Market context and performance 1 Ofcoms third review of public - - PowerPoint PPT Presentation

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Market context and performance

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

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There has been rapid evolution of our media markets, shaped by the growth of the internet

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Technology Platforms and services

1% 3% 6% 10% 11% 24% 34% 37% 44% 50% 60% 61% 75% 97% USB TV device Now TV STB YouView STB 3D ready TV Smart TV E-reader MP3 player DAB digital radio Tablet Games console DVR Smartphone DVD player Digital television

2014 penetration

2007 2008 2009 2010 2011 2012 2013

Non-PSB sources are increasingly providing PSC

4 £1.12bn £1.16bn £1.28bn £1.33bn £1.34bn £1.59bn £0.24bn £0.24bn £0.25bn £0.30bn £0.36bn £0.35bn

£1.36bn £1.40bn £1.52bn £1.62bn £1.71bn £1.93bn

2008 2009 2010 2011 2012 2013

Other genres Sport

Non PSB channel spend on first-run UK

• riginations (real terms, 2013 prices)

Multichannel TV PSB portfolios Online media services Radio

Audience needs and behaviours are changing…

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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

Technologically savvy • The ability to access content whenever, wherever and on

any device is increasingly an expectation

Innovation • An increasing desire for original and innovative content

versus more tried and tested programmes and formats

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Although there have been only gradual changes in viewing trends

Time-shifted viewing, all TV

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And while PSB share has declined it is still significant

75.8% 72.9% 69.6% 67.0% 64.5% 62.1% 60.9% 59.5% 58.3% 56.7% 56.6% 2.5% 4.3% 6.4% 8.5% 10.4% 11.3% 12.4% 14.3% 15.1% 15.8% 15.3% 21.7% 22.8% 24.0% 24.5% 25.1% 26.5% 26.7% 26.2% 26.5% 27.5% 28.1%

0% 20% 40% 60% 80% 100% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 All other channels Commercial PSB non-PSB portfolio channels All PSB (including BBC portfolio channels)

PSB channels share

The PSB system remains strong, but there have been declines in programme spend, output and viewing

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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
• riginated first-run content is also down
• News has seen an 9% decline in spend and there is an increasing reliance on

the BBC

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All hours First-run originations 2014 spend Change 2008-14 2014 spend Change 2008-14 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%

Real terms investment is down across all genres

There are some differences in the nations and regions of the UK

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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.

Percentage of PSB network production value by region

61.1% 60.5% 61.0% 57.0% 55.4% 51.9% 51.6% 6.7% 7.3% 2.8% 2.5% 2.6% 2.1% 1.6% 17.4% 15.3% 15.1% 16.7% 20.0% 19.9% 22.5% 10.2% 10.5% 12.6% 14.7% 12.1% 13.6% 13.4% 2.5% 3.6% 4.6% 4.9% 4.4% 5.9% 5.2% 1.7% 2.2% 2.6% 2.8% 3.5% 3.3% 3.2% 0.3% 0.6% 0.4% 1.0% 0.8% 1.1% 1.2% 0.4% 1.2% 2.2% 1.3%

0% 20% 40% 60% 80% 100%

2008 2009 2010 2011 2012 2013 2014

Other Northern Ireland Wales Scotland Southern England Northern England Midlands & East London

Declining spend has not affected overall audience satisfaction…

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Importance Delivery

Purposes

• Informing our understanding of the world

80%

• 1%

66%

• 1%
• Stimulating knowledge and learning

67%

• 1%

53%

+5%

• Reflecting UK cultural identity

66%

+8%

46%

+12%

• Representing diversity and alternative viewpoints

66%

+2%

51%

+4%

Characteristics

• High quality

82%

+1%

67%

+9%

• Original

74%

+6%

53%

+12%

• Innovative

73%

+2%

52%

+7%

• Challenging

70%

• 4%

49%*

+0%

• Engaging

78%*

+0%

56%*

+6%

* 2013 figures.

…although our analysis suggests some areas of concern

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Investment in content

• The overall fall in spend and specifically in

investment in new first-run UK originations, would be a significant concern if it led to a noticeable reduction in the volume, range or quality of output

Reflecting different cultures

• Do the PSBs fully meet the needs of a range of

audiences? Only 51% of people across the UK are satisfied that programmes adequately portray different kinds of cultures within the UK

Genre delivery • There has been a significant decline in the delivery

• f 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

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Future challenges to the PSB system

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

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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

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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

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What we recommended

PSB Review key recommendations Deciding the role of the BBC is fundamental Consider updating the C4C framework PSBs will need freedom to continue to innovate The prominence regime will need 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.

Questions

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In summary: key points

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• 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
• r in combination, could lead to more transformational changes and

challenges

• There are options for maintaining and strengthening the system