Friday 20 July 2018

UK communications regulator ready to help broadcasters fight challenge from Amazon and Netflix

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Ofcom, the British media watchdog, is chomping at the bit for UK broadcasters to gang together to form a streaming service and save what it sees as the future of the country’s public service broadcasting. It has even hinted at forcing regulation on the sector to favour PSB (public service broadcaster) content over that of foreign-owned SVOD rivals.
All this is in stark contrast to 2009 when the Competition Commission nipped ITV, Channel 4 and BBC Worldwide’s joint SVOD proposal, Kangaroo, in the bud and left the door wide open for Netflix and Amazon to hoover up. The Commission was itself wound up in 2014 [its functions have transferred to the Competition & Markets Authority], with latest figures released by Ofcom revealing the damage done by its decision.
The new Media Nations report paints a stark picture; few can be surprised. The headline statistic is that subscribers to SVOD services (including Sky’s NOW TV) have passed the number for regular Pay TV (15.4 million in Q1 of 2018, compared to Pay TV’s 15.1 million). That matters less to Ofcom than the fact that people are spending less time watching scheduled TV overall: two-thirds (three hours 33 minutes or 71%) of daily viewing time – and slipping – was of broadcast content across all devices, with 1 hour 28 minutes – and rising – being non-broadcast content.
Couple that with a drastic reduction in spend by the UK’s four main broadcasters on UK-made programming (a record low of £2.5 billion last year, nearly 30% less than the 2004 peak of £3.4 billion) and Ofcom’s concern ratchets up. 
While Kangaroo was blocked for being “too much of a threat to competition” the boot is now on the other foot. Netflix and Amazon are deemed to pose too much of a threat to the status quo. BBC Director General Tony Hall has previously characterised the battle as David versus Goliath.
Yet there’s no turning back the tide. Even if the original broadcaster joint venture had not been vetoed, the digital giants would still be dominant. Their business has grown globally regardless of how strong their business is in the UK.
Netflix has 8.2m subscribers in the UK and 4.3m British households are signed up to Amazon Prime Video, according to BARB. Ofcom’s urgency seems to be prompted by the dwindling volume of what it terms ‘British TV’: that is culturally distinct, original locally made programming.
Its conclusion, given the undeniable shift in viewing habits, is that a pooled resource streaming platform is the best means to continue to get this content to people. Ofcom’s position is not new, though it is recent, and could not be a stronger nudge that it would wave through any new proposal – perhaps also involving NBCU – without hesitation.
Indeed, the regulator’s Chief Executive, Sharon White, compared the digital threat to PSBs with the devastating impact of online retailers on UK High Streets. “British broadcasters need to do more to tackle head-on the threat of their own online competition,” White told ITV this week.
She went further: “We think it’s important that Parliament considers levelling the playing field between Netflix and Amazon and British broadcasters so that British TV is just as easy to find on Internet TV as it is on traditional TV.”
Apparently, Ofcom will inform the government of exactly what this means after the summer break, but according to ITV this may include obliging Smart TV vendors to promote the content made by PSBs on their homepages over that of a Netflix. Going further still, the regulator could force Netflix and Amazon “to make more UK-originated programmes and distinctive content, perhaps even news,” according to ITV – one of the principals involved.
It is tempting to see this as an attempt to ringfence ‘made in Britain’ content from the forces massing beyond the wall. Yet Ofcom has previously encouraged opening up to trade with the rest of the world.
“By working with the likes of Facebook, YouTube, Netflix, Amazon, and Apple, PSBs can benefit from these companies’ immense global reach,” White told an Enders/Deloitte conference in March. “They may look to share expertise in technology, marketing and programme-making, in return for investment or prominence on digital platforms.”
There are many issues with an approach that looks to influence the balance of power, not least that it is hard to see how regulating against a Netflix or a Google would pass fair competition rules. Would the licence fee sustain funding of purely British content? Wouldn’t a British Netflix quickly descend into a niche market for travelogues about steam trains, gardening, canal boat holidays and woodland wildlife?
Note that CanalPlay, the SVOD offer from Canal+, recently shuttered in the face of online competition. In what was effectively a eulogy, Maxime Saada, Chairman of the Canal+ board, declared that “we had a French Netflix; it was killed”.
Offering content that is unique, high-quality and ideally exclusive or original does not come cheap. Canal+/Vivendi was seemingly not willing or able to fund this, particularly, as noted by the analyst firm Futuresource, “when its addressable market is more localised than the likes of Netflix or Amazon Prime.”

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