Ofcom research OMC 2014 Panel Session B: Do we need the BBC? Market context Key points Fig 1. Broadcaster portfolio shares . The following slides present background data drawn in the main Audience share from Ofcom’s PSB Annual Report 2013 and Communications 100% 12.3% 11.8% 13.2% 11.4% 12.2% 13.0% Other Market Report 2013. The analysis covers viewing to the PSB 4.0% channels; audience opinion; broadcasters’ spend and output, as 80% 3.9% 4.0% 4.1% 4.3% 4.2% Virgin Media 6.8% 7.4% 8.4% 8.8% 8.3% 8.3% well as an overview of TV revenues. 5.9% 6.0% 5.9% 5.9% 5.9% 6.0% Viacom . Figure 1 shows that the BBC’s audience share has remained 60% 11.7% 11.5% 11.5% 11.8% 11.5% 10.8% UKTV consistent over the period 2008 to 2013 at around 32% of multi- 23.1% 22.3% 23.1% BSkyB* channel homes. Figure 2 shows that the make-up of the BBC’s 40% 22.6% 22.6% 22.7% share has changed as a decline in BBC Two share is offset by the Channel 5 growth of the digital portfolio. 20% Channel 4 31.8% 31.4% 32.3% 32.7% 33.2% 32.4% . The average weekly reach of the combined BBC channels has ITV remained at 84% to 85% from 2008 to 2013 (Fig 3). The 0% BBC incremental reach provided by the digital portfolio has grown from 2008 2009 2010 2011 2012 2013 3.0% to 5.2% over the period. Source: BARB, multichannel homes. Fig 3. Average weekly reach of BBC portfolio Fig 2. BBC portfolio shares 15+ consecutive minute weekly reach (%) Audience share 100 35% 84.8 84.7 85.8 86.7 85.8 84.2 31.8% 31.4% 32.3% 32.7% 33.2% 32.4% 3.0 3.4 3.8 4.2 4.6 80 5.2 30% Other BBC digital - 25% CBeebies 60 Additional reach CBBC 20% 81.8 82.0 82.5 81.2 BBC News 24 40 81.3 79.0 BBC One & BBC BBC Four Two - Combined 15% average weekly BBC Three 20 10% reach BBC Two 0 5% BBC One 2008 2009 2010 2011 2012 2013 0% Source: BARB. Network. Average weekly reach in 2013 for the individual channels 2008 2009 2010 2011 2012 2013 was as follows: BBC Three 21.1%, BBC Four 14.2%, BBC News 11.4%, CBeebies 8.4% and CBBC 6.0%. Source: BARB, multichannel homes. 1

Ofcom research OMC 2014 Panel Session B: Do we need the BBC? Audiences

Key points

. Based on the public service purposes presented in the 2003 Communications Act, Ofcom developed a range of PSB purposes and characteristics in its first PSB review. In Ofcom’s PSB tracker research respondents are asked on a scale of 1-10 about the delivery of these purposes and characteristics by the PSB channels they watch regularly and to consider delivery when thinking about ‘the PSB channels as a whole’. Then respondents are asked how important each of the individual purposes and characteristics are. The methodology used is a telephone survey of 3,000 people across the UK and runs throughout the year. This and the next slide set out some of the results in terms of the proportion of respondents scoring each channel 7/8/9/10 out of 10. . Overall, over three quarters (76%) of respondents were satisfied with PSB provision. . Figure 4 on the next slide shows that provision of trustworthy news programmes and ‘programmes that help me understand what is going on in the world today’ scored the highest in terms of the importance placed on them by respondents. Seventy eight per cent of regular viewers scored BBC One highly on the delivery of each of these aspects; this compares to 64% and 58% respectively for ‘the PSBs as a whole’. . BBC One and BBC Two scored highly among regular viewers for a range of purposes and characteristics, and consistently benchmarked higher than the results for the ‘PSBs as a whole’.

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1 Ofcom research OMC 2014 Panel Session B: Do we need the BBC? Fig. 4 Audience opinion on PSB importance and delivery

PSBs as a whole BBC One BBC Two BBC Three BBC Four BBC News

Base All respondents Regular viewers of each channel

Importance Delivery Its news programmes are trustworthy 85% 64% 78% 72% 50% 56% 81% Its programmes help me understand what’s 80% 58% 78% 71% 39% 61% 88% going on in the world today Its regional programmes provide a range of 78% 60% 70% n.a. good quality news about my area

It shows interesting programmes about 68% 47% 62% 79% 36% 70% history, sciences or the arts

It portrays my region/Scotland/Northern 66% 40% 56% 42% 38% 33% Ireland/Wales fairly to the rest of the UK Its programmes show different kinds of 65% 43% 58% 58% 45% 49% cultures within the UK It shows high quality soaps or dramas made 57% 47% 64% 48% 47% 44% in the UK n.a. It shows well-made, high quality 82% 59% 81% 79% 64% 76% programmes It shows programmes I want to watch 78% 51% 69% 67% 62% 68% it shows programmes that make me stop 70% 44% 62% 69% 39% 61% and think

It shows new programmes, made in the UK 68% 46% 65% 63% 48% 62%

It shows programmes with new ideas and 70% 44% 56% 59% 51% 56% different approaches

Source: Ofcom’s PSB tracker 2012 3

Ofcom research OMC 2014 Panel Session B: Do we need the BBC? Television spend Key points Fig 5. PSB first-run network originations spend, by channel

. The PSBs spent £2.5bn on first-run network originations in 2012, of £2,920m £2,834m £2,660m £2,675m which the BBC spent £1.3bn, a marginal increase in real terms on £245m £221m £2,527m £2,536m BBC £103m £109m £210m £226m Digital 2011. Figure 6 shows PSB first-run network originated spend by £79m £67m £216m £213m £443m £437m £100m Channel 5 programme genre. £387m £348m £98m £384m £385m . While not designated PSB channels, £91m was spent on first-run Channel 4 originated programmes broadcast by the commercial PSBs on their £872m £869m £791m £813m £756m £756m digital portfolio channels in 2012. (Note: while not directly ITV/ITV comparable with Ofcom’s data, according to COBA’s 2012 £398m £334m £348m £355m £286m Breakfast Economic Impact Report, its members spent £0.5bn on first-run £332m originated commissions in 2011. This represents an increase of BBC Two £859m £850m £839m £886m £797m 27% on the previous year. Spend in 2012 on first-run originated £742m commissions was an estimated £0.5bn.) BBC One 2007 2008 2009 2010 2011 2012 . In line with the marginal increase in real-term spend by the BBC on first-run originated content year on year, hours of first-run Source: Ofcom/broadcasters. Note: figures in 2012 prices. BBC digital includes BBC Three, BBC Four, CBBC, CBeebies, BBC News, and BBC Parliament. Does not include S4C, BBC programming increased in 2012 by 320 hours, while the commercial Alba or BBC HD or nations/regions programming. PSBs combined (ITV/ITV Breakfast, Channel 4 and Channel 5) saw a decline of 133 hours. Fig 6. PSB first-run network originations spend, by genre Fig 7. PSB first-run network originated hours, by channel £m £2,920m £2,834m £2,660m £2,675m Children's 35,045 33,981 £2,527m £2,536m

32,691 32,167 32,354 Sports

31,875

£472m

£530m £470m £647m Feature films ITV, C4, £495m £563m £543m Ent./comedy

13,194 C5

9,673 £511m

12,207

10,032 10,963 10,165 £477m Drama/soaps

£473m

£502m

£509m £741m Factual £717m £646m £565m £555m

BBC £526m Education

22,322

22,202

22,002

21,851 21,774 21,728 £585m Religion/ethics £530m £512m £454m £463m £455m Arts/classical music 2007 2008 2009 2010 2011 2012 £356m £338m £332m £333m £316m £311m News/CA Source: Ofcom/broadcasters. BBC figures include BBC One, BBC Two, BBC Three, BBC Four, CBBC, CBeebies, BBC News, BBC Parliament. 2007 2008 2009 2010 2011 2012 4

2 Ofcom research OMC Panel Session B: Do we need the BBC? Television spend

Key points Fig 8. Spend on network programmes, all channels . Total network programme spend across all channels reached £5.6bn in 2012 (Fig 8). BBC spend accounted for £1.4bn across all £5.67bn £5.60bn Channel 5 of its channels. £0.18bn £0.19bn £0.23bn £0.25bn £0.24bn £0.23bn Other PSB portfolio . Figure 9 shows that sport accounted for 19% of PSB total spending £0.37bn £0.31bn channels across the five main channels and the BBC portfolio in 2012. (Note: £0.51bn £0.49bn BBC digital channels compared to the previous year, 2012 was a big year for sport, with £0.71bn £0.69bn the London Olympics and Euro 2012 football tournament, which BBC Two £0.81bn affected spend.) In general there was a spread of PSB spend £0.84bn Channel 4 across genres with no single one accounting for more than 22% £0.80bn £0.85bn Other digital (Drama and Soaps) of spend. News, current affairs and factual channels programming combined accounted for 27% in 2012. ITV1/ITV Breakfast £1.79bn £1.77bn . By contrast, among the commercial multichannels, sport and BBC One entertainment accounted for the majority of spend across key Film/Sport channels genres (Fig 10). 2011 2012 Source: Ofcom/broadcasters. Expressed in 2012 prices. Fig 9. Spend on network programmes, PSBs, by genre Fig 10. Spend by commercial multichannels in key genres £2.94bn £2.89bn £2.73bn Arts & Classical Music £2.71bn Leisure £0.66bn £0.64bn Religion & Ethics Music £0.25bn £0.25bn £0.11bn £0.09bn Education Kids £0.32bn £0.31bn Drama & soap £0.67bn £0.67bn News £0.48bn £0.47bn Children's Factual £0.17bn £0.24bn News & Current Affairs Movies £0.57bn £0.57bn Factual £1.53bn £1.53bn Entertainment Feature film £0.50bn £0.56bn Sport Entertainment & comedy 2011 2012 Sport Source: Ofcom/broadcasters. Includes BBC One, BBC Two, BBC Three, BBC Four, 2011 2012 CBBC, CBeebies, BBC News, BBC Parliament, ITV, ITV Breakfast, C4 and C5. Source: Ofcom/broadcasters. Expressed in 2012 prices. Expressed in 2012 prices. Excludes BBC digital channels. 5

Ofcom research OMC 2014 Panel Session B: Do we need the BBC? Children’s and nations and regions programming Key points . Ofcom’s PSB tracker 2012 showed that parents of children who watch any children’s PSB channel rate the importance of children’s PSB programming highly. Eighty per cent said it was important that the PSBs ‘provide a wide range of high quality, UK-made programmes for children’. . CBBC and CBeebies continued to receive high ratings from the parents/carers of children regularly watching these channels. In 2012, 71% rated CBBC highly on this measure and 81% rated CBeebies highly. This is in the context of a decline in real-term spend by the PSBs. In 2012, of the £92m spent by PSBs on children’s programming in 2012, the vast majority (£88m) came from the BBC. . According to the PSB tracker, 70% of BBC One regular viewers scored it highly on the statement ‘its regional programmes provide a range of good quality news about my area’ which was an increase of 5 percentage points on the previous year. The tracker reported that 66% of regular viewers of Channel 3 scored it highly on this statement. This is against a backdrop of declining spend. Figure 12 shows that there has been a decline in real terms in spend on first-run originated nations and regions programming by the BBC* and Channel 3 since 2007. In that time BBC spend fell by 19% and Channel 3 by 46%. Between 2007 and 2012, total hours of nations’ and regions’ output was down by 857 hours (or 7%) from 11,859 hours to 11,002.

Fig 11. Spend on network children’s programming by PSB Fig 12. Spend on first-run originated nations and regions channels programming £m £123m Spend in nations and regions output by the BBC, ITV/STV/UTV (2012 prices) £120m £117m £111m £379m £14m £106m £22m £19m £6m £3m £92m ITV/ITV £343m £291m £283m £276m £266m £4m Breakfast, C4, C5 £225m £206m £198m £197m Total £190m £183m BBC £109m £98m £99m £105m £102m BBC £88m £154m £136m ITV £92m £86m £86m £83m

2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 Source: Ofcom/broadcasters. Note: figures are expressed in 2012 prices. ITV Source: Broadcasters. All figures expressed in 2012 prices. First-run originations includes ITV Breakfast. BBC channels do not include BBC HD. CITV is excluded. only. *Spend excludes BBC ALBA or or BBC spend on S4C output. 6

3 Ofcom research OMC 2014 Panel Session B: Do we need the BBC? Television revenues

Key points . Our analysis shows that £12.3bn of revenue was generated by the TV industry in 2012 (Fig 13). The BBC’s income allocated to TV represented an estimated 22% of this total. . PACT reports that in 2012 independent producers received almost £1.54bn of revenue from primary UK commissions, equating to 59% of their total revenues.

Fig 13. TV industry revenues, by share Fig 14. Independent producer TV related revenues TV industry revenue shares (%) £m £12,288 (m) 3000 43.1% 43.1% Subscription 41.6% 41.5% revenue £2587m 38.5% 36.9% 2500 £2279m £41m Other UK pre- production £26m £670m Net 2000 Other international 28.9% advertising £673m 32.5% 31.2% £152m income 28.4% 29.9% 29.7% revenue £185m 1500 £123m International sales of 23.6% 23.4% £170m 23.2% 22.4% BBC income UK programmes 21.6% 22.1% allocated to 1000 UK rights income TV £1539m £1287m Other 500 Primary UK 7.1% 7.1% 6.5% 6.3% 5.6% 5.9% revenue commissions 2007 2008 2009 2010 2011 2012 0 2011 2012

Source: Ofcom/broadcasters. Note: BBC expenditure figures are estimated by Ofcom Source: Producers Alliance for Cinema & Television (PACT) census 2013. based on figures in Note 2c of the BBC Annual Report. Figures expressed in 2012 prices.

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Ofcom research OMC 2014 Panel Session B: Do we need the BBC? BBC iPlayer, BBC website, BBC radio Key points Fig 15. Estimated reach of UK video on demand services 1% . The PSB tracker also asks respondents about the BBC Now TV 0% VOD users 2% website and BBC iPlayer. Just over seven in ten (71%) of Talk Talk TV 1% 2% All respondents Blinkbox 1% all those interviewed thought it important that the BBC 4% BT Vision 2% ‘provides a website with high quality content that you can 8% Netflix 3% trust’; this is a significant increase on 2011 (62%). 9% LoveFilm 4% 14% Satisfaction among users of the BBC website remains Demand 5 6% 15% high, with nine in ten (91%) saying they were satisfied Virgin (all) 6% 19% with the website. Satisfaction among BBC iPlayer users YouTube (TV programmes) 8% 27% continued to be high, with 88% of users rating it highly. Sky (all) 11% 28% 4oD 12% 29% . Figure 15 shows that according to consumer research ITV Player 12% 60% from Kantar (TGI, 2013), VOD users are significantly BBC iPlayer 25% more likely to watch on demand content on the BBC 0% 10% 20% 30% 40% 50% 60% 70% iPlayer than any other VOD provider measured in the Source: Target Group Index, Kantar Media UK Limited 2014. Base: all respondents H1 2013 survey. (n=11853) and VOD users H1 2013 (n=4181). Sky includes Sky on Demand/Anytime, Sky Go, Sky Box Office and Sky Store. Virgin includes Virgin on demand and Virgin Media Player. . Figure 16 shows that on average, 90.3% of the UK adult population tuned in to radio each week in Q1 2013. Fig 16. Reach of radio by sector Whereas 67% of adults listened to at least one BBC radio 100% 90.6% 90.8% 90.3% station, compared to 64% for all commercial stations. 89.9% 89.4% 89.8% 89.5% All radio 66.2% 66.2% 66.0% 67.1% 67.6% 66.4% 67.0% All BBC . BBC expenditure on radio was an estimated £721m* in 80% 64.9% 62.3% 61.5% 61.5% 63.7% 63.5% 64.0% 2012, representing around 60% of total radio revenues. All (Note: BBC expenditure figures are estimated by Ofcom 60% commercial BBC network based on figures in the BBC Annual Report 58.4% 58.9% 59.4% 60.6% 61.3% 60.3% 60.9% www.bbc.co.uk/annualreport) 51.5% 52.0% 50.5% 50.9% Local 40% 50.1% 49.5% 49.7% 30.5% 30.9% 31.3% 27.8% 27.4% 26.2% 28.5% commercial National 19.7% 19.0% 17.7% 18.4% 18.7% 17.8% 18.2% 20% commercial 6.0% 6.1% 6.7% 6.3% 6.0% 6.2% 5.8% BBC nations / local 0% Other 2007 2008 2009 2010 2011 2012 Q1 2013

Source: RAJAR, All adults (15+), calendar years 2007-2012, Q1 2013 8

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