Market context and performance 1
Ofcom’s third review of public service broadcasting (PSB) in the UK • Statutory requirement to undertake these reviews periodically with a view to – establishing the extent to which the PSB television channels have fulfilled the purposes of public service broadcasting – maintaining and strengthening public service broadcasting in the future 2
There has been rapid evolution of our media markets, shaped by the growth of the internet Technology Platforms and services Digital television 97% 2007 DVD player 75% Smartphone 61% 2008 DVR 60% Games console 50% 2009 Tablet 44% DAB digital radio 37% 2010 MP3 player 34% E-reader 24% 2011 Smart TV 11% 3D ready TV 10% 2012 YouView STB 6% Now TV STB 3% 2013 USB TV device 1% 2014 penetration 3
Non-PSB sources are increasingly providing PSC Non PSB channel spend on first-run UK originations (real terms, 2013 prices) Multichannel TV £1.93bn Other genres Sport £1.71bn £0.35bn £1.62bn £1.52bn £0.36bn £1.36bn £1.40bn £0.30bn PSB portfolios £0.25bn £0.24bn £0.24bn Online media £1.59bn services £1.34bn £1.33bn £1.28bn £1.16bn £1.12bn Radio 2008 2009 2010 2011 2012 2013 4
Audience needs and behaviours are changing … Increasingly diverse • UK is becoming more diverse in terms of geographic identity, ethnicity, religion and behaviour by age PSB distinctiveness • In a world of increasing choice, consumers prefer to distinguish between ‘good’ and ‘bad’ content Portfolio viewing • The PSB portfolio channels are viewed as equally important as the main channels Generation gap • These trends are particularly true for the young – they may also be taking these habits with them as they age Innovation • An increasing desire for original and innovative content versus more tried and tested programmes and formats Technologically savvy • The ability to access content whenever, wherever and on any device is increasingly an expectation 5
Although there have been only gradual changes in viewing trends Time-shifted viewing, all TV 6
And while PSB share has declined it is still significant PSB channels share 100% 21.7% 22.8% 24.0% All other channels 24.5% 25.1% 26.2% 26.5% 26.7% 26.5% 27.5% 28.1% 80% 2.5% 4.3% 6.4% 8.5% 10.4% 11.3% 12.4% 14.3% 15.1% 15.8% 15.3% 60% Commercial PSB non-PSB portfolio channels 40% 75.8% 72.9% 69.6% 67.0% 64.5% 62.1% 60.9% 59.5% 58.3% 56.7% 56.6% All PSB (including 20% BBC portfolio channels) 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 7
The PSB system remains strong, but there have been declines in programme spend, output and viewing Some metrics have performed well … • Sector revenues have recovered in general – advertising and online are growing • Output still at a high level despite 4% overall decline – new hours in peak time are stable • Audience satisfaction remains high and people believe that the system broadly delivers • Viewing has fallen but from a high base – most loss has gone to PSB portfolio channels Some face potential challenges … • Spend has fallen substantially – by 14.8% for PSBs – and the volume of UK originated first-run content is also down • News has seen an 9% decline in spend and there is an increasing reliance on the BBC 8
Real terms investment is down across all genres All hours First-run originations 2014 2014 Change 2008-14 Change 2008-14 spend spend News & current affairs £304m -£49m -14% £304m -£49m -14% Arts & classical music £43m -£14m -24% £41m -£14m -25% Religion & ethics £13m -£5m -27% £13m -£4m -26% Education £7m -£23m -77% £7m -£23m -77% Factual £498m -£71m -12% £482m -£71m -13% Drama & soaps £590m -£381m -39% £516m -£233m -31% Entertainment & comedy £601m £2m 0% £504m -£29m -5% Feature films £150m -£85m -36% £20m £7m 54% Sports £547m -£54m -9% £545m -£8m -2% Children’s £99m -£24m -20% £88m -£15m -15% Total £2,851m -£703m -20% £2,521m -£439m -15% 9
There are some differences in the nations and regions of the UK Percentage of PSB network production value by region 0.4% 1.3% 1.2% 2.2% 0.3% 0.6% 0.4% 100% 1.7% 0.8% 2.2% 2.6% 1.0% 1.1% 1.2% 2.8% 2.5% 3.5% 3.2% 3.6% 3.3% Other 4.6% 4.9% 4.4% 5.2% 10.2% 5.9% 10.5% 12.6% 12.1% 14.7% 13.4% Northern Ireland 13.6% 80% 17.4% 15.3% 15.1% Wales 16.7% 20.0% 6.7% 7.3% 22.5% 19.9% 2.8% 60% 2.5% 2.6% Scotland 2.1% 1.6% Southern England 40% 61.1% 61.0% 60.5% Northern England 57.0% 55.4% 51.9% 51.6% 20% Midlands & East London 0% 2008 2009 2010 2011 2012 2013 2014 Source: Ofcom/broadcasters Note: A new category ‘Multi Nation/Region production’ has been created for Regional Productions from London Producers which do not meet both 70% of spend and 50% of talent in any one particular Macro Region' See http:// stakeholders.ofcom.org.uk/broadcasting/guidance/programme-guidance/reg_prod/ on Ofcom website for further details. 10
Declining spend has not affected overall audience satisfaction … Importance Delivery Purposes • Informing our understanding of the world 80% 66% -1% -1% • Stimulating knowledge and learning 67% 53% -1% +5% • Reflecting UK cultural identity 66% 46% +8% +12% • Representing diversity and alternative viewpoints 66% 51% +2% +4% Characteristics • High quality 82% 67% +1% +9% • Original 74% 53% +6% +12% • Innovative 73% 52% +2% +7% • Challenging 70% 49%* -4% +0% • Engaging 78%* 56%* +0% +6% * 2013 figures. 11
… although our analysis suggests some areas of concern Investment in • The overall fall in spend and specifically in investment in new first-run UK originations, would be content a significant concern if it led to a noticeable reduction in the volume, range or quality of output Reflecting different • Do the PSBs fully meet the needs of a range of audiences? Only 51% of people across the UK are cultures satisfied that programmes adequately portray different kinds of cultures within the UK Genre delivery • There has been a significant decline in the delivery of certain key genres. Real-terms spend on first run programming by the PSBs on the following genres has fallen significantly; drama, current affairs, children’s, nations and regions 12
Future challenges to the PSB system 13
Projecting forward the current market trends suggest the current system can continue to deliver • Only gradual change in platform mix to main TV set • Ongoing high levels of live viewing • TV advertising structurally robust • PSBs maintain high share and reach • New global entrants do not take traditional viewing share 14
Some developments could lead to more transformational changes and challenges • A faster shift to on-demand viewing • Changing user interfaces drving changes in consumption habits • New disruptive entrants may well emerge • Faster fragmentation of audiences • Structural changes to the key sources of funding 15
Future challenges Maintaining revenues -total investment down £400m since 2008 -the future of the BBC? The challenged genres -news for young people: down 30% since 2008 -the challenges of drama investment -childrens Maintaining the benefits side of the PSB compact -spectrum value/AIP -EPG prominence in a connected environment Future distribution questions -”internet first” BBC -cost of multiple distribution routes -the IP switch question 16
What we recommended PSB Review key recommendations Deciding the role of the BBC is Consider updating the C4C framework fundamental PSBs will need freedom to continue The prominence regime will need to innovate reforming Retransmission reform is challenging Changes in the indie sector need to be carefully monitored … and there are scenarios where changes in consumption habits, consolidation and negative impacts on funding models will require more radical reform. 17
Questions 18
In summary: key points • Rapid evolution of our media markets , shaped by the growth of the internet • The audience has changing needs and behaviours • The PSB system remains strong , but there have been declines in programme spend, output and viewing • Overall audience satisfaction remains high – not affected by decling spend although our analysis suggests some areas of concern • Projecting forward current market trends suggests an evolutionary path for PSB • There are a number of market developments which, either individually or in combination, could lead to more transformational changes and challenges • There are options for maintaining and strengthening the system 19
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