A deteriorating advertising market is giving ITV fresh cause to question its public service broadcasting (PSB) remit. Media and marketing editor Anna Blackaby analyses the issue and what it might mean for regional coverage.
It was with phrases like “Alice in Wonderland” and “nanny state regulation” that Michael Grade described the burden of ITV’s PSB status.
“I think we have a future as a public service broadcaster, provided that we can get Ofcom and the Government to realise very, very quickly that we cannot afford to pay more than the licence and the PSB status is worth,” he said.
The broadcaster’s recent results, showing a 28 per cent drop in half-year profits, back up the scale of ITV’s struggle to cope with expensive PSB regulation in a weakening television advertising market.
But despite ITV outperforming the market in terms of advertising revenues and viewing share, its figures came with a gloomy warning that advertising revenue was likely to drop sharply in September.
Numis media analyst Paul Richards told The Birmingham Post: “If you look at ITV, its overwhelming revenue stream is advertising and, given the deterioration in the UK economy, it is clear that will feed through into its share of advertising.
“ITV simply can’t afford to provide public service broadcasting in the way it used to.
“Sadly it’s an economic fact that given the current environment ITV needs a reduction in its public service broadcasting obligations.”
As a public service broadcaster, ITV1 is required to deliver a proportion of programmes that reflect UK cultural activity and diversity as well as regional news, current affairs and religious programmes. ITV is perfectly within its rights to walk away from its PSB status – indeed it is one of the options that Ofcom is considering as part of its current public services broadcasting review.
But Mr Grade has made clear that this would be a last resort. If ITV were to give up its PSB commitments, it would have to pay to use the airwaves it broadcasts on, which it currently gets for free as a public service broadcaster.
It would also have to give up its prominence on the electronic programme guide, meaning it could lose its much-prized channel three slot to competitors. But weighed against the costs of compliance, ITV is looking at the sums and wondering whether it would make commercial sense to walk away.
Ofcom has estimated that the benefits of ITV’s PSB licence to be £45 million a year after the digital switchover.
But Mr Grade has said that it costs the broadcaster over £220 million a year to maintain its PSB status.
Instead of walking away, ITV wants a review of the regulation surrounding its PSB status. One issue it is asking Ofcom and the Office of Fair Trading to look at is the “contract rights renewal,” which reduces the amount advertisers have to commit if ITV’s audience shrinks. The broadcaster is also required to spend 50 per cent of its production budget outside the M25, something which it is requesting Ofcom review.
Regional news is another area where ITV is seeking regulatory easing, and the broadcaster has submitted proposals to Ofcom on changes to its regional news coverage.
A recent leaked Ofcom document suggests the regulator may be sympathetic to ITV’s requests, but the broadcaster will have to wait until the regulator delivers the second phase of its public services broadcasting review in September.
* Would you be affected by changes in ITV’s public service broadcasting status? Email email@example.com