catering for as many different audiences as possible. It also considers options for maintaining and strengthening the current system.

Current delivery The review found a high level of audience satisfaction: 79% of viewers believe PSB is delivering on its purpose. Over half of all television viewing is to the main PSB channels, rising to 70% if all the PSB channels are included. PSB accounts for 95% of all television news viewing.

In 2013, the PSBs invested just over £2bn in new UK programmes (excluding sports content), compared to around £350m from non-PSBs However, the total level of investment in new UK-originated content has fallen by over £400m in real terms since 2008. The review highlights drama as a particular area of concern: investment has dropped by 44% since 2008. There has also been a 41% decline in the amount of new UK drama being shown on the PSB channels.

Immediate issues The review identified a number of immediate issues:

  • Provision of news for young people – their viewing hours for TV news have dropped by 29%
  • Content tailored to the UK nations and their regions – there is a mismatch between public expectations and how PSB is delivering in practice
  • Diversity and representation – over half of viewers interviewed from black ethnic groups felt under-represented and unfairly portrayed in PSB programmes. Around half of disabled viewers felt under-represented. Half of lesbian, gay and bisexual people viewers thought that they were under-represented, although only 16% felt they were negatively portrayed. 21% of viewers in Scotland and 26% of viewers in Northern Ireland felt they were negatively portrayed
  • Religious programming – the review notes that “provision has all but ceased of religion and ethics” at a time when “matters of religious belief are prominent in public debate”
  • Children’s programming – spending has fallen by £15m and there is very limited provision of non-animation programming beyond the BBC
  • Music, arts and formal education – PSB provision has significantly reduced since the removal of specific quotas in 2003

Independent production Ofcom considers that the consolidation that has been occurring in the independent production sector could bring benefits as well as risks. While overseas investors might be willing to provide greater levels of risk capital to fund PSB commissions, consolidation could put new entrants and small and medium-sized enterprises at risk. The full effect of the acquisition of UK broadcasters and production companies by international companies (six of the top seven UK producers are now owned by large foreign media companies) is not yet clear. Ofcom will keep this area under close review.

Key trends Ofcom identified a number of key trends that will shape the PSB landscape over the next five to 10 years:

  • Changing technologies and models of distribution – superfast broadband availability will rise to 95% by 2017, with the potential for a broadband universal service obligation that could allow people to stream HD channels
  • Changing user interfaces driving new consumption habits – a move towards search and recommendation models built around personal viewing data
  • New international players – streaming and download providers such as Netflix and Amazon Prime who are increasingly investing in content
  • New platforms – it may be increasingly difficult for PSBs to maintain current large audiences in the face of competition from global online platforms

It also identified trends among younger people which may indicate future patterns of consumption:

  • Devices – 90% of younger consumers own a smartphone and they are most likely to say they would miss their mobile phone more than any other device
  • New viewing patterns on VoD services – young adults are more likely to have an on-demand subscription in their home and to want variety and a mix of global, particularly US, content
  • Growth in the use of short-form video (such as on YouTube)
  • A shift towards non-linear services

Threats and opportunities The review identifies growth in online and on-demand viewing, especially among younger people: only 50% of 16–24 years olds’ viewing is through live TV. Young people’s behaviour may be an early indication of a more substantial shift across all age groups to on-demand and online viewing.

The implications of further audience fragmentation would be decreasing advertising revenues, increasing distribution costs and potentially decreasing reach, impact and availability of PSB content. The review warns that the current challenges to the funding of PSB content may increase if current market dynamics accelerate.

While in recent years broadcasters have made savings through reducing programme-making costs and changing the types of programmes they make, the review warns that they may not be able to repeat this in future and could face difficult programming decisions. To avoid this, the review says that PSBs will need to adapt to maximise commercial revenues and efficiencies.

However, it also says that the strength of the PSBs’ brands, combined with their reach and impact, means they are in a good position to take advantage of changing viewer habits. They will, though, need to evolve as online viewing increases.

Options for maintenance and strengthening of PSB PSB is currently supported by benefits including access to digital TV spectrum, prominence on electronic programmes guides and the licence fee for the BBC. The review questions whether such benefits will remain effective in the internet age.

As online and on-demand viewing increases, rules guaranteeing access to PSB content and PSB prominence on linear TV are likely to need reforming to match changes in technology. The PSBs will need protection to ensure that their channels are widely available and easily discoverable, but should also be required to provide their services to all major devices and platforms. The review says that all the PSB channels’ catch-up players should benefit from prominence and access to all major platforms. 

Ofcom suggests that a more flexible model might be required to maximise Channel 4 Corporation’s (C4C) potential. Consideration should be given to updating its framework to meet the needs of younger audiences, perhaps by allowing it to deliver some of its PSB obligations across all of its channels and services, rather than just through the Channel 4 service.

Although the review does not undertake any detailed analysis of the BBC, saying this is a matter for the Charter Review process, it does mention the extension of the licence fee so that catch-up users also pay as a potential positive development. This extension has now actually been agreed as part of the BBC’s funding deal with the government.

Ofcom’s conclusion on the ‘retransmission fees’ debate – some PSBs want pay subscription television platforms to pay to carry their channels – is rather negative. While recognising the additional funding it could bring, it warns that resolving disagreements would likely require significant regulation. It also points out that there is no guarantee that, in the case of ITV and Channel 5, all such fees would be spent on public service programmes.

Ofcom’s response to suggestions on the introduction (or reintroduction) of quotas to address issues of under-provision in certain areas is also negative, as it believes this would likely come at the expense of investment in other forms of content.

The review raises the following questions to be considered in any update of the current rules:

  • Are the ‘must offer’ and ‘must carry’ regimes still fit for purpose given changing technologies?
  • Do the PSBs need protection in relation to carriage arrangements for services carried over the internet of the kind they have for carriage over broadcast networks?
  • Can the rules be designed to capture significant platforms only, given the likely future proliferation of platforms?

Finally, the review also raises some more radical options for increasing funding to the PSB system, if the need for intervention becomes more urgent:

  • Administered incentive pricing for spectrum
  • Review of the restrictions on advertising minutage on PSB channels
  • Deregulation of commercial references
  • Contestable funding
  • Levies on the revenues of pay-TV or distribution platforms, and copyright regimes.