Written Evidence Submitted by Virgin Media
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Written evidence submitted by Virgin Media Virgin Media welcomes the opportunity to support the committee’s inquiry into the future of public service broadcasting. About Virgin Media At Virgin Media, we offer four award-winning services across the country to UK consumers and businesses: broadband, TV, landline and mobile phone. We are the biggest private investor in UK broadband, serving over 6 million customers nationwide. Virgin Media’s TV platform continues to offer the most seamless way to watch all of the best entertainment, drama, sport and much more in one place. We were the first provider to add Netflix, YouTube and iPlayer to our TV offering and the first UK platform to have a 100% HD base. Our latest next-generation TV platform – Virgin TV 360 – offers an updated, modern and more visual user interface with new features such as Search & Control and Startover (which lets users skip back to the beginning of programmes on all major channels) to enhance the entertainment experience. Executive Summary Virgin Media is supportive of the current regulatory regime and delivery model in place for public service broadcasting. The COVID-19 pandemic has demonstrated that the current TV ecosystem works well. The PSBs are reputable and relied upon sources of information, the SVoDs have provided additional entertainment content, and network operators, such as Virgin Media, have ensured infrastructure is resilient. Global competition in the supply of programming has increased in recent years; this is good for consumers. The PSBs have adapted well in the face of this competition. PSB viewership is still high, both on linear and On Demand services, and the UK’s aging population means that it is likely to remain so in the future. Further, the PSBs have adapted to this increased competition through collaboration with the SVoDs. PSBs have been able to leverage the popularity of their shows and benefit financially from growing SVoD market share by selling programming rights to them. PSBs and SVoDs are also co-producing content together, for example Channel 4 and Netflix has collaborated on number of scripted and unscripted programmes. Although attracting and retaining younger audiences is a particular challenge, the PSBs have clearly demonstrated they are able to continue to capture the imagination of this demographic (through shows such as ITV’s Love Island, BBC’s Normal People and Channel 4’s Friday Night Dinner), as well as adapting their broadcasting style to suit younger audiences’ viewing preferences, such as prominently displaying PSB news content on YouTube. Therefore, we see no existential threat that would justify enhanced regulatory intervention either to the benefit of PSBs or to place obligations on SVoDs beyond the extended prominence benefits contemplated by Ofcom. The current dynamic works well. Likewise, we do not believe there is yet adequate reason to transition from the current PSB delivery model, digital terrestrial television (DTT), to a wholly internet-based service (IPTV). IPTV is currently less accessible than DTT and the move would require significant investment. We believe it is a feasible position for the future, but key obstacles related to broadband infrastructure and access need to be addressed first. Whilst we believe no change is required to the current regulatory regime, we question the utility of commercial PSBs being afforded public service broadcaster status in the long term. The content produced by these organisations is largely driven by market demand rather than PSB obligations. In addition, pay-TV channels and SVoDs are now also producing PSB-like content. To ensure that important PSB content is still available to the wider public, a state-run broadcaster could still exist and government could then look at alternative ways to ensure that other PSB-style content is produced without licencing specific channels to do so. In the future, we believe that pay-TV services can work with PSBs to help them compete better, including using data and technology to help them better target content at specific audiences. However, these types of agreements can be done on a commercial basis. Answers to questions Regulation: Are the current regulations and obligations placed on PSBs, in return for benefits such as prominence and public funding, proportionate? What (if any regulation) should be introduced for SVoDs and other streaming services? We are supportive of the current regulation that is in place for public service broadcasters and, at present, see no obvious market failure that needs to be addressed. This is evidenced in the way that the TV ecosystem has responded to COVID-19. The PSBs have delivered high- quality programming that has met the general population’s needs and interests. In particular, individuals have been turning to the PSBs for accurate news content. Ofcom data shows that 76% of the UK population used the BBC as a source of information during the crisis1. Alongside this, the SVoDs have provided additional content to families currently in lockdown, with Netflix adding 4.6 million UK subscribers2, and network providers like Virgin Media have ensured that our infrastructure has remained resilient and able to deal with rising demand for online content. This shows that the current system is working rather than failing. Although there may be short term impacts, like the loss of advertising revenue to commercial PSBs and the fact that new TV content has not been able to be made, this will likely not affect the long-term health of the current PSB regime. In recent months, there have been repeated calls from the commercial PSBs for a reset in the regulatory framework for PSBs to allow them to continue to compete in a more globalised market. However, our assessment of the current market for commercial PSBs leads us to an alternative conclusion. Firstly, we refute the assertion that commercial PSBs are currently inadequately compensated for their PSB status. Using ITV as an example, we believe that the channel would continue to produce nearly all the content that it does today whether it was a PSB or not as it is what their viewership wants to watch – with the exception of regional news. The latest ITV results state that the production of regional news has cost the main channel £72 million per annum in the past two years3, accounting for less than 1% of the channel’s schedule costs for 2019. This would 1 https://www.ofcom.org.uk/research-and-data/tv-radio-and-on-demand/news-media/coronavirus-news-consumption- attitudes-behaviour 2 https://www.theguardian.com/media/2020/may/15/streaming-services-uk-netflix-amazon-prime-video-disney- subscribers-coronavirus 3 https://www.itvplc.com/~/media/Files/I/ITV-PLC/documents/reports-and-results/2019-ITV-Plc-FY-Results- suggest that ITV is adequately compensated for this obligation through EPG prominence, which will arguably increase in benefit if Ofcom’s proposed extension of prominence to internet-connected devices is accepted, and the subsidised spectrum that it receives thanks to its PSB status. Secondly, we doubt the assertion that commercial PSBs are under threat because of the rise of SVoDs and that, as a result, the regulatory framework needs to place additional obligations on these providers. ITV’s live viewing figures have remained high4, in part driven by the UK’s aging population and its reliance on traditional linear television5. In addition, younger people still see a place for PSB programming. ITV’s 2019 results notes that its family of channels remained the largest watched for the 16-34 age group6 and Channel 4’s viewing share among 16-34 year olds is 50% higher than its all-audience share7. This shows that viewership for these PSBs remains resilient in spite of competition. Beyond this, this age cohort also values PSB content, with a recent Freeview study finding that 76% of 16-34 years olds agree that public service broadcasters help keep them informed about important events8. PSBs have also managed to benefit financially from the popularity of its programming by selling the rights to the SVoDs or co-producing content. For example, ITV Studios sold The Bodyguard to Netflix in 2018 so that it could be viewed by subscribers outside of the UK and Ireland9. BBC Studios has also done similar deals with the larger streaming platforms. Channel 4 and Netflix have co-produced a number of scripted and unscripted programmes10 . When this programming is listed within SVoDs, it is always explicitly labelled as content made by each PSB, so that the viewer associates it with this broadcaster, and includes BBFC approved age ratings11. PSBs have also made commercial deals with certain SVoDs to make sure that their on-demand apps are available on their products, for example BBC iPlayer, ITV Hub and All 4 are available on Amazon Fire TV12. Although the PSBs are now taking programming off streaming platforms so that they can be held on BritBox, this is a commercial decision rather than one pointing to any kind of regulatory failure. All the evidence therefore suggests that no additional regulations should be put on the SVoDs. Another common call for adjustment to the PSB regulatory framework is around public funding, and in particular a reset of the licence fee that funds the BBC. It has long been argued that the way that the licence fee is collected should be re-examined to bring it up-to-date with new viewing habits and increased competition. Whilst we understand these arguments, we would caution against any change that would see the BBC lose control