Ofcom's second public service broadcasting review Introduction Ed Richards Chief Executive Officer

Ofcom's second public service broadcasting review Phase 1: the digital opportunity Peter Phillips Partner, Strategy & Market Developments

The UK TV market is experiencing a period of rapid change Penetration of digital technologies rising Audience share for the five main channels falling Source: Ofcom 2003 2007 2003 2007 2003 2007 2003 2007 Source: BARB 54% 11% 47% 84% 78% 64% 69% 51%

Consumers continue to attach importance to PSB purposes which depend crucially on UK-made programming People ranking relevant statements as important 85% 65% 67% 69% Purpose 1: Informing our understanding of the world Purpose 2: Stimulating knowledge and learning Purpose 3: Reflecting UK cultural identity Purpose 4: Representing diversity and alternative viewpoints Source: Ofcom PSB Tracker 2007

And while they believe purposes are being delivered overall, there are some gaps Nations/regions news programmes provide good quality news about my area It provides wide range of high-quality UK-made children’s programmes It portrays my nation/region well to the rest of the UK Innovative programmes 25% 31% 27% 27% Source: Ofcom PSB Tracker 2007

Spend on UK-made output relies on PSB channels and is in real-terms decline Sources: Broadcasters and Ofcom calculations. Networked output only. Does not include spend on first run originated sport nor film. 2007 prices

Funding for commercial public service broadcasting will continue to decline Source: Ofcom estimates

The internet presents new opportunities for the delivery of PSB content - but reach and impact are limited % of individuals citing the internet as their main source for the listed activities/information 1% 21% 3% 16% Source: Ofcom research Q4 2007

Spend on UK-made output will fall under a range of plausible scenarios Spend on UK-made output by the five main PSBs Outcomes under a range of plausible scenarios (£bn) Source: Modelling by Oliver and Ohlbaum, 2008

Consumers value public service competition to the BBC Large majority (75% +) Majority (50% - 74%) Minority (<50%) News and Current Affairs News about my nation/region Programmes made in UK and reflect UK life Children's programming reflecting UK life Current affairs about my nation/region Specialist factual programming Dramas that reflect UK life Other programmes about your region/nation Comedies and sitcoms that are made in the UK Religious programmes Programmes for schools Genre Public support for plural supply Source: Ofcom research Q4 2007

We need a new model because the existing one will not remain fit for purpose Reach & impact Competition to BBC Flexibility Remit & incentives Complements the market Not just TV Financial sustainability Met Now? Future?

There are four broad approaches we could take Model 2: BBC only BBC is the sole UK-wide intervention Extended role for BBC to fill market gaps Competition to BBC relies on the market Model 4: Broad competitive funding BBC is the core institution Long-term transferable funding supports all competition to the BBC Model 3: BBC/C4 + limited competitive funding BBC/Channel 4 are core institutions Channel 4 remit extended + new funding Some long-term but transferable funding for further plurality Model 1: Evolution BBC remains cornerstone Commercial PSBs retain special roles Obligations reduced over time or more funding for PSB responsibilities

A new model could be underpinned by a variety of funding sources Regulatory assets Direct public funding Licence fee Industry levies

Regulatory assets

Direct public funding

Licence fee

Industry levies

In the short to medium term there remain a number of critical issues concerning children's programming Spend on first-run originations among commercial PSBs continues to fall Key concern is PSB content for older children and teens Short term approaches might include: Developing the BBC’s role in delivering children’s content Extending Channel 4’s remit to include older children and teenagers Exploring the role S4C could play in delivering content to all children

Spend on first-run originations among commercial PSBs continues to fall

Key concern is PSB content for older children and teens

Short term approaches might include:

Developing the BBC’s role in delivering children’s content

Extending Channel 4’s remit to include older children and teenagers

Exploring the role S4C could play in delivering content to all children

Pressure coming to bear on Nations & Regions output Direct costs of nations/regions programming are significant The opportunity costs of broadcasting nations/regions content are also material But we know that consumers value nations/regional news highly and also attach importance to competition in this area with the BBC Non-news output valued less but still important However each nation requires a different policy approach

Direct costs of nations/regions programming are significant

The opportunity costs of broadcasting nations/regions content are also material

But we know that consumers value nations/regional news highly and also attach importance to competition in this area with the BBC

Non-news output valued less but still important

However each nation requires a different policy approach

What we are publishing today and next steps Today's publications The Second Review of Public Service Broadcasting consultation document Annexes to the consultation document (online only) The PSB Annual Report (online only) Next steps Consultation closes 19th June Proposals published for consultation in early Autumn 2008 Review concludes 2009

Today's publications

The Second Review of Public Service Broadcasting consultation document

Annexes to the consultation document (online only)

The PSB Annual Report (online only)

Next steps

Consultation closes 19th June

Proposals published for consultation in early Autumn 2008

Review concludes 2009

An interactive executive summary can be accessed via Ofcom’s website

Our PSB blog can be accessed via Ofcom’s website

Questions & answers