Viewers reject “rip off” TV tax plans

TV viewers have labelled proposals to introduce new charges to transmit ITV, Channel 4 and Channel 5 programmes over pay TV networks a new TV tax and a “rip off”, according to a new survey.

In what is the most comprehensive survey to date into the proposed charges, 73% of people said the plans for retransmission fees would amount to a new tax on watching TV. After reading more about the tax, 72% said the new charge would be a “bad idea”.

Government proposals

The survey of 2,001 people for Virgin Media comes as UK commercial public service broadcasters (PSBs) are calling for the introduction of retransmission fees. This would be a charge to carry their programmes, levied on pay TV providers.

Earlier in the year the Government held a public consultation on plans to introduce the fees, with a decision expected at the end of the year. Recent reports also suggest that the Government is seeking to repeal Section 73 of the Copyright, Design and Patents Act 1988which would open the door for retransmission fees on cable companies only.

Increased costs for viewers

But the introduction of fees would mean increased costs for TV viewers: 77% of people believe that Pay TV providers would cover the retransmission charge by raising the price of TV packages . This would come in addition to the significant advertising revenues these commercial PSBs get from their prominent position on Pay TV platforms such as Virgin Media providing free access to tens of millions of viewers.

Change in channel listings

Commercial negotiations between the PSBs and pay TV providers may result in the channels pushed lower down in the TV menus (electronic programming guides). Instead of slots 3,4 and 5 they could move to 59 or 148, for example.  When asked about this potential change, more than three-quarters of people (77%) said they would prefer these channels to stay in slots 3, 4 and 5.

The survey also shows that a third of people said they would be less likely to watch ITV, Channel 4 and Channel 5 if they were lower down the programming guide. A loss in viewership could lead to a decline in advertising revenues for these broadcasters, undermining the limited financial benefits to come from a retransmission fee.

Double payment

When asked about the extra income this fee would bring to commercial PSBs, 76% of TV viewers did not see the need to pay extra when commercial broadcasters already earn money from advertisements, with 71% labelling this double payment a “rip off.” Instead, two-thirds of people said that commercial PSBs should focus on getting more viewers so they can make more money from advertisements rather than introducing new charges.

Fee would be used to prop up profits

If the fee was introduced then two-thirds of people said that commercial broadcasters should significantly reduce the amount of TV advertising.   Some 63% believe that commercial PSBs are looking to introduce these fees as a way to increase their profit margins.

Tom Mockridge, CEO of Virgin Media, said: “Retransmission fees are just a fancy term for a TV tax - a tax on programming that people already pay for through the large amounts of advertising they see between programmes. TV viewers have given a resounding thumbs-down to the idea. The Government must take note.”

Research details

Greenberg Quinlan Rosner Research (GQRR) conducted an online poll of 2001 respondents in Great Britain. The survey fielded from 14-19 October 2015. The data was weighted to be nationally representative of gender, age, region, social grade and ethnicity.

Background

Regulatory landscape

PSBs and pay TV platforms are governed by numerous regulations in this area:

• Section 73 (s73) Copyright, Designs and Patents Act 1988 – the copyright of PSB broadcasts and underlying rights re-transmitted via cable is not infringed.
• Must Offer / Must Carry – the Communications Act 2003 requires that PSBs offer PSB channels for carriage to all major platforms and that Electronic Communications Networks must carry them.\n \n  
• EPG prominence – the Communications Act 2003, establishing the Ofcom EPG Code, requires that EPG providers give appropriate prominence to all public service channels. Prominence is valued and enforced by Ofcom in licence negotiations with the PSBs.

“Balance of Payments” consultation

In March 2015 the Government launched a consultation on retransmission fees. This closed at the end of June 2015 with the Government expected to issue its conclusions by the end of this year. (Consultation doc and the impact assessment are here)

Speaking at the RTS conference in September, Culture Secretary John Whittingdale said: “I can confirm that we will be publishing the Government’s response before the end of the year.” (full speechhere)

In addition to this, various reports have suggested that as part of its response the Government will be looking to repeal Section 73 of the Copyright, Designs and Patents Act 1988. This is the copyright exemption that currently applies to cable, with the practical effect of requiring that copyright within a PSB programme is cleared before broadcast, therefore meaning that no retransmission fees are paid by cable customers.

Justification for Section 73

Justification for repealing S73 is that the policy rationale behind it has expired – but, in actual fact, this is wrong.  It is widely, but mistakenly believed, that the original policy rationale was to encourage the cable industry to compete with satellite and analogue by incentivising roll out.  However, if you read the relevant Hansard extracts from the debates on this, there is no sign of that justification and instead, the justification was to benefit the PSBs by allowing them to reach ‘black spots’ via cable.

The justification made by the Government of the day for S73 was:

1.     Ensure distribution of PSB channels where universal over the air reception was not available (i.e. black spots)  [Note: this was identified by the Whitford Committee on Copyright in 1977]

2.     A desire by the then Government to avoid double payment (to the copyright owner of the programme) for the same broadcast [referenced by Lord Beaverbrook during the Second and Third Reading of the Bill in 1988.

§  “If cable operators were also liable to pay the owner of rights in the programme content, this would be double payment for the same transmission to the same potential audience”.

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