4. Driving investment and growth in the UK’s TV content industries

6 Responses to 4. Driving investment and growth in the UK’s TV content industries

1. Dermot Boyd says:

   September 10, 2012 at 10:33 am

   Communications Review Seminar Series

   Driving investment and growth in the UK’s TV content industries

   QVC Comments on Session 2, Second topic – EPG prominence

   1. Importance of Certainty to Investment Decisions

   QVC believes that, to encourage investment, it is essential that channel owners have certainty about their channel number – it is a key element in their business plan. Adverse changes in channel number can lead to very large losses.

   The Technologia report for DCMS and its Appendix E from Canis Media both support previous research by Attentional and others that EPG (electronic program guide) position has significant economic value.

   Channel numbers should be allocated as mechanistically as possible and re-ordering of channels should be minimised as virtually all changes will favour some channels and discriminate against others.

   We believe that given the importance of LCNs (logical channel numbers) and the conflict of interest inherent in DMOL’s shareholders also being leading channel providers, it is essential that DMOL’s role in allocation of channel numbers on Freeview should be regulated by Ofcom. We are pleased that DMOL has recognised this and that DMOL now holds an Ofcom EPG provider licence.

   2. Choice, Diversity and Plurality of Channel Providers

   QVC notes that there has been a reduction in the number of non-PSB owned channels on the Freeview platform and a large increase in the number of PSB portfolio channels. We believe that plurality of channel providers is likely to lead to greater content investment over the long term.

   One reason for the reduction in non PSB owned channels is that bandwidth fees have remained very high even at poor LCN positions. It contrasts with the satellite market where bandwidth is readily and cheaply available from SES Astra and Eutelsat (not from BSkyB) and where there is great diversity of channels.

   The price of Freeview bandwidth is hugely higher than transmission costs – this can be seen for example from the published financial statements of multiplex operator SDN available from Companies House. SDN Ltd’s profit for the financial year ended 31 December 2011 was £60m on turnover of £77m.

   We would expect the price of bandwidth to fall until new entrants came into the market. Instead what is happening is that PSB portfolio channels are taking most of the bandwidth which becomes available. Many of these transactions involve inter-group transfer pricing – four out of six multiplexes are controlled by PSBs. (SDN Ltd is a 100% owned subsidiary of ITV plc.)

   In addition, HD versions of PSB channels are also taking up bandwidth – but generating no incremental content investment.

   Finally, the operation of the “Associated Channels Rule” on Freeview means that when bandwidth auctions are taking place, different bidders can be bidding for different LCNs with different economic values. It is difficult to see how auctions can be fair with this rule in place and it should be abolished.

   If it is a policy aim to encourage investment in content, rather than seeing more cash flow to the already highly profitable multiplex operators, then consideration should be given to setting a cap on the number of channels that any one provider can have on the platform and also to capping the proportion of total bandwidth that can be used by any one provider (e.g. for HD versions of channels). If this were done it is likely that bandwidth prices would fall to a level that made it economic for new entrants to launch on the platform. Versions of such capping are used in France, Spain and Italy.

   Even if prices did not fall, it would provide some assurance that prices in the market were arm’s length.

   3. Potential to Allow a market for LCNs to Develop

   It was noted at the seminar that on the BSkyB platform there is a market for LCNs. We believe that permitting such a market to develop on Freeview would also be beneficial in potentially attracting investment and we do not believe that there are significant barriers to permitting this immediately.

   Arguably the current rules permitting two channels owned by the same provider to swop places is simply a special case of such a market where the difference in market value is inter-group and so no consideration is paid. In principle we see no reason why channels without common ownership should not be allowed to swop in similar fashion if they can agree a commercial payment.

   4. Consumer Interest and Navigability

   There is no unprompted evidence of consumers having difficulty with, or being confused by, the Freeview EPG. QVC has asked how many times EPG navigation has been raised as a query by members of the public to either DMOL or DigitalUK and there is no record of such queries. This contrasts with thousands of queries regarding retuning for example.

   Despite the absence of queries about navigation from the public, DMOL has often sought to invoke consumer benefit when proposing changes to the Freeview EPG.

   On the last two occasions when DMOL has published research on the topic, EPG numbering has “not been top of mind” for consumers and respondents have been satisfied with the current numbering with only tiny percentages disagreeing.

   The recent Kantar research commissioned by DMOL had very large sample sizes which showed that 65% of respondents agreed with the statement “I like the current television listing as it stands” with 30% neutral and just 6% disagreeing, a net 59% in favour. (Kantar report, section 4.3, Fig.7).

   DMOL focused instead on the fact that 66% agreed with the comment “I think that the channels should be grouped together by content type”, ignoring the further data that 12% disagreed giving a lower net figure of 54% in favour. There was also a negatively phrased control statement “I don’t think that the channels should be grouped together by content type” which had 19% agreement and 52% disagreement – a net disagreement of 33%. This control result of 33% casts doubt on the reliability of the net 54% in favour of grouping by content type and the 52% is also significantly lower than the 66% much quoted by DMOL.

   DMOL considered proposing “channel family groupings” because it claims that this is “logical” and included such ordering in its research. QVC believes that such ordering explicitly discriminates in favour of the BBC, ITV and Channel 4 portfolio channels and that therefore it should not have been included as an option in the research.

   When the outcomes of such proposals are viewed in the context of the evidence from Canis Media, it is clear that the changes would be economically beneficial to DMOL’s own shareholders whilst being commercially detrimental to other channels.

   QVC is unaware of “channel family” ordering being used elsewhere in the UK (or indeed in any of the markets where it operates internationally – USA, Japan, Germany, Italy, China) except on FreeSat, which, we note, is wholly owned by the BBC and ITV – the prime beneficiaries of this ordering.

   Based on the evidence, consumers have no difficulty with navigation on Freeview and there is no reason to change it. Channel family ordering in particular is discriminatory and should not be permitted.

   Conclusion

   The current system for LCN numbering has worked reasonably well to date but independent channels such as QVC have had to spend large amounts of time and money constantly defending their channel position which has been threatened every 2 years as DMOL has repeatedly invoked “logic” or “navigability” or “consumer interest” to propose changes. The proposed changes are certainly always logical when viewed from the perspective of DMOL shareholders but there has consistently been no evidence of consumer benefit and many proposals would have had severe adverse impact on non-PSB owned channels. Indeed the likely main consumer impact would have been the departure of even more non-PSB owned channels from the Freeview platform with a reduction in both consumer choice and investment.
2. Rodney Whittaker says:

   September 6, 2012 at 5:10 pm

   I strongly endorse the comments about the importance of sub-titles on TV. In particular, these are rarely/ever available for TV on demand or catch-up TV, making these useless for many. Hearing loss is almost invariable for the over 60 age group and this is becoming an increasing proportion of the population, many of whom may be relying on TV more than when they were in regular work. Deafness brings enough social embarassment, in the family/home as well as in the wider community, and sub-titles can alleviate this in the home environment substantially.
3. Dr Farid El-Husseini says:

   September 4, 2012 at 10:31 am

   Sky’s recent appeal against DMOL’s proposed Freeview EPG reshuffle, citing the likely negative impact on Sky News, has again brought the value of EPG prominence under the spotlight. Perhaps even more pertinent is the fact that DMOL’s proposal does not actually change the relative position of the News channels within the genre rankings on the Freeview EPG, but simply changes their LCNs (logical channel numbers) to facilitate the future launch of new channels in the General Entertainment (which is overflowing), HD and Children’s genre sections. In effect, Sky is therefore not appealing against an immediate loss of EPG prominence (such as would have been the case for the Shopping channels, for example, if DMOL had succeeded in moving them out of General Entertainment into a dedicated Shopping genre section) but against a likely future loss of Freeview EPG prominence as new channels launch in the genre sections ahead of Sky News in the coming months and years.
   There are of course numerous examples of the significant viewing impact of EPG prominence that Sky could cite in support of its case, and much of my work in this area has been published on the Ofcom website. The impact of MTV’s move from the top of the Music section into the 25th channel slot in the Entertainment section of the Sky EPG (a rise of 150 channel ranks) on 01/02/2011 is a particularly striking example, with its Share of viewing on the Sky platform rising by around 150% when comparing its performance in the 6 weeks after versus the 6 weeks before the reshuffle. The fact that, over the same timeframe, MTV’s Share of viewing was down nearly 20% on Virgin Media, where it didn’t benefit from a rise up the Virgin Media EPG, suggests that the positive viewing impact of its prominent new position on the Sky EPG is likely to have been even higher. Indeed, comparing MTV’s performance on the Sky and Virgin Media platforms over a longer timeframe, we find that in the 13 months from the start of the new BARB panel (in Jan-2010) to the time of the SKY EPG change, MTV averaged 0.144 Share points on Virgin Media versus 0.104 Share points on Sky. By contrast, in the 18 months since the Sky EPG change MTV on Virgin Media has average 0.138 Share points versus 0.290 Share points on Sky. In other words, after consistently getting around 28% less Share on Sky than on Virgin Media, since the EPG change MTV’s Share on Sky has been consistently more than twice as high as its Share on the Virgin Media platform. This is clearly a dramatic example, if ever there was one, of the long term benefits of a prominent EPG slot.
   The value of EPG prominence as a means of promoting UK originated content was also one of the main topics of discussion at the recent DCMS seminar on Driving Investment and Growth in the UK’s TV Content Industries. The Government’s drive for a local TV service in the UK has certainly begun to establish a precedent for using EPG prominence as a means of promoting channels by adding them to the list of PSB channels that are due ‘appropriate prominence’ on EPGs under section 310 of the Communications Act 2003. In the case of local TV this has not proved to be particularly controversial, as the overall competitive impact of a local TV service is likely to be small, and as a result the concept of potentially rewarding channels with more prominent EPG slots based on the public service value of their content has gained at least some political traction. A more comprehensive effort to promote PSB or UK originated content, on the other hand, by for example adding further channels to the list of PSBs, or implementing more prescriptive legislation tying EPG prominence to the volume of UK originated content being broadcast, is likely to prove far more controversial and difficult to implement.
   There is also the question of whether EPG prominence is necessarily that important when it comes to promoting more specialist PSB type content, such as a hyper local news or magazine shows, as there is a case to be made that viewers who are interested in such content are much more likely to actively seek it out, putting less emphasis on the need for a prominent EPG slot to aid discoverability and provide easy access. The PSB value of its content aside, proponents of this view would argue that the MTV example isn’t particularly relevant, as its eclectic mix of Factual Entertainment and Comedy based content is just the sort of thing that might appeal to EPG browsing viewers looking for something to watch. Within the context of using EPG prominence to promote specialist PSB type content, however, it would be hard to argue against the relevance of the recent example of the Sky Arts channels moving into prominent slots on the Sky EPG.
   On 21/02/2012 Sky Arts 1 and Sky Arts 2 moved up nearly 90 channel ranks from the first page of the Lifestyle & Culture section into the 28th and 29th channel slots in the Entertainment section of the Sky EPG. With some significant event based programming (e.g. live concert coverage) the viewing to the Sky Arts channels can be highly volatile and so it is best to analyse their combined Share of viewing to generate a more stable set of results. A further complicating factor is that the Sky Arts EPG reshuffle also coincided with a significant drive by Sky to raise the profile and appeal of the Sky Arts channels, with a raft of new programmes, paid for by a three-fold increase in programming budgets, being broadcast in 2012. As a result, there was a statistically significant increase in the Share of viewing of the Sky Arts channels on both the Sky and Virgin Media platforms at the time of the Sky EPG reshuffle, even though they didn’t change position on the Virgin Media EPG. Crucially, however, the performance boost was substantially higher on the Sky platform (up 118% in the 6 weeks after versus the 6 weeks before the EPG reshuffle on Sky, with only a 54% increase over the same timeframe on Virgin), suggesting that as well as the new content there was an additional benefit from being in a much more prominent EPG slot.
   The additional benefit of the gain in EPG prominence is also evident when we compare the performance of the Sky Arts channels on the Sky and Virgin Media platforms over a longer timeframe. In the 14 months from Jan-2010 to Feb-2012 the Sky Arts channels averaged a combined total of 0.089 Share points on Virgin Media versus 0.106 Share points on Sky. By contrast, in the 5 months since the Sky EPG change they averaged 0.149 Share points on Virgin Media versus 0.230 Share points on Sky. In other words, after consistently getting only around 19% more Share on Sky than on Virgin Media, since the Sky EPG change the combined Sky platform Share of the Sky Arts channels has consistently been around 54% higher than their corresponding Share on the Virgin Media platform.
   While perhaps not as dramatic as the MTV example, this is still strong evidence in support of the thesis that even with more specialised content, where potentially interested viewers are more inclined to make an effort to seek it out, EPG prominence is still likely to have a significant performance impact.
   It is, however, also important to recognise that other types of search and recommendation systems (e.g. TiVo, Second Screen Apps, etc.) will begin to play an increasingly important role in how we find and consume audio-visual content. Nevertheless, scrolling through the standard EPG channel listings is likely to remain a significant element in the way we select the unplanned portion of our television viewing for the foreseeable future, particularly among older viewers. This also explains why, despite platform convergence and a growing list of new gateways to access both live and on-demand content, EPG prominence continues to be a valuable commercial commodity for channel operators, as well as a potential legislative tool for increasing the viewing of (and hence promoting) certain types of content.
4. Robin Davies says:

   August 26, 2012 at 9:28 am

   Hi as a blind person who lost my sight in later life I find the provision of audio description for TV programmes, either broadcast or on catch-up services, vital to my ongoing enjoyment and participation in our most vibrant and comprehensive media provision. Without audio description I would be more isolated and removed from this aspect of our shared social experiences. The current provision of only 10% of programmes with AD is insufficient and its absence from most catch-up and online services very poor for the blind and visually impaired community, currently over 2 million in the UK.I would ask that this low or absent provision be addressed with any new legislation.
5. Valerie Privett says:

   August 18, 2012 at 10:15 pm

   I am hard of hearing and rely on Subtitles most of the time. Newsreaders are mostly fairly articulate except for those with regional accents,but because these are usually live broadcasts, the subtitles are always behind.Many of the news items are repeated during the day. Is it not possible to get the subtitles lined up properly for the repeats? This of course applies to all live broadcasting. I also look forward to the day when all programmes offer this facility whichever channel it is on. Please don’t forget us. Thank you
6. Robin Emms says:

   August 13, 2012 at 4:38 pm

   Sub-titles are a crucial element of TV for a huge number of people. For the hard of hearing they are the only way to follow a programme, for the family of the hard of hearing they are crucial for the sanity of the family, as they are for close neighbours. For example, I am hard of hearing & so rely on sub-titles for any tv programmes I watch. Many a time the sub-titles are intermittent or gobbledy-gook & so I have to ask my wife to update me or use the pause & re-wind buttons to catch up – either of these actions can cause uproar in our household. The alternative to relying on sub-titles is to raise the volume, this pleases neither family or neighbours, the former complaining that the volume is too high to hear, the latter having to compete to hear their programme on the other side of the wall.
   Every programme available either live or on catch-up should include the option for sub-titles which are up to date with the scenes and accurate with the content. It’s not rocket science!