Retrans Fees Could Cross the Pond

U.K. Regulators Revenue Could Help Fund Original Content
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The United Kingdom could be the next nation to open the Pandora’s box that is retransmission consent, once the sole bane of U.S. distributors, based in part on a recent report commissioned by that country’s largest commercial public broadcaster, ITV.

After years of lobbying by broadcasters like the BBC, ITV and Channel 4, U.K. regulators seem open to the idea, with U.K. culture secretary Sajid Javid stating recently that the government is set to review whether more of a free-market approach to the U.K. television system, including retransmission payments, should be taken to encourage further investment in programming.

“I will be taking a long, hard look at the balance of payments between broadcasters and platforms,” Javid said at the recent Royal Television Society Conference in London, according to U.K. newspaper The Guardian.

Javid’s Department for Culture, Media and Sport intends to launch the retrans review by the end of the year.

Estimates are that U.K broadcasters — who until recently were paying satellite distributors like British Sky Broadcasting as much as $40 million annually for the right to be carried on the service — could take in up to $400 million per year in retransmission fees.

That is still a fraction of what U.S. broadcasters rake in from retransmission consent. According to the study written by NERA Economic Consulting — Delivering for Television Viewers: Retransmission Consent and the U.S. Market for Video Content — U.S. free-toair broadcasters received about $3.3 billion in retrans payments in 2013, accounting for less than 3% of cable operator revenue, but making up about 15% of total broadcast revenue — and “having little or no impact on pay TV prices.”

U.S. retransmission fees are expected to more than double by 2019, the study added.

That last quote will likely be argued to the contrary by U.S. distributors, who have said retrans payments are increasingly being passed on to consumers and have pressed U.S. government agencies to turn back the retrans clock.

Most recently, MVPD lobbying groups have proposed a “Local Choice” initiative that would require broadcasters sell their channels directly to consumers, who would have the right not to purchase the service. The Local Choice push, though, seems to have faded under pressure from broadcasters.

Across the pond, though, the pressure is high to help fund original programming, which is becoming increasingly more expensive to produce.

ITV, which is 6.4%-owned by U.S.-based international cable operator Liberty Global (which also owns Virgin Media, the largest U.K. cable company), estimates that U.K. public-service broadcasters invest about $4.8 billion per year on programming, most of it pumped back into original content.

ITV chief executive Adam Crozier said introducing retransmission fees would have clear benefits to the U.K. creative industries and the wider economy by enabling PSBs to continue to invest in original programming.

“The majority of viewing on these pay TV U.K. distributors, sounding a lot like their U.S. counterparts, warned that cherry-picking regulations from another country’s television system could provide unintended consequences.

BSkyB CEO Jeremy Darroch, speaking at the RTS conference, was supportive of deregulation but said it had to work both ways, according to The Guardian. And he added that current benefits to U.S. broadcasters — like platform access and prominent positioning on electronic programming guides — could be lost in a retrans regime.

“Be careful what you wish for,” Darroch said at the conference, according to The Guardian.

At Virgin Media, which never charged content providers for carriage in the past, CEO Tom Mockridge likened retrans to an additional tax on viewers to watch programming they’ve already paid for.

“There is a careful balance to strike,” Mockridge said, according to reports.

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