Matthew Horsman, Mediatique: presentation on "Carriage consent in the UK" given at the TV content seminar, Driving investment and growth in the UK’s TV content industries, 16 July 2012. More information at http://dcmscommsreview.readandcomment.com/tv/

1. Carriage consent in the UK
Presentation to DCMS seminar
July 2012
Mediatique

2. Key questions
The brief: promote investment in original content alongside a deregulatory approach to
public policy
What is the current balance of payments between
PSB channels and platforms?
What are the benefits of carriage to each party?
Are ‘carriage consent’ fees a basis on which to
ensure equitable payments?
Can carriage consent fees contribute to greater
investment in original content?
Mediatique

3. Some policy context...
 “Carriage” of PSB channels in the UK varies by platform:
Platform Must offer? Must carry? Copyright? Payments?
Cable Yes Back-stop No - exempt None
provision only
Payment flows in
DTT Yes Yes Yes None favour of Sky under
regulated Platform
Contribution
Charges (TPS)
Satellite Yes No Yes Channels pay platforms:
regime: £14m
- Sky – TPS regime
currently
- Freesat – EPG charges
PSB channels are also
PSB channels effectively
multiplex operators/
unable to deny carriage
tenants in DTT
Mediatique

4. The benefits of carriage...
Channel Pay-TV operator / platform
 Benefit from being able to  Benefit from offering PSB
reach pay TV homes (c14m) channels on an integrated
Key benefit of
basis, within their EPGs and
carriage
 ...a key element of their mass- linked to their “players”
market access and unlocking
advertising revenue streams  ...consumers do not have to
“toggle” to get their PSB
services
 Viewing impairment – the  Incremental churn – those
What is the
benefit at risk if drop in viewing generated by subscribers that would switch
channels are not those that remain on the to a rival platform as a result
carried? platform after it has stopped of the channel(s)’ absence
carrying the channel
Mediatique

5. From benefits to payments...
 A “carriage consent” regime would Benefits to
permit the two sides of the carriage channel
bargain to withhold or deny carriage
at will – at the risk of service black-
outs
Benefits to pay-
TV operator
 Payments might flow in either
direction, from broadcasters to pay
TV operators or the other way Whichever side has higher “benefits at risk” would
be willing to pay the other
around...
For modelling purposes, 50% of the difference
between the two sets of benefit
 ...depending on assumptions on
churn and viewing impairment – for
which international and domestic
data is limited
Mediatique

6. From payments to content investment...
 What would the party receiving payments do with the incremental money?
 Short of imposing obligations, there is no sure way to predict how payment flows
will affect content and subscribers
 ...but, past behaviours provide guidance...
Impact of/on... Investment in original Investment in original content Subscriber prices
content by PSBs by platforms/pay-TV channels
Payments from PSBs 
 
to TV platforms
Payments from TV
  
platforms to PSBs
Key factors How important is content spend to
Mitigated by PSB commitments
platform robustness – vs.
at BBC/C4
functionality, technology etc? Competitive context is important
– is there scope to raise prices?
...and commercial objectives at
Will current plans be honoured, or
ITV/C5
costs passed onto third-parties?
Mediatique

7. Mediatique

8. Policy options...
Policy options Basis of assessment
a) Status quo  Deregulatory?
 Impact on content
b) Removal of all relevant payments for PSBs investment?
(i.e., platform charges = 0)
 Risk of black-outs?
a) Negotiations – with backstop I.e., allow PSBs to
withhold channels by  Impact on
removing must-offer subscription prices?
b) Negotiations – no backstop obligations
 Legal and execution
issues?
Backstop of must-carry
Collective or separate
based on US experience (at
negotiations?
regular intervals – 3 years)
Mediatique

9. Key issues for discussion
 Are international case studies relevant in light of UK platform penetration trends?
 Would the parties accept the risks of market negotiation?
 Is reform worthwhile if the expected payment flows are small and content outcomes
broadly unaffected?
 Are the regulatory hurdles too great (EU/domestic)?
 Will level of TPS trend downward in any event, short of any reform?
Mediatique

10. Mediatique
21 Little Portland St
London W1W 8BT United Kingdom
Telephone: 020 7291 6900
Facsimile: 020 7291 6901
www.mediatique.co.uk
Mediatique