The Stage

Funding shortfall of £235m in public service broadcasting by 2012, warns Ofcom

Published Thursday 25 September 2008 at 12:10 by Matthew Hemley

Public funding of between £330 million and £420 million will be required by the broadcasting industry by 2012 if audiences want to enjoy the same content on television that they have today, Ofcom has warned.

In the second phase of its public service broadcasting review, published today, the media regulator said £185 million of this amount could be raised by “existing regulatory assets”, such as reserved spectrum, leaving a funding gap of around £145 million to £235 million.

It said the shortfall would arise because of a decline in the value of regulatory subsidies to the commercial public service broadcasters, including privileged access to spectrum, brought about by digital switchover.

A deterioration in the advertising market, Ofcom warned, meant that “challenging drama, scripted comedy and drama for children” was already becoming commercially unattractive and could deteriorate further without new funding.

Considering how money might be raised to plug the shortfall, Ofcom said there was concern about using the licence fee to fund other providers.

However, it said the surplus in the current licence fee settlement that is ring fenced to pay for digital switchover, if retained, could be used for other purposes after 2012 “without in any way curtailing the BBC’s ability to deliver high quality public service content”.

This surplus, it said, would be worth around £130 million.

Other proposals include the prospect of the BBC developing partnerships with commercial broadcasters, or the transfer of some or all of BBC Worldwide’s assets to Channel 4, which the regulator said last week faced a shortfall of £60 million to £100 million by 2012.

The regulator has also proposed the idea of an industry levy as a way of raising extra money, but said “the ultimate decisions” about funding “lie with government and parliament”.

In its review, Ofcom also said action was needed now to ensure commercial public service broadcasters have obligations that are “realistic, sustainable and meet audiences’ demands”.

It said ITV and Five should retain important PSB roles for at least as long as the current licence terms, which continue until 2014.

But it warned that “if significant adjustments are not made now, it will not be possible for ITV1 to balance the costs of holding its licences with the benefits”.

It said choices need to be made to create a “sustainable structure for the next few years” and said ITV should be focused on programmes made in the UK, network news, and nations and regions news, especially in peak time.

For ITV, the regulator has proposed the broadcaster’s quota for original UK production remains unchanged. However, it said the quota for programmes produced outside the M25 should be reduced from 50% to 35%.

Five should be focused on programmes made in the UK, network news and UK children’s programmes.

It said the broadcaster should have a small adjustment in its current quota for original production, suggesting a reduction from 53% to 50%, with a cut from 42% to 40% in peak time.

Regarding Channel 4’s funding situation, the regulator said it was “a matter for government”, but added that provided new funding arrangements are put in place, the broadcaster’s quota for programmes produced outside the M25 should increase from 30% to 35%.

Ofcom chief executive Ed Richards said: “Audiences value public service programming highly, but strong digital TV take-up means it is becoming harder for our leading commercial broadcasters to provide this. We have provided a clear set of choices for maintaining and strengthening public service broadcasting in the future. Along with our proposals in the short term, timely decisions by government and parliament will be critical.”

Ofcom is now holding a consultation on its review, which runs from today until December 4.