In part one of our seven-part series on the draft Media Bill (which can be found here), we looked at Part 1 of the draft Media Bill, which aims to update certain obligations on public service broadcasters, so that these obligations may be met more readily in an evolving media landscape.
In this article, we look at the Government’s impact assessments in relation to these proposed changes (see here for the overarching impact assessment and here for the specific impact assessment on modernising public service broadcasting).
Rationale for intervention
The Government has recognised that the existing regulation of public service broadcasters (which, in the spirit of the ongoing transition of UK media, we are referring to as public service media owners or “PSMOs”) requires updating.
By way of reminder, PSMOs include the statutory corporations of the BBC and S4C, and the providers of the licensed public service channels that provide nationwide Channel 3 services (such as ITV and STV), Channel 4 (also a statutory corporation, but regulated in a different manner to S4C) and Channel 5. The PSMO regime is set out in legislation, primarily in the Communications Act 2003. This imposes a number of obligations on PSMOs in exchange for a number of benefits (the so-called ‘PSB compact’) and is focussed on broadcast television.
In its impact assessment, the Government acknowledges that rapid changes in technology, audience viewing behaviours and the entrance of global players have resulted in declining viewing shares for linear TV, particularly among viewers aged 16-34, with the main beneficiary being video-on-demand (VoD) services. According to the impact assessment, online video services are the main way of watching TV and film for nearly half of UK adults, and over 40% of subscription VoD (SVoD) users have indicated that they can imagine not watching any broadcast TV in five years’ time.
In the production sector, streaming giants’ production spends far outstrip those of the PSMOs, which has seen PSMOs facing challenges in competing for talent and has resulted in inflated costs in some parts of the sector. According to the impact assessment, the move away from linear television to VoD services has also changed the UK advertising market, which is a key revenue source for commercial TV broadcasters, with online advertising revenues increasing and linear TV advertising revenues falling.
The Government has concluded that, given the focus on broadcast television, the current legislation regulating PSMOs does not cater for the modern industry and that, to ensure PSMOs can meet the challenges of the new landscape, the existing regulatory framework needs to be updated.
The aim, through the package of measures found in the draft Media Bill, is to make sure that the obligations associated with being a PSMO do not unnecessarily constrain the ability of the PSMOs to attract audiences and compete effectively. The Government justifies this intervention by stating that public service content is still highly valuable to UK audiences and that PSMOs are uniquely placed to bring UK audiences together for national ‘shared moments’ and to support the ‘public good’ through their provision of informative and impartial content.
The proposed key reforms to the regulation of public service television include:
- the introduction of a general requirement to produce distinctively British content;
- allowing the delivery of certain quotas via a wider range of services, including PSMO internet and on-demand services (such as iPlayer, ITVX, or All4);
- introducing additional protection (i.e. a power to establish new quotas) for content areas that are underserved;
- updating the “Terms of Trade” to reflect changes in technology and the way viewers are watching PSMO content; and
- updating the listed events regime to make the regime a PSMO-specific benefit.
Costs and benefits
The Government considers that the proposed update to the PSMO remit and the requirement to produce distinctively British content are likely to have minimal direct impacts on PSMOs. Allowing PSMOs to deliver their quotas through a wider range of services will result in increased flexibility and efficiency in how PSMOs are able to deliver their content to viewers and reach audiences. There may be small-scale familiarisation costs for PSMOs associated with the proposed measures as well as transitional and set up costs in respect of the changes to the remit and quotas. The power to establish additional quotas may create costs for PSMOs in the future, but this would require secondary legislation and the associated impact would be assessed at the time.
The impact assessment seems fairly understated in relation to the benefits of the proposed measures for PSMOs, which may seem at odds with the warm welcome these reforms have received from PSMOs. This is because many of the benefits that PSMOs are hoping to reap in the market as a result of these measures (particularly in terms of positioning themselves against streaming giants) are difficult to quantify or predict. However, according to the impact assessment, these proposed measures will strengthen and secure the long-term sustainability of the PSMO ecosystem and, overall, will benefit PSMOs.
The Government considers that the proposed measures will have a significant positive impact on UK audiences. This is due to the fact that audiences will benefit from strengthened PSMOs and the supply of high-quality content, including distinctively British content, being future proofed. Extending quotas to online services will enable the PSMOs to be more effective in meeting the needs of their audiences. Additionally, the Government believes that the revised PSMO remit will increase the accountability of PSMOs to Ofcom which, in turn, will have a direct correlation with delivering value for viewers.
The Government recognises the potential for negative impacts on those audiences who cannot access content online, such as older viewers, as a result of permitting delivery of quotas through on-demand services. However, the PSMOs have stated explicitly that extending quotas in this way will not result in a detriment to their traditional linear services. In addition, the delivery of news and current affairs content will continue only to count towards a PSMO’s relevant quota when delivered through their main linear channel, ensuring important, high-quality news and current affairs content remains accessible to all.
The Government believes that there are unlikely to be major teething issues in how these reforms are monitored. Ofcom already has an existing role in overseeing PSMOs and is required to report, at least every five years, on the achievement of the PSMO remit. With Ofcom’s most recent review being in 2019-2021, the Government believes that the next Ofcom review will be well placed to consider the impacts of the proposed measures.
Conclusion
In its impact assessments, the Government sets out how the proposed reforms will strengthen the position of PSMOs in the UK media market, will result in nominal costs to PSMOs and other domestic players (with no wider impact on small, micro and medium-size businesses), and will provide a significant benefit to audiences. While these reforms may provide the clarity and support that PSMOs have been seeking, the impact assessments do not conclude whether or not the reforms will be effective in sufficiently strengthening the position of PSMOs in the UK against strong “Big Media” headwinds, although this may be the biggest indicator of their success.
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