Kate Bulkley, Media Analyst.

Fight for rights is hotting up

By Kate Bulkley

Broadcast News

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For Broadcast February 07, 2019

Original programming is key to BBCS’ feud with Discovery over UKTV, says Kate Bulkley

The battle between commissioners and producers for programme rights is only going to intensify, and the growing fracas is creating interesting side effects, including on the value of pending M&A deals.

The emergence of the hungry global SVoDs ignited the fuse, but the battle for rights is set to heat up considerably this year. The launch of more subscription on-demand platforms by broadcasters and studios – led by Disney, Warner Media and NBC Universal – is part of it: all of these are betting big as they try to outflank Netflix and co.

Meanwhile, broadcasters globally are ramping up their own OTT services, from ITV and its ‘More than TV’ mantra to the BBC iPlayer, which is fighting to provide more box sets for longer.

Elsewhere, Discovery has teamed up with Germany’s ProSiebenSat.1 to launch what has been dubbed “an OTT offensive”, and Now TV’s Gidon Katz has been dispatched to the US to help new parent Comcast finetune its VoD services there.

Linear TV channels can still command vast audiences – look no further than BBC1’s Bodyguard – but there is a slow but sure decline in overall linear viewing, especially among younger demographics.

According to an Enders Analysis report published in January, trends around TV revenues are beginning to deviate from consumer consumption trends, which essentially means that non-linear TV video advertising is looking more attractive to advertisers. In the UK, that’s all before factoring in the impact of a potential no-deal Brexit.

Amid these factors is the impending carve-up of UKTV, which runs 10 channels, including several on free-to-air platforms. This is being driven by co-owners BBC Studios (BBCS) and Discovery, who cannot agree which one of them should become the sole owner.

BBCS might well want full control but does it have the firepower? The circa-£350m price tag for Discovery’s share looks high at a time when the BBC says it cannot afford to subsidise licence fees for over-75s at an expected initial cost of £745m annually. Meanwhile, Discovery would like to buy out BBCS’s stake but has been pushed back.

So why is BBCS so keen to keep at least part of UKTV, which today announced its chief executive, Darren Childs, would exit in July as its parents explore“leadership options for the next phase of growth”? Well, the value includes original programming like Taskmaster and Murder On The Blackpool Express, which have helped UKTV punch above its weight in brand recognition. Meanwhile, BBC content like Inspector George Gently, QI and New Tricks has also been vital in driving UKTV audiences, especially on Drama.

However, there are lingering questions over whether BBCS should own commercial linear channels outright in the UK, given that BBCS boss Tim Davie would inherit a huge commercial ad book. The other issue is UKTV’s VoD business.

Indeed, the value of UKTV’s original programming slate crystallised last year when Virgin Media took all UKTV channels off air, ostensibly over the lack of VoD rights to non-originals. Virgin accused the BBC of being a “linear dinosaur in an on-demand world” because it was holding back on digital rights.

A few months down the road and the BBC is keen to keep the channels that have the originals, such as Dave, as well as those with top-performing BBC content – like Drama and Gold. One observer suggested this would benefit iPlayer, which would likely gain that programming from UKTV Play, and effectively return UKTV channels to a linear-only past.

BBCS would also like as much of UKTV’s operating cash-flow as possible – last reported UKTV revenues were £345m, with EBITDA of £91.3m for 2016.

Meanwhile, Discovery’s offer to buy out BBCS’s entire stake sits on the table. Just who is making a meal of this entire deal, do you think? ­

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