Will We See a Broadcaster Exodus Post-Brexit?

The UK has established itself as arguably Europe’s primary broadcasting hub, with many international broadcasters including Disney and Turner International using London as the home of their European operations. But with the UK pulling out of the European Union, this status could be under threat, as Britain may no longer serve as a gateway into Europe.

One critical issue is that many broadcaster currently use the UK’s Ofcom license in order to allow them to broadcast throughout Europe. Ofcom says it currently licenses around 1,200 TV services, many of which broadcast both to the UK and the rest of the EEA, but 400 of which broadcast primarily outside the UK. If a deal isn’t agreed between the UK and EU though, then an Ofcom license won’t be valid outside Britain anymore, leading some to speculate that we might see international broadcasters pack their bags and leave.

UK Prime Minister Theresa may has spoken about the issue specifically, and seems to recognise the broadcasting industry’s importance to the country. But if no deal is agreed, will international broadcasters up sticks once the UK leaves Europe?

The Country of Origin Principle

If no deal is agreed, international broadcasters will need to attain a second license from within the EU to maintain their right to broadcast within the Union. The ‘Country of Origin’ principle enshrined within the EU Audiovisual Media Services Directive states that broadcasters are permitted to transmit across the entire EEA so long as they comply with the rules of their host country, which of course must be a country from within the EEA.

This would have several consequences. Firstly, a license obtained in a different EU state could see broadcasters subject to different interpretations of the EU’s Audiovisual Media Services Directive, as well as local broadcasting laws which don’t apply in the UK. Simon Spanswick, CEO of the Association for International Broadcasting, said Ofcom’s guidance on broadcasting rules are very clear and detailed, which isn’t the case in many countries elsewhere.

Broadcasters would also be required to relocate, at least in part, to the country they get their license from. “The country of origin is defined by things like where the company is owned, where editorial decisions are made, or where the satellite uplink is based. There is quite a lot of scope within those criteria to interpret the country of original principle differently,” said Ed Hall, managing partner with broadcast and media consultancy Expert Media Partners.

Spanswick says he is currently talking to regulators across the EU to figure out how exactly they interpret the principle, but it seems certain that all regulators will require a company to have some kind of physical presence in the country in order to get a license there.

Pitches from Abroad

If the UK does manage to secure a deal with the EU over broadcasting rights, the problem will go away of course. But as with many other Brexit-related issues, the uncertainty in the interim is a major strategic headache and there’s too much at stake for broadcasters to wait around for a decision that might never come, so many are making contingency plans for a no-deal scenario. As Ofcom reported last October, some companies may activate these contingency plans this year, and others have put proposals for new investment in the UK on hold.

As broadcasters have started to look abroad, investment agencies from EU companies have been quick to send out scouts to tout their own country’s credentials.

“The Dutch government welcomes companies looking for an alternative to the UK as a location,” said Michiel Bakhuizen, a spokesperson from the Dutch Ministry of Economic Affairs and Climate. “To that end it has appointed additional people in the US, in London and in The Hague to attract foreign investments. Currently, the NFIA (Netherland Foreign Investment Agency) has contact with over 200 foreign companies that are considering a possible switch to the Netherlands following the Brexit.”

Alongside the Netherlands, which positions itself a broadcasting hub, Ireland is another obvious choice.”Most of our regulation is quite similar to the UK in terms of broadcasting,” said Shane Nolan, SVP of technology, consumer and business services at Irish foreign investment agency IDA, “and we’ve reached out to most of the big broadcasters.” Ireland also has incentives for the TV and film industries, such as tax relief for production work, and lacks the language barriers broadcasters might face elsewhere in Europe.

Is Moving a Division Abroad Enough?

As well as choosing where to go, broadcasters will have to decide how much of their business to send overseas.

One option is to keep the majority of operations in Britain, but to move a small portion of company elsewhere in order to fill the requirements of the country of origin principle. This could mean, for example, moving an editorial team abroad in order to show that editorial and scheduling decisions are made in that country, thereby allowing the company to get a license there.

For large companies, this may be the straightforward option, especially if they have substantial local teams across the EU anyway. “If you are a large scale broadcaster with 2500 staff in London, moving 20 of them to another country, with some of them having editorial responsibilities is disruptive but not a game changer,” said Spanswick, saying he expects this is what most will choose to do.

Nolan agrees this is the most likely option, saying IDA Ireland is helping broadcaster calculate the optimum amount of the business to move abroad, ensuring it’s enough to meet licensing requirements and is big enough to avoid becoming “a weird offshoot over in Ireland.”

The reason for this is that even after Brexit, London will remain attractive to broadcasters thanks to the size of its creative industry. Many will also be tied into infrastructure leases which expire post-Brexit, meaning it’s not easy to pack up business and take it elsewhere. Interestingly Turner Broadcasting has just taken a long term lease for a new building on London’s Old Street, suggesting it has no plans to relocate to the continent any time soon.

The second option is to move the bulk of the business to an EEA member state, leaving a remnant behind in the UK in order to maintain an Ofcom license. While this has large costs, some might see it as an easier option than constantly readjusting their plans based on back and forth negotiations between the UK and EU.

Hall said this option will become more appealing as negotiations drag on. “The longer and more painful you make this, the more straightforward you make it for a large broadcaster to say ‘We are not going to making gaming Brexit options our main business objective for the next four years, let’s just go,’” he said.

A third option is for broadcasters to use Brexit as an opportunity to pull the majority of their business back to their home country as technological advances make it less necessary to have large workforces overseas. Discovery’s relocation could be seen in this light, as it’s choosing to move staff back to the US, rather than moving them elsewhere within the EU.

However Hall says the costs of virtualising operations in this way are too high right now for this to be an attractive option to many, though it may be something we see more of in the future as these costs come down.

Uncertainty in Negotiations

The view overwhelming given by those VAN spoke to was that the best option for broadcasters by far would be for a deal to be reached which allows them to continue as they currently are. Nolan from IDA Ireland acknowledged that while his organisation is reaching out to broadcasters, IDA’s preferred position on Brexit is for no change to be necessary.

Whether this will happen or not remains uncertain. Spanswick said he was impressed by how high up the government’s agenda the issue seems to be, given how Theresa May has directly talked about it herself.

Hall on the other hand was more pessimistic.”I haven’t met a single general counsel, head of legal, or media partner in London who thinks that free trade in television services will make it into any final deal,” he said.

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