Retransmission fees - to pay or not to pay?

Director, Policy and Strategy

Last week the BBC announced a plan for how it proposes to deliver its services to audiences with the licence fee frozen until 2017. These plans amount to £670m of savings which are a mixture of cuts to scope and productivity. Although we have tried hard to protect programming it was simply not possible to make these savings without having to make cuts to some of our output.

It is worth noting however that there remains one area outside the BBC's control that could deliver us substantial additional annual savings. This is the area of 'retransmission fees'.

Put simply, the BBC currently pays Sky a fee so that it can be broadcast on their platform, this was something that was agreed many years ago in order to help satellite broadcasters justify the investment they needed to build their platform. The annual cost to the BBC is £10m. The question now is whether or not this money is still flowing in the right direction. A new study due to be published shortly argues that the UK is the only country of all those examined (including the US, Canada, France, Germany and Spain) that operates in this way. When you consider that the majority of viewing time remains firmly within these networks it begins to look like the balance here may be the wrong way round.

BBC Director General Mark Thompson summed the argument up in his 2010 MacTaggart speech by quoting someone else who thinks that those who invest in content should get a better deal saying that "Asking cable companies and other distribution partners to pay a small portion of the profits they make by reselling broadcast channels, the most-watched channels on their systems, will help ensure the health of the over-the-air industry in America."

He went on "The point is a simple one [in the US] it's the free-to-air networks who invest the most in broadcast content, they're also the most popular networks in the US cable and satellite environments, so isn't it reasonable that the distributors should pay the networks a charge in return for the right to carry them? The man who made that case is Rupert Murdoch and in America he's winning the argument - Fox is now receiving distribution fees from the cable companies. So why not introduce retransmission fees in the UK as well?"

To be clear, here in the UK the BBC would not seek to be paid by Sky for the re-transmission of its content - the BBC is already funded by a universal licence fee. But if we did not have to pay Sky £10m a year we would save £50m over the remainder of the licence fee period. And that is £50m that could go back into programme making - it would for example cover all the costs that we are currently planning to take out of local radio and BBC Four combined.

John Tate is Director, Policy & Strategy, BBC.


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