The Streaming Wars Could Put PSB’s Funding Models Under Threat says Ofcom

UK public-service broadcasters (PSBs) have become increasingly reliant in third-party funding for content production in recent years says UK communications regulator Ofcom, signing up for joint productions, often with the big subscription video on-demand platforms. This funding model has helped make up for declining revenues elsewhere, but has been primarily focused on genres which help drive subscriptions to those SVOD services. And this funding model could come under threat as the streaming wars ramp up, with the SVOD services focussing more on their own productions in favour of joint productions with other media companies.

The findings come in Ofcom’s ‘Small Screen: Big Debate’ report, a five year review of UK public service broadcasting released today. The report documents the main changes which have impacted the main PSB channels (BBC One, BBC 2, ITV, Channel 4 and Channel 5)since 2014. Most of these trends are already well documented by Ofcom, for example the shift of audiences away from PSBs and towards global SVOD services like Netflix, and user-generated video content platforms like YouTube. Over the same period, revenues for the main PSBs have fallen due to a mix of falling advertising revenues, and lower levels of public funding. Total PSB TV broadcast revenues fell from £6.4 billion in 2014 to £5.8 billion in 2018, according to Ofcom’s figures.

The report finds that despite this, the PSBs have generally been able to continue fulfilling their mandate. “The PSB channels are still distinctive in the amount and range of first-run, original UK programmes they broadcast,” says Ofcom. “Collectively, they provide audiences with approximately 32,000 hours of new UK content in a wide range of subjects, including news, current affairs, drama and children’s programmes. This far outweighs what is available on other commercial broadcast channels and the global streaming services.” And audiences still see them as important – when asked to rate the importance of the PSBs out of ten, 69 percent gave a seven or above in 2019 (up from 66 percent in 2014).

But it may become more difficult for the PSBs to continue delivering on their remit in the coming years. “Third-party funding has become an increasingly important source of funding for the PSB channels, and tends to be focused on certain genres, such as drama,” said Ofcom. “When we include co-production contributions from third parties such as SVOD services, and US TV Networks like AMC, total PSB spend on first-run original programmes has remained broadly flat at around £3bn between 2014 and 2018 in real terms.” From Ofcom’s figures, third-parties contributed nearly £500 million of this £3 billion spend in 2019.

This funding model could be threatened by the streaming wars, as SVOD services place more priority on exclusive solo productions. “As new SVoD services launch in the UK and the broadcasting market becomes increasingly competitive, it is unclear whether SVoD services will continue to invest in coproductions at this level, or potentially prioritise their own productions,” said Ofcom.

This is just one of the threats facing the PSBs. Ofcom found that while they are trying to adapt to changing viewing habits and build audiences on their OTT services, so far these efforts haven’t been sufficient to counteract the drop in broadcast viewing. And the trend is set to continue over the coming years – 38 percent of adults surveyed said they could see their households no longer watching broadcast TV in five years time, according to data from Ampere Analysis (though it should be noted that self-reported figures don’t necessarily reflect what will actually happen). At the same time, public funding for the PSBs appears to be under threat, as the current UK government considers decriminalising non-payment of the TV license fee, which funds the BBC.

“Live broadcast viewing is in decline, as viewers increasingly shift to global on-demand and online services,” said Ofcom. “The connections which some audiences, particularly younger people, have traditionally had with PSB channels has diminished. The time is right to explore new ways in which PSB could be delivered, so that audiences and the wider UK economy continue to benefit.”

Subscribe to Weekly VAN Newsletter