My Lords, I put my name down to support Amendment 80 because I believe it is in keeping with the spirit of this Bill, which is to strip away regulation and to open up commercial activity—in this case in the television market. The noble Lord, Lord Grade, has explained the restrictions on public service broadcasters created by this antiquated section. The Secretary of State for Culture, Media and Sport acknowledged this in his RTS speech in September, when he said:
“I will be taking a long, hard look at the balance of payments between broadcasters and platforms … I still want to know whether the amount of regulation around these transactions is really necessary”.
He went to ask:
“Can we take government out of what should be a private matter between two private companies?”
The broadcasting of PSB channels on Virgin Media draws in extra viewers, adding to the number of subscribers to the platform. However, Virgin does not reinvest in original British content. Obviously it is doing very well from this arrangement. It is charging its subscribers extra for a new set-top box to record viewers’ favourite shows. They are signing up in record numbers, not least to time-shift their viewing of programmes. ITV estimates that 40% to 50% of viewers record its top-value drama programmes, such as Downton, and watch them at a later date. Virgin's new set-top boxes even go on automatically to record viewers’ favourite programmes. Not only does Virgin make extra revenue from this service but the commercial stations increasingly lose advertising revenue from the use of these set-top boxes. Guess what, my Lords: when you have a pre-recorded programme, you whizz through the adverts. So the commercial impact—a major source of revenue—is severely diminished.
The absurdity of this arrangement is revealed by the fact that even though the main channels, ITV1, Channel 4 and Channel 5, cannot charge retransmission fees, their digital counterparts, ITV2, ITV3 and ITV4, and E4, can do so, with great effect. If this amendment becomes law it will open up the regulatory system for the negotiation of retransmission fees, not just for Virgin Media but also for other platforms, such as Sky.
Ofcom has in place a regulatory framework left over from the rollout of digital television. It means that the emphasis is on the value of the programme content for Sky and the platforms rather than for the content providers. Surely that should be redressed at a later stage, but your Lordships need to repeal Section 73 first, which will pave the way for a level playing field between the content providers and the platform operators.
It is hard to say how much revenue will be generated for the broadcasters, but the latest report by Morgan Stanley reckons it could provide between £50 million and £100 million in revenue. Those are very disparate figures, but they give us a clue to the huge sums in play. There are clearly concerns that this extra money will go straight into the profits of the broadcasting companies. However, in the MacTaggart lecture this August, David Abrahams, CEO of Channel 4, said:
“I commit, here and now, that Channel 4 will reinvest all of the proceeds of a fair deal back into commissioning more original UK content”.
Commercial television is a very competitive market. If one channel invests in content and the others do not, they will start losing viewers and market share to their rivals.
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The noble Lord, Lord Grade, mentioned what has happened in America, with $3.3 billion being generated by retransmission fees. According to the NERA report, this has been reinvested in local news production, with output increasing by 11 minutes per week for each of the 1,300 commercial stations in the US. They have also reinvested in digital multicasting, which will allow programmes to be received via the internet on mobile devices.
At the moment ITV invests £1 billion a year in programming, the vast majority of which is original British content. That has been the case for the past few years. It has also invested heavily in the regions and nations, spending £350 million on a new production base and stage at Manchester’s MediaCityUK; over in Leeds it has spent £7 million on new production facilities. The commercial broadcasters commission extensively from independent regional production houses, supporting creative industries and economies outside London. There is every reason to believe that the extra revenue from retransmission fees would further increase spend in the regions and nations of this country.
The introduction of retransmission fees for broadcasters will reflect a value to the platforms of the content provided—the better the content, the bigger the audience, and so the more they should have to pay. We the viewers will be the winners if this amendment becomes part of the Bill.