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US - Style retransmission fees to hit the UK?

View profile for Paul Herbert
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Is the current UK broadcasting framework – in which public service broadcasters are carried by cable and satellite service providers for no payment – overdue for an overhaul?

ITV and Channel 4 maintain that they should be permitted to levy retransmission fees for their carriage on Virgin Media and BSkyB, and the Culture Secretary appears to be listening. Last week, Sajid Javid responded to an appeal by the aforementioned, vowing to examine the fee-based relationship between platforms and broadcasters. His consultation will ascertain whether changes should be made to an arguably outmoded system which has been in place since the rollout of cable television in the 1980s. Interestingly, the BBC is not party to the PSBs’ campaign as it apparently has a ‘zero net fees’ agreement with Sky.

The proposed fee revamp would see British carriers move in the direction of the retransmission consent standards which have been in place in the US since 1976. Although based in an essentially distinct market, cable operators in the States pay compulsory retransmission fees to terrestrial broadcasters like Fox Networks under the 1976 Copyright Act and the Cable Television Consumer Protection and Competition Act of 1992. According to Pew Research, 3.6 percent of total US broadcast television revenue emanates from retransmission fees, which recently topped $327m (£200.6m), having increased significantly over the last decade; they were $20m (£12m) in 2003.

In the UK, carriers pay commercial terms for other networks, but not for PSBs. In fact, the latter are required to compensate cable operators in order to transmit their main channels. An independent survey commissioned by the BBC revealed that the UK’s retransmission terms for free-to-air networks are “the least generous” in the developed world. The move to allow PSBs to demand retransmission payments could bring in annual revenue streams to the tune of “tens of millions of pounds”, according to the Financial Times.

ITV, which has spearheaded the so-called ‘retrans’ campaign, with the backing of Channel 4 and Five, attributes the development of North American TV’s “golden age” to retransmission payments made to broadcasters. The not-so-subtle message to the Government and Ofcom is that the imposition of such fees by PSBs would be good for the industry and further, for viewers, thanks to enhanced original programming development facilitated by the additional revenue.

Weighing in on the consumer position of the debate, Graham McWilliam of Sky warns that in reality, viewers will end up footing the bill “for PSB channels that are supposed to be free”. He argues that PSBs are singling out standards from an unrelated (US) market while receiving all the benefits of being a PSB in Britain. These include TV license fees for the BBC; and for all PSBs, guaranteed access to the requisite broadcasting spectrum, and preferential positioning on TV electronic programme guides. Notably, EPG status, said Mr Javid, will figure in DCMS’ consultation on the matter.

Fanning the flames of the current retrans debate, this summer’s US Supreme Court decision in American Broadcasting Companies v Aereo was not only significant in terms of its impact on copyright law, but also a wake-up call for US Networks. The cloud-based online TV service supplier Aereo, backed by entrepreneur and InterActiveCorp chairman Barry Diller, believed it had found a way around paying retransmission fees by its method of giving customers access to virtually live TV streams. The New York-based startup then passed on its savings to consumers by offering a low-cost subscription rate (estimated at over 85 percent below cable TV competitors’ rates).

Aereo was able to receive linear terrestrial broadcast signals by way of small remotely-stored antennae, each of which was designated to a single subscriber during their viewing session. The company streamed programmes to users on a need basis, and not having obtained content rights or paid retrans fees, effectively cut out the middlemen. The startup has suspended its services in the wake of the 6-3 Supreme Court ruling against it.

Conclusion

The introduction of the proposed retrans fees could ultimately open up a Pandora’s Box consisting of a US-style carriage payment scheme, and, say proponents, a robust and potentially thriving new era for the British TV industry. However, just as networks begin to reap the financial rewards of the retrans battle, they could be faced with a hornet’s nest of as-of-yet-unexploited cloud-based tech workarounds capable of bypassing such fee systems. These seemingly inevitable scenarios – the beacons of a whole other TV era – will certainly require a nimble and anticipatory approach on the part of Parliament and regulators, as well as some creative interpretation by the courts.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 020 7404 0606 and ask for your usual Goodman Derrick contact.