Summary:

Ofcom has proposed giving more license fee money to ITV (LSE: ITV), Channel 4 and others to stave off financial threats they face in digital…

Ofcom has proposed giving more license fee money to ITV (LSE: ITV), Channel 4 and others to stave off financial threats they face in digital transition. In its lengthy and important second review of public service broadcasting, the regulator proposes 1) allowing ITV1, C4 and Five to become purely commercial, 2) retaining only BBC and C4 as public-service broadcasters, 3) letting all broadcasters bid for public cash and 4) maintaining the status quo.

An accompanying report commissioned for the review found £500 million was spent on online public service content by local government, the commercial sector and charities combined in 2006/07. That includes £200 million on online news, £170 million from broadcasters, an average £30 million per year from national newspapers and £20 million from regionals. The BBC spent £116 million on bbc.co.uk while the combined budget of ITV, C4 and Five was just £30 million to £35 million – and only £13 million to £14 million of that was on public service content. UK central government spent a further £70 million to £90 million.

Funding for public service channels is drying up as digital consumption options proliferate and advertising spend moves online. Ofcom said the public service channels represent 90 percent of all UK TV investment but their audience share has dropped 17 percent since 2003, higher at 22 percent amongst internet-savvy 16-to-24s.

Ofcom: “The internet is now the most important medium for younger people” and for “discovering new things”. But: “The costs to commercially-funded public service broadcasters of making programmes that meet these aims is going up, while their main financial benefit – privileged access to terrestrial broadcasting radio spectrum to transmit programmes – is going down.” Local news and children’s programming from ITV in particular are set to suffer fruther.

So the regulator is mooting options for reconfiguring the landscape. Amongst funding options – which include government funding, the existing license fee and cut-price spectrum – Ofcom posits copying President Sarkozy’s idea of taxing commercial French broadcasters: “It might be possible to introduce levies on providers not currently part of the formal public service broadcasting model, such as broadcasters, equipment sales, internet service subscriptions or UK online content providers.”

For all its stats showing how media use is moving to the web, Ofcom’s review pays precious little lip service to funding of online public content specifically, and does not carry forward at all its 2005 notion of a “Public Service Publisher” (PSP), a publicly-funded dedicated online content production house. The consultation is open, Ofcom launched a new blog for the process and the final conclusion is due early in 2009.

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