Reports Differ on Whether BBC Services Affect DTV Market
The BBC’s 4 DTV channels are giving viewers poor value for their money and could threaten competition, 2 reports released Wed. found. One, an independent review of the BBC’s DTV services by London Business School management & marketing Prof. Patrick Barwise, was commissioned by Culture Secy. Tessa Jowell in the lead-up to review of the broadcaster’s Royal Charter. The 2nd is from the Office of Communications (Ofcom). While reviewers agreed the BBC has contributed to DTV uptake, they split on its impact on the DTV market. The BBC Board of Governors has until next month to respond to the Barwise report.
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The 4 new digital channels -- BBC3, BBC4, CBeebies and CBBC -- started in 2001 and 2002. The BBC said they aimed to help drive digital takeup, create public value and extend the reach of public service broadcasting (PSB). Barwise’s mandate was to see whether the BBC had lived up to its promises. Individuals’ comments during a public consultation were “overwhelmingly positive” about the new services, Barwise said, while commercial broadcasters stressed the services’ market impact.
Barwise criticized the BBC for a DTV strategy that it said “seems to be based on the idea that every channel, and even every programme, should have a clearly defined target audience.” The BBC assumes, he said, that TV audience behavior is segmented clearly enough to justify the costs of targeting specific groups. Barwise found CBeebies to be “a triumph and an exemplary PSB service for preschool children” and CBBC, another children’s channel, to be a success overall. But he said viewers aren’t connecting with BBC3 because it’s aimed too narrowly at 25-34 year olds, or with BBC4, which was established as “a place to think” but which pulls a very small audience share, in part because of its low budget.
BBC has made a “huge contribution” to digital uptake through the success of Freeview, a service that provides up to 30 free digital channels and is marketed by a company owned by the BBC, Crown Castle Intl. and BSkyB. But its 4 digital channels’ results haven’t justified their budget of Pounds 171 million (around $307 million), Barwise said. The broadcaster should address all groups using resources on free-to-air DTV programs for all age groups, it said. Given the BBC’s modest contribution to DTV uptake and its limited contribution to the reach of PSB TV, the 4 services “together represent poor value for money,” the report said.
Nor do the services have much of an impact on the market, Barwise said. Together they account for 2.8% of viewing in digital homes, he said. It’s unlikely they have directly cut commercial channels’ ad revenue since they have such small audiences. “I believe the impact of BBC3 and BBC4 on the programme supply market has been overstated,” Barwise said. He agreed with Ofcom that “it is unlikely that the BBC’s services have driven, or will drive, any established TV channels out of business.”
The report recommended, among other things, that the BBC increase the impact of the 2 stations for adults and focus its resources on driving DTV. Barwise urged the govt. to: (1) Ensure that its policy is based on evidence and analysis to maximize the net public value of the BBC’s digital channels. (2) Ensure the BBC continues to promote digital takeup and gets enough money to do that. (3) Ask Ofcom and the BBC to work toward an expert consensus on the market impact of BBC programming.
Ofcom examined the impact of the new services from 2 perspectives: Their effect on developments in market structure and competition, and specific impacts on competition or innovation that might be threatened by the BBC’s presence. On the up side, the regulator said, the new services have contributed to DTV uptake, particularly with Freeview. However, it said, there’s a “real risk” the broadcaster’s involvement in some market segments may leave insufficient revenues for interested commercial operators to address. The 4 channels could hurt commercial investment in burgeoning niche markets by leaving insufficient audience for new entrants, driving programming costs up, or restricting access to key content, Ofcom said. (The BBC is funded by license fees paid by everyone who owns a TV).
Ofcom urged the govt. to enact safeguards to cut competition risks. Most importantly, it said, the govt. should consider measures aimed at giving commercial operators more certainty about the BBC’s current mission and any future digital development plans. Ofcom also recommended the govt. work with BBC governors on a common approach for assessing the market impact of future digital services.
In comments filed during the public consultation, the Office of Fair Trading (OFT), the U.K. consumer watchdog, said general competition law applies to the BBC’s activities, but it may not allow competition authorities to investigate conduct that may harm competition. The BBC’s internal fair trading rules deal only with its commercial services, OFT said, while its public services are either not subject to direct economic oversight or are subject to a consent regime in which competition authorities have no formal, public role. The Secy. of State “may wish to consider ways in which Ofcom… could be given powers to impose specific competition controls on the BBC, to reflect the BBC’s unique position in the UK broadcasting sector,” OFT said. At the least, it said, the govt. should establish some independent monitoring of the BBC’s impact on competition.