Retransmission fees - to pay or not to pay?

Friday 14 December 2012, 12:20

John Tate John Tate 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.


Comments

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    Comment number 1.

    I've done a few bits here http://www.ukfree.tv/fullstory.php?storyid=1107051908 (transcript and Sky's internal £20m map) and http://www.ukfree.tv/fullstory.php?storyid=1107051881 (how the figures are worked out).

  • rate this
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    Comment number 2.

    It's worth pointing out here that there is no "retransmission" going on.

    The BBC (along with ITV plc, STV, UTV, Channel 4 and Channel 5) broadcast their channels free-to-air on the SES Astra satellites using capacity the broadcasters get directly from the company.

    These exorbitant prices are what Sky Subscriber Services Ltd charge to LIST these free-to-air broadcasts in their "guide". This is a trivial amount of data compared to the many transponders full of MPEG-2 encoded video and audio.

    Also, the BBC/ITV joint venture Freesat manages a BETTER EPG service (has radio listings) for almost no cost - the whole venture has had start-up funding of less than £2m.

  • rate this
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    Comment number 3.

    On this occasion it seems that the BBC has both moral and financial arguments firmly on its side, so perhaps it's finally time for a major rethink on this issue. And if this ultimately results in the BBC threatening to withdraw its channels from the Sky platform if no deal can be achieved then so be it; Sky is perhaps counting on the fact that the BBC might be too timid to make such a threat, so its bluff should be called if Sky fails to be constructive in this regard.

    Maybe someone ought to have a quiet word with Mark Thompson...

  • rate this
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    Comment number 4.

    This point is worth noting, from http://www.c21media.net/news/detail.asp?article=63362&area=1

    "In countries such as France, Germany and Spain, [cable and satellite] platforms pay terrestrial networks to retransmit their feeds."

  • rate this
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    Comment number 5.

    Another question worth asking is: "how much does BBC Worldwide get from hosting 10+ channels on Sky?"

    There are 10,300,000 Sky customers, who must be pay the "basic charge" of £234-£294 a year for the 120 non-premium Sky channels.

    That's almost £3,000m of "basic channel" income to Sky.

    But BBC Worldwide AS A WHOLE reports £1158m sales and £160m profit.

    So... how much of the £3bn Sky gets from subscribers for access to UK TV channels ends up Sky's profits and how much back to the BBC?

  • rate this
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    Comment number 6.

    Perhaps too much emphasis is played in obtaining the top listings in the Sky EPG. I find it hard to believe that Sky would live to its threat of burrying the BBC main channels somewhere in the 'International' channels should the BBC jettison this agreement with Sky, without Sky risking a customer relations disaster. Having BBC 1 - 4 listed AFTER Sky 1, Sky 2, and Sky 3 is not a mortal sin worthy of £10M pa.

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    Comment number 7.

    This is so wrong, Sky get package income from selling this, and they should pay the BBC for the content. The BBC doesn't pay Virgin Media. This again shows how wrong the Murdoch empire is, charging for a service, and where by the recent license agreement and additional costs 2,000 will loose their jobs at the BBC, but Sky post increasing profits.The BBC should tell Sky they will not pay anymore, and if the BBC goes of the EPG so be it.

  • rate this
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    Comment number 8.

    It seems strange to use the term "retransmission" in this context. Can someone explain exactly what Sky are "retransmitting"?

    As I understand it, the BBC pay SES Astra to transmit BBC channels via satellite. sky are transmitting nothing on behalf of the BBC. Correct?

    Yes, it might be the case that the EPG and platform charges that Sky charge are excessive, but why isn't the blog focused on that rather than on "retransmission" that Sky don't do anyway?

  • rate this
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    Comment number 9.

    I feel so strongly about this I have just registered to leave this comment. This is so ridiculous that when I heard about it I was utterly gob-smacked. The whole idea of the BBC paying Sky money to be re-transmitted is so commercially stupid and this would not happen in a normal 'commercial' arena. Let Sky take the BBC channels away and we shall see how quickly they put them back again after you get 'X' amount of customers complaining.

 

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