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Broadcasting Sector Report

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Broadcasting Sector Report Broadcasting Sector Report 1. This is a report for the House of Commons Committee on Exiting the European Union following the motion passed at the Opposition Day debate on 1 November, which called on the Government to provide the Committee with impact assessments arising from the sectoral analysis it has conducted with regards to the list of 58 sectors referred to in the answer of 26 June 2017 to Question 239. 2. As the Government has already made clear, it is not the case that 58 sectoral impact assessments exist. The Government’s sectoral analysis is a wide mix of qualitative and quantitative analysis contained in a range of documents developed at different times since the referendum. This report brings together information about the sector in a way that is accessible and informative. Some reports aggregate some sectors in order to either avoid repetition of information or because of the strong interlinkages between some of these sectors. 3. This report covers: a description of the sector, the current EU regulatory regime, existing frameworks for how trade is facilitated between countries in this sector, and sector views. It does not contain commercially-, market- or negotiation-sensitive information. Description of sector Scope 4. The broadcasting sector covers the production of audiovisual or audio (radio) content and its distribution, which is subject to the framework of regulation overseen by Ofcom (or, for TV stations based elsewhere in the European Economic Area (EEA), by another EEA regulator). 5. This report primarily covers linear (or live) visual broadcasting services (digital TV, live streaming, webcasting, near video-on-demand) and non-linear services (video on demand services such as the BBC iPlayer, All4, etc, or subscription video on demand services such as Netflix). Radio is part of the broadcasting sector and is a predominantly domestic-focused industry subject to national licensing. Though the main focus of this document is on visual content, radio is discussed where relevant. 6. There is a significant overlap with the creative industries (television and radio production and distribution is designated as a creative industry) as well as with the telecommunications, manufacturing and technology sectors. 7. This report does not cover video games (discussed in the Creative Industries report) or social media such as Facebook or Snapchat. 1 8. The provision of equipment to receive television or radio services (e.g. manufacture and sale of television sets and radios, set-top boxes, satellite dishes etc.) are not covered by this report. Equipment used to distribute content (which most broadcasters lease or contract for) is covered as this is a sectoral cost, but the implications of the specialist equipment suppliers for this market - the majority of whom are based overseas - are not considered in any detail. Sector Overview 9. Broadcasting can be roughly broken down into three phases: Production, Content arrangement and packaging, and Distribution. 10. Production (which overlaps with the Creative Industries sectoral report) refers to the production of TV, TV-like and audio content itself. This includes not only the production of television shows and news but also the presentation of sports programmes where the underlying rights are not owned by the broadcasters (e.g. Premier League, Olympic Games). There are a large number and range of producers and creative content companies (all part of the creative industries), of a range of sizes. Sectoral regulation has contributed towards creating a dynamic market of independents and non-independents (i.e. integrated with broadcasters). 11. This market is driven by strong commissioning from public service broadcasters (PSBs), but in recent years there has been an increase in commissioning and co- production deals involving UK-based commercial broadcasters and international broadcasters. Alongside this investment ‘over the top’ (OTT) services such as Amazon Prime and Netflix which have now entered the commissioning market with large budgets. This broader, international market is key if the sector is to continue to grow, particularly as PSB commissioning budgets have fallen by nearly a quarter in real terms since 2005.1 12. Content arrangement and packaging: Service companies include TV broadcasters, catch-up services and video on demand (VoD) services. The role here is to package and aggregate content whether by traditional channels or OTT portals. The main sub- sectors are: ● PSBs: These organisations each have certain obligations regarding broadcast content and how it is delivered. PSBs include: the BBC (including the BBC World Service), which is licence fee-funded but generates a commercial return from post-broadcast content via BBC Worldwide; Channel 4 (state- owned but commercially-funded); ITV and Channel 5 (commercially-owned and funded but meeting certain public service broadcasting requirements) and S4C in Wales (mostly funded by the BBC). All bar Channel 4, which is a ‘publisher broadcaster’, have production businesses. There are also smaller channels which serve a public service purpose, such as BBC Alba in Scotland (funded by the BBC and Scottish Government), and local TV services (commercially owned but benefiting from BBC funding for distribution and 1 PSB Annual Research Report Ofcom - July 2016 2 news content). All the major PSBs have both live broadcast channels and catch-up ‘players’ such as iPlayer; ● Commercial non-PSB broadcasters: including businesses with a specific focus on the UK (e.g. Sky and UKTV) and international broadcasters using the UK as their European hub. The UK has become the biggest European broadcasting hub, with approximately 150 companies transmitting 7582 channels into the EU. Revenue for commercial multichannels was £2.5bn in 2016, having grown at an average of 5% each year since 2011.3 Further analysis from the Commercial Broadcasters Association (COBA) shows that broadcasters invested £725m in UK content, including £597m in first-run content in 2013.4 Some of these broadcasters have catch-up players (e.g. UKTV Player) but most are currently individual or suites of live broadcast channels; ● Subscription Video on Demand: Under a subscription contract, consumers pay a fee (usually monthly) in order to access these OTT services. Paid on- demand services have registered a steady growth; Netflix has a reported year-on-year growth of 17%, whilst Amazon more than doubled its subscription base over 2016.5 These emerging players are generally not based in the UK (for example, Netflix is based in the Netherlands6); ● Small International broadcasters: Ofcom licensee data suggests that there are a number of small international broadcasters established in the UK (some of which target the UK and some of which exclusively target Europe, generally either aimed at diaspora groups, providing religious broadcasting or some special interest).7 These small companies benefit from the resources created by the hub of the larger broadcasters such as availability of skilled freelance staff, and competitive pricing for production, post production and distribution; and ● Radio: For radio, there is the BBC (funded by the licence fee) and commercial radio services (national and local) - local commercial radio has requirements to provide news and locally produced content and is funded primarily by advertising. There is also a community radio sector providing mainly local community services with a smaller overall share of the market.8 13. Distribution, which includes free-to-view, subscription, and online. Pay platforms may provide equipment as part of the overall service. Radio operates separate distribution arrangements on analogue (FM, Medium Wave or Long Wave) or digital (DAB) as 2 Data from European Audiovisual Observatory: Audiovisual Service in Europe; this number includes 82 Ofcom broadcasting licences aimed at services both in the UK and Ireland 3 Communications Market Report Ofcom - August 2017 4 2014 Census: Multichannel Investment in TV Production COBA 2014 and Coba sector statistics 5 Communications Market Report Ofcom - August 2017 6 media.netflix.com/en/press-releases/netflix-announces-400-new-jobs-in-europe-and-two-new-european- original-series 7 List of cable and satellite broadcasters Ofcom 8 Communications Market 2016: Radio and Audio Ofcom 3 well as broadcasting online. For television broadcasting, the main free-to-air platforms are: ● Freeview - digital terrestrial television received via an aerial provides free-to- air TV to over 98.5%9 of UK households. Used by around 40% UK TV homes for primary sets (this excludes DTT hybrid services - see below ),10 and available in up to 75% of homes (this includes secondary sets); and11 ● FreeSat - via a satellite without a subscription. Effective coverage is around 93%. Used by around 7% of UK TV homes.12 14. The main pay TV platforms are: ● Sky - via satellite and generally bundled with internet services including on- demand services. Subscription service. Effective coverage is estimated to be around 93%. Used by around 31% of UK TV homes; 13 ● Virgin - cable based subscription service also offering high speed broadband as well as pay TV and on demand services. Effective coverage is around 50% of UK homes passed14 (with plans to expand coverage ). Used by around 15% of UK TV homes;15 ● IPTV/ Freeview Hybrid services - offered by BT, Talk Talk, Now TV (Sky) and EE - these services also provide access to Freeview services. Coverage extends to around more than 90% of homes which now have sufficient
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