Kate Bulkley, Media Analyst.

PSB channels should be paid for

By Kate Bulkley

Broadcast News

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For Broadcast August 28, 2014

US system of retransmission fees makes more sense, says Kate Bulkley

Coming to the end of my summer break in the US, one thing never fails to surprise me – just how big everything is compared with dear old Blighty. The people seem bigger, their cars are all enormous and a single starter option from a children’s restaurant menu is large enough to feed an entire British family. The same is true in the TV business – what we think of as large in London or Manchester is a minnow in LA or Manhattan.

The issue of size underscored much of David Abraham’s MacTaggart lecture at the Edinburgh International TV Festival last week: he said the giant tech and mobile companies are so huge they are a threat to the UK television business and that America’s hunger for the UK’s ideas, creative people, best content companies – and even our terrestrial TV channels – will change the special TV ecology in the UK.

Consolidation will continue, the C4 boss said, as the Americans keep feeding at this particular table. Even ITV (which we think of as pretty sizeable) could be gobbled up by the likes of Liberty Global or NBC Universal without so much as a thought of financial indigestion.

More worryingly, the goals of these outsize giants are different, Abraham said. He believes buying assets in the UK is about them “internationalising their revenues, priming their distribution pipes and shielding their tax exposure”.

So Abraham wants some updating in our industry and, from my summertime seat in the States, I think he’s got a point. One area that definitely needs adjusting is retransmission fees. Here in America, such monies have been paid to the big broadcasters by local affiliate stations and the pay-TV companies that offer the channels almost since TV was invented.

Cable companies and other carriers pay millions every year to CBS, NBC et al because the market system is in place and the broadcasters’ programmes add value to their business. And as the US broadcasters face threats to their audience size and advertising revenues, retransmission fees become more important. In fact, CBS expects to rake in as much as $2bn a year in retransmission fees by the end of this decade.

In the UK, the picture is completely different: the PSBs have only recently stopped paying BSkyB to distribute their main channels. I always thought this was a topsy-turvy charging structure and now the next step needs to be taken – PSBs should be paid for their main channels.

This is an important principle, as was seen in America, where a Barry Diller-backed company called Aereo recently went all the way to the Supreme Court for the right to stream the channels online without paying for them. It lost.

Given the history of these channels being free in the UK, should pay-TV operators like Sky be allowed to pass on the retransmission costs directly to the consumer in a transparent way? This could be a bone of contention.

But the issue is really about copyright and protecting the investment made by the PSBs in original programming.

That seems a pretty straightforward argument – especially as the big boys from the US hoover up UK programming and broadcasting assets. David Abraham said times have changed – and I think he’s right.

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