The document summarizes key points from a presentation given by Damian Radcliffe at Birmingham City University on November 26, 2009. The presentation covered Ofcom's role as the UK communications regulator, the state of the communications market, issues around public service broadcasting, local media, and the Digital Economy Bill. It provided an overview of Ofcom's duties and focus areas, trends in digital technologies, challenges facing public service broadcasters, and the goals and main elements of the Digital Economy Bill.
2. 1 Agenda About Ofcom Communications Market in the UK today Hot topic (1) – Public Service Broadcasting Hot topic (2) – Delivering news, media and information at a local level Break Hot topic (3) – the Digital Economy Bill 6. Broadcasting Code
4. About Ofcom Ofcom is the regulator for the UK communications industries, with responsibilities across television, radio, telecommunications and wireless communications services It is independent of Government but accountable to Parliament Ofcom’s sponsoring Departments of State are: the Department for Business, Innovation & Skills (BIS) the Department for Culture, Media & Sport (DCMS) Set up - and its powers and duties defined – by the Communications Act 2003
19. 10 …while take-up of all key services continued to rise Broadband and HDTV among the fastest growing services Source: Ofcom research/operators
20. 11 Time per day spent using communications services On average, consumers spent a little more time using communications services – home internet on the rise, but radio listening declines 5 year CAGR 0.1% -1.9% 21.5% -3.4% 15.2% Source: Ofcom/BARB/RAJAR/Nielsen Netratings (internet is home use only)
26. 14 Household spend on communications fell again in 2008… In real terms, UK household average spend was £93.69 a month, down 4.7%, or £4.39, on 2007 Total
27. 15 …and more consumers are buying services in ‘bundles’ 46% of consumers now buy two or more communications services from a single supplier, up from 39% a year earlier Source: Ofcom research
44. 21 Mobile broadband enters the mainstream Mobile broadband connections exceeded 260,000 in May 2009. 75% of mobile broadband homes also have landline broadband Source: GfK
51. PSB purposes 25 Informing our understanding of the world - To inform ourselves and others and to increase our understanding of the world through news, information and analysis of current events and ideas 2. Stimulating knowledge and learning -To stimulate our interest in and knowledge of arts, science, history and other topics through content that is accessible and can encourage informal learning 3. Reflecting UK cultural identity - To reflect and strengthen our cultural identity through original programming at UK, national and regional level, on occasion bringing audiences together for shared experiences 4. Representing diversity and alternative viewpoints - To make us aware of different cultures and alternative viewpoints, through programmes that reflect the lives of other people and other communities, both within the UK and elsewhere
52. PSB characteristics 26 High quality - well-funded and well-produced Original - new UK content rather than repeats or acquisitions Innovative - breaking new ideas or re-inventing exciting approaches, rather than copying old ones Challenging - making viewers think Engaging - remaining accessible and attractive to viewers Widely available - if content is publicly funded, a large majority of citizens need to be given the chance to watch it
53. 27 The central challenge – the move from analogue to digital model of public service broadcasting
55. 29 Impact of Digital TV Over 90% of households now have access to Digital TV Digital Switchover means all homes will be multi-channel by 2012 Digital homes have access to around 40 channels on Freeview and over 400 channels on multichannel subscription – representing huge choice for viewers. By 2012 the 5 channel home will be moribund. For many it already is.
56. Data from Q1 2007 is basedon consumer research **** Chart using new GfK research from Q1 2007 Digital TV progress 1998-2008 Source: Ofcom
57. Market share of platforms – All sets Q4 2008 Under a third of sets remain analogue terrestrial Source: GfK research 31
58. 32 The UK TV market is experiencing a period of rapid change Penetration of digital technologies rising Audience share for the five main channels falling 78% 69% 84% 64% 51% 54% 47% 11% 2003 2007 2003 2007 2003 2007 2007 2003 Source: Ofcom Source: BARB
60. 34 The growth in digital platforms is creating new opportunities for audiences Penetration of digital technologies (%) Source: Ofcom, GfK, Sky, Virgin Media. Mobile broadband includes penetration of 3G phones plus dongles
61. DVR penetration in all homes % of homes 27% Source: Ofcom Research (Technology Tracker) 35
62. BBC iPlayer online usage BBC iPlayer monthly online streams/download requests, 2008 Autumn TV schedule launches TV iPlayer launches on Virgin Media Streams/downloads (m) 36
63. Despite more choice, TV consumption is declining % growth 2002-2007 -3% -5% 295% -7% 88%
64. Total viewing hours of National News, main PSB channels only, by age group Total hours per year watched by average individual (4+) 103 28 50 195 71 143 Source: BARB, 2008
65. 39 PSBs face declining income as well as audiences Increased competition for advertising revenue from other TV channels and internet 2007 TV advertising 1993 TV advertising Other channels Otherchannels Channel 4 ITV1 ITV1 Channel 4
66. 40 Investment in UK content depends on public service channels but is already falling PSB content – excludes sport Source: Oliver & Ohlbaum Assocs
67. Spend on first-run originated output on the five main networks £2,620 Total £2,697 £3,064m £2,952 £2,848 £m Source: Ofcom/Broadcaster returns. Note: figures are expressed in 2008 prices. Figures include GMTV. 41
74. Local journalism is important because it underpins democratic participation in the UK 45 Informing Representing Interrogating Campaigning
75. Consumers value local and regional content – particularly news 46 % saying local and regional content is very important - weekly users Scores based on respondents importance rating 9/10 on a scale of 1-10. Source, Ofcom research
76. People using internet for local media more than they used to Use of local media now compared to two years ago Source: Ofcom research 47
77. The internet has also created new opportunities and business models Local and regional newspapers online Ultra-local reporting and citizen journalism Emerging hyper-local and community internet services Location based services National classified advertising vehicles 48
78. But the growth of the internet as an advertising medium has created challenges for the sector 49 Source: Advertising Association, IAB, PWC, WARC, Oliver & Ohlbaum Analysis
79. 50 The recession has placed further pressure on regional and local media Regional Press advertising revenues Cyclical Structural Current Prices (£m) Source : Advertising Association/ WARC (www.warc.com)
80. 51 The recession has put further pressure on regional and local media TV net advertising revenues £m revenue at constant prices (2000) Cyclical Structural Source : Advertising Association / WARC (www.warc.com)
81. Consumers value plurality in regionally based TV news Percentage who state it is important to be on than more than one of the main channels Source: Ofcom Research 52
82. Our analysis shows that the Channel 3 licences could face a deficit of £38-64m by 2012 53 Millions Ranges between higher and lower values based on current best estimates Cost Benefit of PSB status for the Channel 3 network Source: Ofcom
87. 57 A number of potential bidders have already emerged
88. A large number of stakeholders have responded to the DCMS consultation Majority expressed agreement that plurality in regional TV news is important and that commercial news providers are facing substantial pressures Many recognised that some form of additional funding may be required to sustain this Support for IFNCs as a mechanism to achieve this Some concerns raised: Commercial impact of public funding of regional news Proposed use of the licence fee for non-BBC services Impact of public funding on governance and impartiality of news Complexity of awards process 58
101. Ofcom’s Statement with recommendations on Media Ownership Rules – to Secretary of State has been published
102.
103. Digital Economy Bill 62 “The communications sector underpins everything Britain does as an economy and society. The rapid drive to digital technology is transforming how both businesses and people operate. And this digital revolution offers great opportunities. Not only does the digital economy contribute around eight per cent of our GDP, it is vital for the success of every other area of productivity. It is growing in significance as we plan for recovery from the economic downturn. The Government is committed to securing the UK’s position as one of the world’s leading digital knowledge economies. This Bill would put in place the necessary legislative measures to deliver the strategic vision set out in the Digital Britain White Paper.” http://www.commonsleader.gov.uk/output/page2920.asp
104. Digital Economy Bill (2) 63 “The purpose of the Bill is to: Strengthen the nation’s communications infrastructures, equipping the UK to compete and lead in the global digital economy. The main benefits of the Bill would be: Promoting a competitive digital communications infrastructure, through proposals on radio licensing, changes to Ofcom’s duties and spectrum modernisation. Providing essential support for creative industries in a digital world, through proposals on online copyright infringement and changes to copyright licensing. Improving digital security and safety, by putting in place a classification system for boxed video games that meets the needs of parents and children. Securing public service content in a rapidly changing broadcasting landscape, through action on the provision of news in the nations, regionally and locally, updating Channel 4 Corporation’s functions and future-proofing the Channel 3 and 5 licences.”
105.
106. Support the plurality of independent and high quality news in the Nations, locally and in the regions – giving Ofcom powers to appoint and fund Independently Funded News Consortia.
107.
108. Digital radio - updating the regulatory framework to make moves to digital switchover for radio possible by 2015.
109. Channel 4 Corporation – updating its functions to encompass public service content on all media platforms - online as well as television.
113. 69 Case Studies Gordon Ramsay's Great British Nightmare, Channel 4 Casualty, BBC1 Breakfast Show, Kiss FM Katie and Peter, ITV2 Sumo TV
114. Thank you for listening damian.radcliffe@ofcom.org.uk 70
Editor's Notes
Further highlights in Nations and Regions Reports and also in the UK report.
Government is playing the leading role – owning policy in this area HMG taking leading role in relation to: Digital Economy Bill On going work on IFNC pilotsThe Queen’s speech scheduled for 18 NovemberFurther Ofcom activity in this area Ofcom Statement on Media Ownership Rules – due to Secretary of State by 13 NovemberOfcom Consultation on DDR in due course - will include discussion of spectrum suitable for local TV
Government is playing the leading role – owning policy in this area HMG taking leading role in relation to: Digital Economy Bill On going work on IFNC pilotsThe Queen’s speech scheduled for 18 NovemberFurther Ofcom activity in this area Ofcom Statement on Media Ownership Rules – due to Secretary of State by 13 NovemberOfcom Consultation on DDR in due course - will include discussion of spectrum suitable for local TV
Overall duties are to further interests of citizens and consumers in relation to communications matters, where appropriate by promoting competitionSecure availability of wide range of TV and radio services of high quality and wide appealMaintain sufficient plurality of providersLicence national and local analogue and community radio stationsEnsure optimal use of the radio spectrum – including for Local TV Plus, in addition:Role in conducting Local Media Assessments for newspaper mergers where there may be competition concerns
Consumers identify with the area they live in as a form of concentric circles with community at the centre, and the UK as a whole on the outside. Our work looks at all elements of this below the UK as a whole.
Informing: To participate in their local communities, citizens need to be informed about important local issues such as major planning applications, new transport initiatives or proposals to close a hospital wing. People want to be informed – succinctly, accurately and accessibly – about significant events of relevance to them: from court reports, decisions of council committees and key local appointments, to achievements by local people on the national or international stage, progress of local sports teams, or the activities of local amenity groups. Representing: Local media can also act as tribunes of the people, facilitating the expression of popular opinion (through letters pages, blogs or discussion programmes) and ensuring that the collective view is passed on to key decision makers. Local newspapers or radio stations have historically been important vehicles for large-scale expressions of dissatisfaction over, for example, a major stadium building project or the inadequacy of local hospitals. And local media can be champions of their own localities, drawing attention to particular achievements or inadequate central government investment. Campaigning: Newspapers in particular have a long tradition of identifying issues directly relevant to their readers, and demanding appropriate action from relevant authorities. At the local level, such campaigns will be attuned to the specific needs of local communities, such as charity appeals, campaigns for action on unsafe roads, or protests against the proposed closure of a local amenity. All local media have traditionally regarded such campaigns as an integral element of their rootedness in the local community. Interrogating: An integral part of the media’s contribution is its watchdog role, holding public authorities and private corporations to account - from elected council officials, school governors, chief constables and county court judges to major employers and retail stores. Effective scrutiny depends on institutional support and adequate resources: as these become more depleted, local institutions become less accountable and arguably less responsive to the needs of the local community.Journalism, Democracy and the Public Interest: rethinking media pluralism for the Digital Age (Barnett 2009)
Consumers value local and regional content92% consume some form of local media at least weeklyOver half say local/regional news on TV is very important while over a third say the same for paid for local newspapers and local radioIts also worth saying that more people view early evening regional news programming on the BBC and ITV than watch the combined UK-wide network news programmes around the same time (8.7m vs 8.2m) – 10% higher
The% of advertising on internet has grown from 3% in 2003 to 20% in 2008While search has been driver of this growth, classified and display have seen significant increases too.
Red lines are our best estimate of costsBlue lines are our best estimate of benefitsThe gap between cost and benefits is between £38m-64m in 2012The single biggest PSB cost attributable to the Channel 3 network is the production cost of regional news which is estimated at £68 million in 2010, and projected to be £72 million in 2012, based on current production costs. These costs are after the regulatory changes made in the PSB Review.It is notable that the production cost of regional news is very similar to the scale of the opportunity cost deficit across the Channel 3 network.This data is based on the figures supplied by the ITV regional broadcasters. As we outline in our LRM report, we have also commissioned an independent assessment of production costs which has produced a similar set of figures.
Independently funded news consortia (IFNCs) would bid to provide regional news service on Channel 3 backed by public fundingConsortia could include incumbent TV news providers, newspaper groups, TV production companies and newsgathering agenciesConsortia awarded contracts based on public criteria, including: - reach & impact - high production & editorial standards - financial stamina
News consortia could offer enhanced options for localness, by- extending local coverage beyond current regional transmission footprint - using news content gathered at local level to underpin extra local servicesEnhanced news services could be offered across media platformsConsortia could also make news footage available more widely
The hypothetical scenario modelled above assumes public funding for news consortia in one English region and two nations commencing late 2010, and full funding commencing in early 2013, as suggested by the timeline in DCMS consultation. There are likely to be transitional financial issues for the Channel 3 licensees until the funding for a full roll out of news consortia is secured. As such, the surplus that we see in the Channel 3 licences today, and again potentially once full funding is provided, may be needed to offset the deficits in the transitional years when funding is only provided for the pilots.Beginning a full roll out of news consortia in early 2013 may leave the winning bidders an insufficient contractual length to allow amortisation of start up and capital costs, and a suitable return on their investment before the Channel 3 licences expire at the end of 2014. In this case, the terms of the contract may need to extend into the new licensing period. Ranges between higher and lower values based on current best estimates
Majority expressed agreement that plurality in regional TV news is importantMany recognised that some form of additional funding may be required to sustain this Support for IFNCs as a mechanism to achieve this – but was not universal Some concerns and opposition expressed in relation to:Commercial impact of public funding of regional newsProposed use of the licence fee for non-BBC services Impact of public funding on governance and impartiality of newsComplexity of awards process
The local and regional media sector is currently facing a range of challenges:Continued provision of regional news on Channel 3 in doubtLocal commercial radio sector under pressureSmall local TV sectorLocal and regional newspaper closures Limited visibility of community media sector ... But also a range of opportunities More localised, cross-media serviceReinvigorated and fit for digital ageNew opportunities on DTTA wide choice of content, available on traditional platforms and onlineThriving community media sectorUnderpinned by innovative, grass roots journalism – supporting the 4 aims
Government is playing the leading role – owning policy in this area HMG taking leading role in relation to: Digital Economy Bill On going work on IFNC pilotsThe Queen’s speech scheduled for 18 NovemberFurther Ofcom activity in this area Ofcom Statement on Media Ownership Rules – due to Secretary of State by 13 NovemberOfcom Consultation on DDR in due course - will include discussion of spectrum suitable for local TV
Government is playing the leading role – owning policy in this area HMG taking leading role in relation to: Digital Economy Bill On going work on IFNC pilotsThe Queen’s speech scheduled for 18 NovemberFurther Ofcom activity in this area Ofcom Statement on Media Ownership Rules – due to Secretary of State by 13 NovemberOfcom Consultation on DDR in due course - will include discussion of spectrum suitable for local TV
Government is playing the leading role – owning policy in this area HMG taking leading role in relation to: Digital Economy Bill On going work on IFNC pilotsThe Queen’s speech scheduled for 18 NovemberFurther Ofcom activity in this area Ofcom Statement on Media Ownership Rules – due to Secretary of State by 13 NovemberOfcom Consultation on DDR in due course - will include discussion of spectrum suitable for local TV
Government is playing the leading role – owning policy in this area HMG taking leading role in relation to: Digital Economy Bill On going work on IFNC pilotsThe Queen’s speech scheduled for 18 NovemberFurther Ofcom activity in this area Ofcom Statement on Media Ownership Rules – due to Secretary of State by 13 NovemberOfcom Consultation on DDR in due course - will include discussion of spectrum suitable for local TV
Government is playing the leading role – owning policy in this area HMG taking leading role in relation to: Digital Economy Bill On going work on IFNC pilotsThe Queen’s speech scheduled for 18 NovemberFurther Ofcom activity in this area Ofcom Statement on Media Ownership Rules – due to Secretary of State by 13 NovemberOfcom Consultation on DDR in due course - will include discussion of spectrum suitable for local TV