An independent report commissioned by the BBC Trust has recommended that the broadcaster review its investments in the Freeview, Freesat and YouView platforms. The BBC must be currently considering whether its multimillion-pound commitment to YouView represents value for television licence fee payers. British broadcasters are instead expected to back yet another brand, Freeview Connect.
The report was delivered to the BBC in November 2013 and has now been published and presented to the government.
Among its recommendations, the report states: “The BBC should carefully review its investments in TV platforms, namely Freeview, Freesat and YouView, in light of BBC-wide platform and distribution strategy and in particular its duty to promote the availability of services free (or at no incremental cost) at the point of delivery.”
YouView is approaching a million homes, but an estimated 97% of these have been bundled boxes provided by broadband providers BT and TalkTalk, the latter claiming 732,000 television ‘customers’.
Reporting results, Dido Harding, the chief executive of TalkTalk proclaimed: “We have the fastest growing TV business in the UK and we now expect to have nearly 1 million TV customers by the end of FY14.” The TalkTalk share price doubled over two years to the start of 2014.
There is now growing recognition that this has been achieved at the expense of the broadcast partners in the joint venture. The shareholding partners spent over £75 million on the project in the two years to April 2013, and that does not include the marketing or set-top box subsidy costs of the two telcos involved.
As the report presented to the Trust observes: “In practice, nearly all YouView ‘sales’ have been of subsidised equipment offered by sponsoring ISPs in exchange for a subscription payment of some kind. This may have implications for the BBC’s strategy of promoting ‘free’ access to its services, and is likely to form an element of a platform review by the BBC which is currently under way.”
The BBC alone is spending around £6 million a year on YouView. That works out at around £6 per YouView household. Many YouView users are still not happy. Online forums are full of complaints about the service, to an extent to seen on other platforms with many more users.
Whatever value these ‘customers’ derive from YouView, it should not really cost the BBC any more to deliver its services to them, since it simply relies on existing digital terrestrial television signals used for Freeview and iPlayer services over broadband.
The BBC spends now pays less to be on the Sky platform, which reaches over 10 million homes. The much larger cost of satellite distribution goes to SES Astra and also serves Freesat.
In all the BBC spends around £200 million annually on traditional distribution and an estimated £30 million every year on online distribution, which together amount to around 6.5% of the licence fee.
While traditional distribution delivers around 98% of viewing, making online delivery relatively expensive.
The report observes that there is a question of whether and over what time online delivery will substitute for broadcast. Some in the BBC expect traditional distribution to decline rapidly in the medium term, while others believe that traditional channels will remain relevant well into the future, particularly among older viewers.
The BBC, along with other broadcasters, will face competition for terrestrial spectrum for other uses such as mobile broadband.
One of the conclusions of the report is that “In fundamental ways, the BBC’s ability to maintain the relevance of free-to-view broadcasting may well be affected by decisions outside its control”.
While the report makes various recommendations, it does not offer radical solutions, such as moving to a single platform that could combine satellite, terrestrial and broadband distribution. It does not address other issues, such as mobile viewing or the potential for ultra-high-definition television services.
Whatever the outcome, it is increasingly clear that YouView is not the answer. Broadcasters are expected to reduce their investment and involvement in YouView when the existing shareholder agreement expires in April.
Instead, the public service broadcasters are expected to back a new brand, Freeview Connect, through Digital UK, an industry body funded by the BBC, ITV, Channel 4 and Arqiva, originally established to promote digital switchover.