Bleak prospects for digital advertising leave no choice to news publishers but to generate revenue from readers, and the lack of widespread frictionless micropayment options means there is no alternative to subscription — the vast majority of western ‘quality’ newspapers have rolled out paywalls; meters and registrations are the most promising approaches

Recent politics have increased demand for quality journalism and readiness to pay. Despite clumsy commercial models the rise in subscriber numbers is encouraging, but current price points may be too low for a sustainable digital transition. Churn is high, publishers have yet to fully develop and optimise ecommerce

The transition to an audience-centric model is a shift away from click bait, with distinctiveness, curation and news agenda hierarchy among the most important factors. Leveraging data to optimise audience engagement remains challenging

We interviewed the biggest hitters in the UK television production sector, asking them about the current issues affecting their industry, such as consolidation, Peak TV, and Nations and Regions quotas

Most pertinent, however, was the production sector’s relationship with the new buyers—Netflix, Amazon, Apple et al.—and how their approach to them differed for each one, as well as traditional broadcasters when pitching, negotiating deals or producing programmes

With views anonymised for candour, this report is an honest representation of an industry where quality and volume are both at an all-time high, despite the challenge of change brought about by these new players

Our latest forecasts predict traditional broadcasters will account for 72% of all video viewing in 2027, down from an estimated 82% in 2017, reflecting the continuing adoption of online video services across all UK age groups.

Additional viewing of online short-form content such as YouTube will keep pushing overall volumes higher, with SVOD services serving more as a substitution for linear TV.

The extent will be greater among younger age groups, for whom the shift has already been significant. We predict that in 10 years just 42% of 16-34s’ total viewing will be to conventional broadcasters versus 91% for the over-55s.

Linear TV's decline continued into 2018, with an overall drop of 3% across the first 12 weeks YOY. However, overall TV set usage remained flat at 4 hours/day, as time spent on unmatched activities—which includes Netflix, Amazon and YouTube—continues to rise.

Within the ever-shrinking pie of consolidated viewing to the TV set, share of viewing (SOV) to the ten largest channels remains broadly flat. Across the whole of 2017 and the start of 2018 the best performer has been ITV (main channel).

Several big-name digital channels are showing surprising signs of recent decline, including UKTV’s Drama and Viacom’s 5USA. It is too early to tell if these declines are a blip or a trend. However, they reflect stalling growth from the long tail of digital channels in aggregate. 

The market for addressable TV looks constrained despite its benefits, with Sky AdSmart taking less than 2% of overall TV ad revenues. Meanwhile, online video revenues for Google, Facebook and others have surged dramatically

Agencies are seemingly enraptured by online video – a highly profitable medium to buy – despite concerns about a lack of effectiveness, safety and transparency 

For broadcasters to compete, better radical collaborative action is needed, including industry-wide adoption of AdSmart, and overhauling the trading agreements which hinder its take-up

A change of control clause triggered by Discovery’s takeover of Scripps will grant BBC Worldwide the option to acquire the 50% of UKTV that it does not already own

With a possible price in the vicinity of the £339 million paid by Scripps in 2011 it is by no means certain the BBCW could proceed alone—so a new, minority partner may well be necessary

Discovery, on the other hand, may be keen to acquire full ownership of UKTV, while retaining a licensing arrangement for the BBC’s content. A channel portfolio containing the best of Discovery, Scripps and UKTV content built on UKTV’s strong EPG positions would transform Discovery in the UK

Responding to the Green Paper’s question on the BBC’s market impact, this report finds that the UK’s creative economy would suffer a 25-50% decline of investment in new UK content “if BBC TV did not exist at all”.

Advertising-supported broadcasters would gain little, if any, extra revenue from expanded commercial audiences. ITV, Channel 4, Channel 5 and non-PSB multichannel broadcasters would be unable to fill the gap in investment left by the BBC Pay-TV platforms could gain significant revenues although the loss of BBC.

TV programming, with 30% viewing share, would increase costs. Pay-TV platforms invest <10p on the £ of revenue in new UK content excluding sport so they, too, would not fill the gap left by the BBC.

The DCMS Green Paper on BBC Charter Review promises a nit-picking examination of all the BBC does, where the focus will be on how to redefine its mission as well as reform and/or improve BBC services in the internet age.

A central theme is the scale of the BBC. The Green Paper underlines the “dramatic” expansion of BBC services in the last 20 years, and questions whether there is still a need for the current breadth and universality of the BBC’s offering in the online world of greatly expanded choice.

Among the future BBC funding options laid out in the Green Paper, the suggestion of a mixed public funding and subscription model raises serious concerns with regard to its potential negative impact on the commercial television sector.

The recently elected Conservative government took less than a week to negotiate a licence fee settlement with the BBC immediately prior to Charter Renewal in which it will offload the government’s over-75s licence fee subsidy on to the BBC in return for various financial benefits.

But, there are strings attached to a financially poor settlement, making it very difficult for the BBC to protest in the run-up to a charter that promises a major diminution in its ability to contribute to the UK creative economy.

The only possible gainers are the commercial media, though the benefits may prove much less than some anticipate, however pleased the newspaper publishers may be by the Chancellor’s criticism of the BBC’s “imperial ambitions” in online news. Much more to be feared is the likely negative impact on the UK TV production sector.

Last Monday’s (6 July) announcement by the Secretary of State marks the second major direct intervention by government without recourse to public consultation in the financing of the BBC throughout the corporation’s history. The previous occasion was 2010.

 

As in 2010, the government has interfered by top-slicing the BBC’s licence fee revenues. We estimate the current annual top-slicing component that will appear in the annual accounts for 2014/15 (BBC year running from April to March) to be in the region of £525 million, including funding the BBC World Service for the first time (est. circa £245 million). By the time the BBC fully absorbs the over-75 subsidy (worth £608 million) in 2020/21, we are looking at a total revenue impact of circa £750 million; that is without taking inflation into account.