The BBC wants to stop paying Sky ten million pounds a year for EPG listing
Six weeks ago I wrote a an article about how much the BBC is Paying Sky for free public service television channels
Today on The Media Show: BBC savings strategy (see 17:30) the BBC have announced they are not going to put up with it.
Below is a transcript of the two interviews from the programme between award-winning Steve Hewlett and the BBC's John Tate and consultant Matthew Horsman from Mediatique.
Steve Hewlett: The BBC and Sky look set to fall out over something else, BBC strategy chief told us in that interview. The BBC has commissioned a firm of consultants to look at what the corporation pays sky to carry BBC channels on the sky platform.
The report recons it is about ten million pounds a year that a) takes no account of the value of having the BBC channels there in the first place and b) is unlike the position in comparable market where they say that other cable satellite and other platform operators pay so called retransmission fees to free to air broadcasters for the right to carry their channels
This is what John Tate told me
John Tate: I think sky does excellent job they have taken a lot of risks and they are putting money into UK original content they increasing that money and I welcome that I think however in the context of a very tight licence fee settlement payment from us to them for retransmitting what are to them are highly valuable services is not appropriate.
SH: so is that now the BBC's formal position going into the communications act?
JT: well we said some time ago, the dg said quite clearly this areas needs looking at. And I think the other public service broadcasters channel four and five and ITV would also want it looking at.
SH: Have you discussed it with them?
JT: Yes, we have discussed it with them. I think we would all agree that the current system is an anomaly. You know, various measures were taken to get satellite started in the UK, and this was one of them and satellite is very healthy and they are making billions of pounds every year and next to that profitability and our constrained licence fee we need to look again at this particular concession.
SH: Will you want the government to legislate that you no longer have to pay sky and virgin for carriage?
JT: You could consider it deregulation, in the sense of allowing an open conversation to take place
SH: why can't this just be done by normal commercial negotiation? If the value to sky is as significant as you say it is from having BBC's channels on its platform and I can see why it might be they wouldn't want people exiting the sky platform to find BBC somewhere else, reducing the customer experience. If it is of value to sky as you say, merely threatening to take it away should produce a commercial outcome.
JT: That a good question. The government might want to consider if it should be left to a commercial conversation.
SH: Sky would say "if you are going to compel us to carry it pay us for doing it".
JT: I think if it were a commercial negotiation, the balance of advantage is to sky for taking those channels. That should be reflected in the arrangement. The dg has said we are not looking for payment in the case of the BBC, others can state their own positions, and we would look to not having to pay these retransmission fees.
SH: over the course of the licence fee settlement between now and 2017, if this change was to be enacted as you and the other public service broadcasters want, how much revenue it save the BBC?
JT: It is the equivalent of not having to make the reductions in output local radio plus the reductions in BBC four to give you a service-related figure. Overall fifty million pounds over the period.
SH:And what would you do with the fifty million pounds if you had it back.
JT: We could mitigate the cuts I have just described - we would not have to make them.
SH: In our earlier discussion some of these cuts sound like good sense in any event.
JT: I have been very clear that there are cuts in outputs that we would not have made but for the new licence fee settlement and it are those areas that the money we pay sky to broadcast our channels could be put to much better use.
SH: ten million pounds a year minimum could be spend on local radio and BBC four. So is he right or is his playing politics? Sky were unable to join us but they gave us this statement:
"The BBC chooses to buy platform services that enable it to provide a wide variety of services on the satellite platform. As with any broadcaster that uses our platform we ask for a 'fair and proportionate' contribution to its running costs. Of course if the BBC no longer wants to buy these services from us, it is free to stop doing so at any point, but these are legitimate costs which are regulated by Ofcom. All broadcasters who choose to use platform pay them. We don't see the BBC as being the exception to this principle, no one expect the national grid to provide the BBC with cheap electricity subsidized by its other customers so why is sky any different?"
Matthew Horsman is a man who understands these things. Can you in "idiots guide" terms explain what this ten million pounds?
Matthew Horseman: The ten million pounds is the charge that Sky makes to ensure that the right BBC service is in the right region of the country - SO that is the starting point.
SH: SO all the BBC one regions are all carried on sky?
MH: they are all carried and wherever you happen to be in the country the set box will get the right service and in general it is a way of ensuing that the service gets from where the BBC gives it the transponder the uplink all the different things that go on technically and then it subsumed into the sky platform so anyone who has sky TV gets their BBC service on channel 101.
The twenty-million pound a year Sky map
SH: so why shouldn't the BBC pay for this?
MH: right now it has to and everyone does by the way, not the BBC all the mainstream public service broadcasting channels and indeed any channel that wants to go onto the sky platform that isn't retailed by sky, isn't part of the pay of the pay TV package that sky sells onto the consumer have to pay their share Ofcom has deemed to be an allowable recovery again sky's investment in the platform.
SH: but the argument from the BBC then that leave aside what is costs sky to host the BBC services that sky is paying nothing to reflect the value of those services to sky?
MH: here is where the BBC completely has a point. Sky's viewing for instance is pretty indicative of this. On the sky platform that has 400 channel services, the core public service broadcasters - BBC 1, 2, ITV1, channel 4 and channel 5 represent 50% - that's half - of all viewing in sky homes. If you add in the extension channels, BBC3, BBC4, ITV2, 3, 4 etc, it is more than 60%, so Sky obviously benefits a great deal from having the channels that people want to watch incorporated into its consumer boxes.
SH: all sky viewers are also licence fee payers, they have no choice but to do that this content is already paid for by sky's customers, so why shouldn't they get it "free" on sky as they do everywhere else.
MH: This comes to the larger point that Mr Tate was making in his comments the BBC is a bit different from the rest of the public service broadcasters, but look broadly why this argument has come up, and what Tate said other countries actually have a regime where free to air channels, give the US as an example, NBC, CBS, ABC those are all paid by cable operators to be retransmitted;
SH: in a nutshell - what is going to happen here?
MH: there needs to be some kind of guidance from the government either in the comms bill or as secondary legislation that says that sky is obliged to pay fees or the parties are commercially able to negotiate fees with the backstop of saying they still have access to the platform with appropriate prominence and "must carry" legislation in place. We think the end games is that sky will end up not being paid by the BBC and having to pay the other channels.
+ ITV backs retransmission fee review | News | Broadcast +
"ITV has said it would back a review into whether public service broadcasters should be compelled to pay premium platforms to carry their channels.
The commercial broadcaster stopped short of supporting the BBCs repeated calls to completely drop retransmission fees to the likes of BSkyB.
However, it confirmed it would throw its weight behind a review of the current arrangements.
ITV would not be drawn on what it hoped to achieve from such a review, which could be carried out by the government or Sky itself. A spokesman simply said: We are supportive of the need for a review of the current arrangements.
Commercial PSB broadcasters are understood to be interested in actually reversing the fees by charging Sky for the right to show their channels, although the BBC has distanced itself from this move.
Mathew Horsman, director of media research and advisory firm Mediatique, said that based on arrangements in the US - where Fox has retransmission agreements with cable operators - the broadcasters could collect up to £120m a year in retransmission consent fees.
The issue could be examined by the government in the new communications bill or through secondary legislation, Horsman said, paving the way for ITV, Channel 4 and Channel 5 to negotiate terms with Sky.
The issue is being revisited on the back of a report commissioned by the BBC, which claims the UK is the only territory in which PSBs pay for their channels to appear on platforms.
The report, which has not yet been published, was cited by director of public policy and strategy John Tate in a blog post this morning.
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+ C21Media: +
The BBC has claimed it could make "substantial additional annual savings" and ease its cuts programme if it did not have to pay retransmission fees to BSkyB.
The corporation's director of policy and strategy John Tate has said the £10m (US$15.7m) the BBC currently pays each year to ensure its TV and radio output is carried by the Rupert Murdoch-owned satellite platform "could go back into programme making."
He added that the £50m it will pay Sky over a five-year period would "cover all the costs that we are currently planning to take out of local radio and BBC4 combined."
"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 question now is whether or not this money is still flowing in the right direction," said Tate.
The comments come a week after the BBC outlined plans to cut 2,000 staff in a bid to make savings of around £670m a year by 2016/17, after the licence fee was frozen by the government last October.
C21 first reported the cost of the BBC's Sky retransmission fees last year, after a freedom of information request revealed the corporation had shelled out £30m (US$48.2m) over the previous three years.
Speaking at the Edinburgh International TV Festival last year, BBC director general Mark Thompson also raised the issue. He pointed out that Murdoch's US network Fox receives distribution fees from the local cable companies that carry its channel, and called for a similar set-up in the UK.
The BBC does not pay any fees to platforms such as Virgin Media, BT Vision or TalkTalk, which all carry its channels for free. In countries such as France, Germany and Spain, cabsat platforms pay terrestrial networks to retransmit their feeds.
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The solution for this - Sky needs to be broken up. The first company provides the TV channels and owns the rights to sport etc. The second is the retail side of the business. Selling the service, providing the Sky Box etc. The second company deals with the first company in the same way as cable providers do now but on an equal footing. Other companies will be should be able to compete with both companies.
Similar examples are how the government broke British Gas up and how Breweries were only allowed to own so many pubs.
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Stuart: As I recall the court took the view that it was OK for Sky to recoup the costs of the "free dish and box offer" by making EPG charges to broadcasters.
I don't think that Rapture TV had any funds left to contest the matter further.
Sky is a very unique company in that it charges BOTH the suppliers and customers for the services.
Sky have also used the "free box and dish offer" to turn most of their profits into losses over the last decade or so, which means they have had to pay very little tax indeed.
Probably why you don't see much of UK Uncut on Sky News.
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Brian - thanks for the clarifications.
"I would think a substantial number of viewers would stop subscribing to Sky if the PSBs had their channels erased from the Sky Guide."
If BBC channels are available by satellite regardless of Sky I think BBC should be charging £100m for their programme data and right to link to it.
Though you are unfair about Shy's free boxes. That's how they get ther subs income, not a tax dodge!
And makes for a useful resale market. I've just bought a Sky+ HD box - 500Gb - for £60.
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I think it would be a better idea to brake up the BBC. They have had it all there own way for far to long and wasted far to much of our money.
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Ian's: mapI's Freeview map terrainI's terrain plot wavesI's frequency data I's Freeview Detailed Coverage