Written evidence submitted by ViacomCBS and Channel 5

 

 

DCMS Select Committee Inquiry into the Future of PSB

 

 

19 June 2020                                                       

 

 

ViacomCBS welcomes the opportunity to submit evidence to the Select Committee’s inquiry into the future of Public Service Broadcasting (PSB). For three decades ViacomCBS has been the most successful international supplier of pay TV channels to the UK market, in particular MTV, Nickelodeon, Comedy Central, BET and the Paramount Network. The purchase of Channel 5 in 2014 not only extended the ViacomCBS footprint into free-to-air, public service commercial television, it represented a step-change in our ambitions for our UK business: to invest in more local original programming, to create synergies between our pay and free channels, and to export more programmes and formats globally.

 

Since 2014 Channel 5 has undergone a radical transformation. It has recently won the prestigious Channel of the Year accolade at the 2019 Royal Television Society Awards, Channel of the Year 2019 at the Broadcast Television awards, and a 2018 Channel of the Year win at the Edinburgh TV Awards.

 

 

EXECUTIVE SUMMARY

 

 

 

 

 

 

THE CONTINUED IMPORTANCE OF PSB

 

The media sector has undergone a period of radical change over the past decade. Online content delivery of both curated and user-generated content has altered viewing habits as more than half of UK households have their TV connected to the internet and around half subscribe to a subscription video on demand (SVOD) service[1].

 

There is a view among some commentators that in the context of these significant changes there ‘must’ be a need for a radical reform of the structure and functioning of the PSB system: moving the BBC to a part or wholly commercial model and reforming the current commercial PSB licensing system under Ofcom to a more market-driven delivery of PSB type content. The argument goes that PSB outcomes can be delivered not just by a group of designated broadcasters, but across other broadcasters in the market that make UK originated content, including those behind a paywall or with subscription models.

 

While such an approach would indeed still provide some types of PSB content to viewers, it is hard to see how the Sky, Netflix or Virgin Media commercial platforms could, without the established PSB channels and players, replicate the huge range and reach of programmes offered by commercial PSBs to reflect the UK’s culture, diversity and values; or create a trusted, easily identifiable and accessible place where viewers know they can find drama and children’s programmes, accurate and impartial news, current affairs and documentaries. PSBs, as their name suggests, are an important and enduring part of British cultural life that cannot be replicated with the same public value by the commercial marketplace.

 

This is not to diminish spend by the commercial TV sector on first-run UK originated content, to which ViacomCBS is also a contributor through its pay channels. We recognize that some channels - such as Sky News, Discovery, History Channel, or Nickelodeon may contribute to public purpose, but these channels do not have the reach and impact, and in many cases are not free to air or universally available. Nor are they subject to the rigorous application and scrutiny of programme quotas, terms of trade, and other licence obligations placed on PSB services.

 

Instead of seeking radical reform that trusts the market to deliver desired outcomes, we urge the Committee to consider how policy interventions can strengthen and maintain PSB broadcasters going forward. Whilst there has been some decline in viewing to linear TV, particularly among younger audiences, PSB channels and their associated on-demand services remain valued by consumers and account for the majority of viewing[2]. PSB is the centre of gravity for creative innovation and economic growth within the TV industry and a home for viewers seeking content that reflects their own culture and values.

 

The PSBs make the largest and most significant investment in UK production right across the UK. Despite challenging market conditions PSBs (BBC, ITV, Channel 4, Channel 5) invest £2.5Billion each year on first run UK originations[3]. This compares to £1Billion spent by the entirety of the commercial broadcasting industry[4] of which 90% is news and sports programming[5]. Further, hours of first-run original UK content on the five PSB channels and the BBC’s other public service channels[6] combined has remained stable since 2014, despite market challenges, at approximately 32,000 hours per year. This compares to 210 hours of UK-produced content available on Netflix & Amazon Prime[7].The success of the UK production sector is rooted in investment by PSBs that have supported small, regional and independent producers that have gone on to work with commercial broadcasters and the global SVOD players.

 

The response to Covid-19

 

The Covid-19 pandemic has underlined the importance of PSB for UK audiences as they seek information and guidance on their response to the virus, as well as entertainment for themselves and their families at home. Without the established PSB eco-system it would have been far more challenging to sustain a collective sense of responsibility and mutual support through the crisis.

 

Channel 5’s 6.30pm news bulletin returned on 10th June having been off-air for two months due to operational pressures caused by the pandemic, but its flagship news bulletin at 5pm has been maintained and Channel 5 continues to broadcast brief news updates throughout the day at 12:10, 19:55 and 20:58. Despite the restrictions on movement Jeremy Vine, Channel 5’s daily two-hour current affairs programme, has been maintained. It has proved an incredibly important vehicle to distribute information about Covid-19 to the general public and give them an opportunity to put their questions to expert medical professionals.

 

To entertain children and support their parents at this time, Channel 5’s preschool Milkshake! block is releasing a brand-new episode everyday between March and August, and 250 additional episodes have been uploaded onto Channel 5’s VOD service My5, to sit alongside the 500 episodes already on the platform. In addition, on social platforms brand new content will include Milkshake! Activities and Milkshake! Move & Shake shorts led by Milkshake! presenters, as well as new fact and mindfulness posts. The content will supplement the 22 hours of shorts and posts already made available on Milkshake!’s social platforms, covering birthdays, craft, dance, music, story time, keeping fit, food, celebrations and learning about new things.

 

 

CHANNEL 5’s ROLE WITHIN THE PSB ECOLOGY

 

As one of the UK’s two commercial public service broadcasters, Channel 5 has a substantial set of programming quotas which it is required to deliver as part of its licence agreement. These cover news and current affairs, UK first-run original, independent and regional productions, and access services (See Annex). It is also subject to Terms of Trade rules in its dealings with independent producers, regulated by Ofcom.

 

Since 2014 increased spend on original UK content has funded the creative reinvention of Channel 5 under its Director of Programming Ben Frow, allowing it to display greater range and ambition in its commissioning. No other UK broadcaster has undergone such a transformation over the same period. Channel 5 is the smallest of the UK’s PSBs with a programme budget of just £240M and a team of only nine Commissioners, yet it punches well above its weight on public value delivery.

 

Whilst historically the channel was focused on US acquisitions and set piece reality TV shows for prime-time audiences, since 2014 there has been a significant change in approach to content including a greater emphasis on UK original content, and fewer acquisitions of internationals series. Channel 5 has carved a position in the market as a major factual channel alongside investment in drama, kids, news and current affairs to provide UK audiences with a rounded schedule, but with a major focus on the domestic UK social agenda.

 

 

Factual, Current Affairs, and News

 

Finding creative talent and investing in factual and documentary programming has been a highlight of Channel 5’s changed programming schedule. Its varied offering in just the last year has included Ben Fogle’s New Lives in the Wild, Our Yorkshire Farm, GPs Behind Closed Doors, and The Nile with Bethany Hughes. Channel 5 also has a strong working relationship with the armed forces, creating programming with the RAF, Army and Royal Navy in recent years.

 

Channel 5 devotes many hours of content, beyond its licence obligations, to deliver feature-length documentaries on important issues to a UK audience.  It focused on domestic abuse with the groundbreaking 90-minute documentary The Abused and companion programme How to Leave An Abusive Partner Safely.  It has tackled the subject of rape in the RTS award-winning film Raped: My Story, which followed ten brave men and women who told their story to camera, followed by a debate programme to explore the issue.

 

Channel 5 aired over 500 hours of accessible, popular current affairs last year, nearly four times its public service quota of 130 hours, covering subjects of interest to our viewers.  We air over 280 hours of news programming every year, with a significant proportion of our audience skewing female and relying on Channel 5 for our popular and accessible service.

 

Children’s TV

 

Channel 5 is the only commercial PSB to offer a dedicated, branded block of programming for children on its primary linear channel each morning – this is a key element of Channel 5’s brand differentiation compared to the other PSBs. Milkshake! reached 19.5 million viewers in 2019 and is the brand-leader for pre-school television in the UK.

 

Milkshake! offers a wide range of high-quality programming including world class animation, live action factual, music-based entertainment and wildlife documentaries and is behind some of the UK’s most popular pre-school shows including Peppa Pig, Thomas & Friends, Bob the Builder, Milkshake! Monkey, Shane The Chef, Noddy & Friends, Digby Dragon, Fireman Sam, Floogals and Ben and Holly’s Little Kingdom. While always entertaining, its programming and continuity output covers healthy eating, keeping fit, science, history, geography, wild-life, pets, social and religious festivals, communities, family life, as well as reading initiatives, music, dance and hobbies.

 

In 2019 Channel 5 invested in 42 hours of new originated content for Milkshake!, equating to approximately 160 individual episodes. It is currently Channel 5’s intention to increase this figure to 50 new UK-originated hours per year from 2021, which will move production to over 300 individual episodes[8]. Milkshake! also provides over 800 episodes and 120 hours of content on My5 and over 250 episodes and 22 hours of content on You Tube for viewers to continue their viewing after the linear blocks finishes.

 

Further, the channel has embraced the BFI’s Young Audiences Content Fund (YACF), a contestable fund established in 2019 by Government to support funding for free-to-air/free-VOD children’s TV[9]. To date we have commissioned five programmes supported by this initiative including animations Milo (produced in the North West) and Winnie and Wilbur (produced in Glasgow) and live action shows Meet The Experts (produced in Cardiff), and Mimi’s World ( filmed in Belfast, Northern Ireland)[10] and The World According to Grandpa (produced in Manchester).

 

Regional Programming

 

Channel 5 invests heavily to support production outside the M25 and the creative economy in the nations and regions of the UK, which it sees as a key point of differentiation. This corresponds with significant viewership for the channel outside of London, particularly in Yorkshire, North West, Border, and Eastern Regions of the UK. 5 News specifically is very popular in Scotland and this is reflected in it having a dedicated Scottish correspondent. Jeremy Vine also indexes higher for audiences in Wales, Scotland, the North West, and Yorkshire regions compared to other current affairs programmes such as Panorama and Dispatches which have a larger audience in London and the South[11].

 

Channel 5 far exceeds its OFCOM target quota of 10% for both regional hours and spend. Regional spend was 35.5% 2019 against 21.6% in 2018. Regional hours represented 20.7% (380 hours) of the schedule in 2019 against 16.4% (289 hours) in 2018, an increase of 27% year-on-year.

 

Almost 40% of independent production companies that received commissions from Channel 5 in 2019 were classified as regional. In 2019 Channel 5 broadcast 325 hours of regionally-produced content in peak – an increase of 20% year-on-year.

 

Channel 5’s ongoing commitment to regional programming includes a regional independent producer scheme, launched in 2018, whereby commissioners are paired with 16 small independent producers to help them develop content ideas. It is the dividend of this initiative that has so dramatically increased regional production, to date resulting in £7m and 75 hours of new commissions (as of February 2020).

 

As part of its commissioning strategy, Channel 5 has a successful track record in investing in Yorkshire-based and inspired programming – and has spent £20m in the region since 2015. Commissions include: award-winning The Yorkshire Vet (on S10), Springtime on the Farm, Big Week At The Zoo and Today At The Great Yorkshire Show. New C5 drama series All Creatures Great and Small will air later this year and has also received investment from Screen Yorkshire’s Yorkshire Content Fund.

 

 

SHAPING POLICY FOR THE FUTURE OF PSB

 

The public value of PSB continues to endure, and we are proud of the achievements made at Channel 5. In spite of this success however, we believe that it has yet to reach its full potential because of its reliance on advertising revenues alone. Competition for viewers and advertising spend has dramatically increased with the growing dominance of advertising-funded online digital services, and a volatile, unpredictable advertising market compounds the problem.

             

Even before the dramatic impact of the Covid-19 pandemic, there had already been significant deflation in the advertising market caused by business uncertainty over Brexit. Recent research by the World Federation of Advertisers (WFA) has now found that 81% of marketers from major multinationals (collective marketing spend of $60Bn) say they are deferring planned campaigns as a result of Covid-19. In a separate poll by the WFA, respondents anticipated an average reduction in media budgets of 23%, including a fifth of the sample that predicted cuts of 40% or more[12]. UK advertising spend is declining rapidly, linear TV advertising spend for April and May is likely to be down year on year between 40 and 50 per cent.

 

Channel 5’s revenues will continue to be materially impacted by these factors, and it has been forced to explore a range of measures to reduce costs across all parts of the business, including production. Whilst we are confident that it will remain a viable and successful PSB channel, reforms are needed to place it on a more stable long-term financial footing. With greater stability, combined with a higher level of funding, the channel will be able to plan and make investments based on reliable expectations of future revenues, delivering a greater breadth and depth of quality UK programming. ViacomCBS is recommending three interventions.

 

Prominence

 

The impact of PSB relies on easy access for people to consume it and the prominence rules were put in place over 15 years ago to support this objective. Unfortunately, the current prominence regime has not kept pace with market change, with rules only applying to the linear EPG but not catch-up or on-demand content, search, or recommendation features. Other TV apps such as Netflix or Amazon are able therefore to purchase prominence over PSB content, for example the Netflix button on some remote controls, and through the prominent placing of their apps.

 

In July 2019 Ofcom recommended the establishment of ‘A new framework of legislation and regulation that would ensure that viewers can continue to find and access the PSBs’ linear and on-demand services, across a range of connected devices (smart TVs, set-top boxes and streaming sticks)’, and further that PSB content should also be given protected prominence within TV platforms’ recommendations and search results[13]. We support this recommendation but remain frustrated that the Government is yet to act upon it. Given that legislation is required in this area we believe that it could be achieved in the forthcoming Government online harms legislation.

 

 

Direct resourcing of commercial PSB

 

Additional government funding should be allocated to increase and sustain Channel 5’s UK content production. Any funding would need to be carefully calibrated to ensure that it was allocated to PSB content, with all the existing license conditions continuing to apply. It could also be linked to revenues generated through advertising or vary according to market performance.

 

We would recommend HM Treasury allocate funds to Channel 5 from the Digital Services Tax on digital platforms, which is expected to generate an increased revenue to the exchequer of £500M pa. by 2025[14]. Allocating new funding to Channel 5 from a tax on these platforms would allow it to replenish the PSB value lost through programming spend reduction as a result of advertising revenues lost to these platforms.  This approach to supporting commercial PSB was raised by former Ofcom CEO Sharon White at last year’s RTS Cambridge Convention[15].

 

In this context it is worth noting that the government’s Online Harms White Paper observed that some digital platforms are a tool for abuse and bullying, and for undermining democratic values and debate. Social media platforms, it said, can lead to ‘echo chambers’ or ‘filter bubbles’, where a user is presented with only one type of content instead of seeing a range of voices and opinions’.[16] Redirecting a small fraction of their revenues towards services which can counteract these online harms would be a proportionate and effective public policy intervention to secure a safe and secure ‘line of defence’ for UK citizens.

 

 

Establishing a contestable fund

 

The Young Audience Content Fund (YACF) is a £57Million fund managed by the BFI to support the development and production of distinctive high-quality children’s content. The BFI can award up to 50% of the production budget for projects which have secured a broadcast commitment from a free-to-access, Ofcom-regulated service with significant UK-wide audience reach. Further, the YACF can provide funding for project development so that small independent producers are able to get an idea to a stage that it can be pitched to a broadcaster.

 

As noted earlier in this submission Channel 5 has already made use of the fund. By altering the financial dynamics of content creation in the children’s TV market it has allowed several previously unfeasible UK programmes to be made. Given the success of this fund ViacomCBS supports the creation of a second fund (or series of funds) to support a wider variety of genres, including UK current affairs, factual and documentary programming. As above, sources of funding would ideally come from revenue to the exchequer generated by the digital services tax.

 

 

CONCLUSION

 

As set out above, this inquiry is timely. Robust policy interventions are required now to support PSB and the value it adds to UK society, the media industry, and the broader economy.

 

We look forward to discussing the issues raised in this response with the Committee.

 

 


 


ANNEX: PSB genre and programming quotas, by broadcaster

 

 

 

 

 


[1] Ofcom, 2019, ‘Media Nations 2019’, August 2019

[2] Ibid.

[3] Ibid.

[4] COBA 2019 Content Report, Oliver & Ohlbaum Associates for COBA

[5] Ofcom 2020, PSB Review, Ofcom, 27 February 2020

[6] The BBC’s other public service channels are BBC Three, BBC Four, CBBC, CBeebies, BBC News and BBC Parliament. BBC Three ceased broadcasting as a television service on 31 March 2016.

[7] Ofcom, February 2020, ‘Small Screen: Big Debate – a five-year review of Public Service Broadcasting (2014-18)’

[8] Ofcom, 2019, ‘Children’s content review: Our response to ITV, Channel 4 and Channel 5’s plans’

[9] Ibid.

[10] BFI, 2019, YACF Slate Announcement. https://www.bfi.org.uk/news-opinion/news-bfi/announcements/young-audiences-content-fund-slate

[11] BARB, 2019

[12] WFA, 2020, ‘Survey: Covid-19 global response (March 2020)

[13] Ofcom, 2019, ‘Recommendations for a new legislative framework for PSB prominence’, 4th July 2019.

[14] HM Treasury, 2020, ‘Policy Paper: Digital Services Tax’ 11th March 2020

[15] Sharon White, 2019, ‘Speech to the RTS Cambridge Convention’, September 2019. https://rts.org.uk/video/conversation-sharon-white-julie-etchingham-rts-cambridge-2019

[16] DCMS 2019, Online Harms White Paper’, Executive Summary section 4, 8th April 2019.