Ofcom has signalled a desire to recast the current public service broadcasting regime into a more expansive public service media regime. We take a look at what this might mean for stakeholders across the broadcasting sector.

Ofcom’s recent consultation entitled Small Screen: Big Debate reached a stark conclusion: that in order to save public service broadcasting (PSB) “there is now an urgent need for a new framework to support an effective transition to public service media (PSM)”. This PSB to PSM transition is more than a rebrand and represents an attempt to redraw the lines of PSB in order to achieve its public policy aims in the age of streaming. In this second article in our Broadcasting Subsector Series we look at what Ofcom means by a “transition to PSM” and how a new framework might work.

The existing PSB framework

The existing framework relies on a ‘give and take’ between regulator and broadcaster, or what is often referred to as the “PSB Compact”. The obligations on ITV/STV, Channel 4 and Channel 5 (Commercial PSBs) are set out in their respective licences whilst those relevant to the BBC are set out in its Charter. However, these obligations, in general terms, extend to:

• Programming quotas for independent productions, original UK productions and news;
• Regional production and regional programming obligations;
• Provision of certain types of programming;
• Universal provision free at the point of use; and
• General requirements relating to the creation of high-quality, impartial productions reflective of the diversity of the UK’s nations and regions and its cultural identity.

In return, the PSBs are granted certain benefits, namely access to spectrum, prominence on electronic programme guides (EPGs), must-offer/must-carry provisions to ensure wide availability, and, in the BBC’s case, funding through the licence fee.

The PSB Compact has always required a careful balancing act between benefit and obligation so as to drive innovation and competition in the market whilst also protecting the broadcasting output envisaged by the regime. A market that is stacked too much in favour of the PSB providers would discourage new market entrants, thereby stifling innovation, customer choice and investment in the UK production sector. A market that allows the PSBs to be swallowed up by giants with deep pockets could be similarly disadvantageous to the consumer by reducing the provision of less-commercially rewarding programming (such as children’s TV, where advertising spend is less), reducing consumer choice and access for those without internet, reducing guaranteed spend on regional UK production and, as proponents of the regime would suggest, deprive consumers of “shared national experiences”.

Why the apparent need for a transition?

The last meaningful update to the PSB legislation was in 2003, when Netflix had yet to turn a profit and Blockbuster, its main competitor, was experimenting with offering its customers the opportunity to rent up to four (!) movies at any one time via its DVD-by-mail service.

Since then the technology available to content providers has led to a vast increase in content made available via the internet (OTT Services) and a proliferation in the number of providers, including giants such as Amazon, Disney, Apple and Discovery. These giants have deep pockets and global reach, and also the ability to interact with a consumer across more than just media services (for example Amazon use their Prime service to cross-sell their marketplace platform by offering free delivery).

OTT services also introduce new customer journeys through connected TVs and other devices – with proprietary platforms, bespoke user interfaces (UI) and new methods of searching and recommending content replacing the standardised broadcast system and centralised EPGs. Taken together, these developments provide a significant challenge to both the operation and the effectiveness of the current PSB framework.

This challenge, posed by the rise of digital and streaming, dramatically affects the balance of the PSB Compact in some keys ways:

1. The benefits granted to PSBs are devalued

Changes in the way content is being consumed reduces the value of the benefits being granted to PSBs. For example, prominence is not guaranteed on many now widely-used services or in the new ways people search and access content (for example through buttons or icons on connected TVs), and the “must carry” obligations do not extend to on-demand platforms and connected TVs. Both of these issues are said to leave the PSBs struggling to negotiate for position and availability against the streaming giants.

2. Viewership of PSBs is reduced

The rise of OTT services reduces the reach and viewership of PSB and therefore limits the regime’s ability to successfully achieve many of its missions and aims (why work so hard to guarantee impartiality and productions that reflect the UK’s cultural identity if only a small percentage of the population are watching, for example?).

3. Traditional incomes streams are negatively impacted

A migration of viewers away from PSB services creates financial pressures on Commercial PSBs who have seen a reduction in broadcast advertising income, and on the BBC which continues to find itself defending the licence fee structure from multiple attacks, including arguments that non-payment of the licence fee should be decriminalised to proposals that it should be scrapped altogether.

The warning from Ofcom is clear: that the current PSB framework must be radically rethought for the digital age or it risks becoming obsolete.

The transition to PSM: radical overhaul or just a change of acronym?

Replacing the ‘B’ with an ‘M’ might, at first glance, appear to be little more than a rebrand. However the shift towards a public service media represents an attempt to expand the footprint of the public service regime to encompass both broadcast and online services.

Whilst Ofcom’s process is some way off presenting any concrete regulatory proposals, it envisages a number of ways in which this shift to PSM might manifest itself within a new framework:

Qualitative outcome focused requirements

A move away from the existing quantitative-focussed quotas would give more flexibility to PSM providers to design services that would deliver on the aims of PSM, whilst allowing those providers to also compete in the marketplace.

A move towards service neutrality

Possibly the biggest and most important potential change. The consultation suggests that PSM providers could be given greater flexibility over which services are best suited towards delivery of their obligations, and that new providers of all shapes and sizes could also emerge to deliver PSM content.

Ensuring continued prominence and availability of PSM

Attempting to replicate the prominence and availability benefits from the PSB regime into the PSM regime will be fraught with difficulty – a point recognised upfront in the consultation. Whereas the broadcast spectrum was controlled by the regulator, inclusion on platforms is not. Prominence across connected TVs, through a dedicated button or icon on the UI, would involve regulating some of the world’s biggest hardware manufacturers, and risks distorting genuine competition in a market where many non-PSB commercial operators continue to invest heavily in marketing and securing prominence for their own services. Attempting to ensure availability of PSM services will require a similarly delicate approach. The consultation suggests platforms could be required to carry a ‘core’ PSM service, with enhanced forms of that service available for commercial value.

The concept of service neutrality for PSM is particularly interesting. This may simply allow an existing PSM provider more flexibility over how to deliver its content. A more radical implementation, though, would recognise that content with the required PSM characteristics is already delivered by existing providers – albeit potentially behind paywalls or subscription services. If these providers were sufficiently incentivised to provide some of their content libraries for free, for example, the ‘core’ PSM regime could then be limited to an exceptions-only service, filling gaps left by the market.

Final Thoughts

Ofcom’s consultation and its proposals for a ‘new framework’ are, ultimately, rooted in the same belief that the Select Committee on Communications and Digital reached during their 2019 report: that the provision of public service content is as vital as ever.

Perhaps for this reason Ofcom’s consultation doesn’t really contemplate anything other than fairly major pro-PSB shake-up of the UK’s rules, and the very least we might expect is a shift towards PSM including an expansion of the existing rules to support PSM provision via streaming and on-demand services.  However, in our view any changes will have to be carefully thought through and implemented if Ofcom and government are to create PSM providers that are adequately equipped to compete in the increasingly competitive global marketplace, whilst protecting the levels of competitiveness that have attracted the technological innovation and investment in UK production and media industry that we see today.

The consultation is open until 16 March 2021, with Ofcom intending to make recommendations to Government later this year. Interested parties are encouraged to submit responses here.