On the 29th of March 2023, the UK Government published the Draft Media Bill (the “Draft Bill”) which brings into reality part of the Government’s proposed vision, which was initially highlighted in its White Paper, Up Next, released in April 2022. According to the Secretary of State for Digital, Culture, Media and Sport (“DCMS”), the Draft Bill will “reform decades-old laws to turbocharge the growth potential” of the UK’s public service broadcasters, allowing them to better compete with global giants. But what does this mean?

So, what is changing?

There are six key areas of change when it comes to the Draft Bill:

  1. Changes to Video on Demand regulation
  2. Reforms to the Radio Broadcasting regime
  3. Reforms to Channel 4/S4C
  4. Reforms to the Prominence regime
  5. Reforms to the Listed Events regime
  6. Reforms to the Public Service Broadcasting rules 

The Draft Bill has a broad impact across the industry, including on TV and Radio Broadcasters, VOD providers, smart devices/smart TVs, set-top boxes, sports rights holders, 3rd-party content aggregators, digital selection services and Ofcom. The Draft Bill intends to modernise broadcasting legislation and introduce wide-ranging reforms to the regulatory environment for public service broadcasters (“PSBs”) and, more broadly, video-on-demand (“VOD”) services.

1. VOD regulation 

The 2010 AVMS Directive introduced minimum obligations on VOD services (that were supplemented under the revised 2018  AVMS Directive– see our article here). But the need for more regulation of these services was very apparent across the industry. According to Ofcom’s Media Nations 2022 Report, 60% of UK households subscribe to Netflix, 46% to Amazon Prime and 23% to Disney+.

Proposals

The Draft Bill focuses on a country-of-destination framework rather than a country-of-origin approach, marking the UK’s departure from the EU. The Draft Bill proposes increased regulation on all large streaming services watched in the UK. In order to do this, the Draft Bill introduces a concept of “Tier 1 Services”. 

Tier 1 Services are split into two camps:

  • PSB- operated VOD (excluding BBC iPlayer which is separately regulated); and
  • any VOD services specified by the Secretary of State either explicitly by name or by reference as falling within the parameters mandated by the Secretary of State from time to time.

Ofcom will provide a report on the UK VOD market ahead of the Secretary of State designations. Commentators already expect Netflix, Amazon Prime Video and Disney+ to be included by virtue of their inclusion in the Government press release.

In order to implement this increased regulation, Ofcom will create a new code which will take effect 6 months after a Tier 1 Service receives such designation. This will bring all large VOD platforms under the jurisdiction of Ofcom, and may mean that businesses who have relocated to the EU find themselves subject to parallel regulation. The Draft Bill suggests that the new code will meet the same or similar standards that are currently applied to PSBs, including standards for accuracy, fairness, privacy and harmful or offensive content. Further, accessibility provisions are also addressed within the Draft Bill.  Two years after Tier 1 Service designation, accessibility quotas regarding subtitling, audio description and signing will need to be met. Finally, Ofcom will also be assessing whether VOD services are adequately protecting their audiences from harm.

Ofcom’s powers of enforcement in relation to Tier 1 Services are largely already in existence in the Communications Act 2003. Further, the powers described below in relation to PSBs and information requests will equally apply to VOD services.

2. Radio Services 

Smart speakers currently do not fall within the scope of media regulation. The Draft Bill seeks to change this by requiring that all simulcasts of UK radio stations by smart speakers are implemented with no additional cost to the radio station itself. This is effectively a “must carry” obligation to reflect the consumer switch from AM/FM/DAB to internet radio sources. Further, the smart speaker/platform itself will not be permitted to overlay advertisements by interrupting the transmission, removing this revenue stream option for players such as Google or Amazon. This proposal has received a lot of attention and has understandably been met favourably by radio stations, whilst facing greater resistance from smart speaker providers.

The Draft Bill also seeks to make significant changes to the framework of radio regulation by reducing the role of Ofcom in the industry:

  • The Draft Bill removes the current restrictions and conditions around the content played on the radio. The Draft Bill replaces these restrictions with an obligation for broadcasting to include local news and information, such as traffic, weather or local events which consist of locally-gathered news, at regular intervals.
  • Under the Draft Bill, Ofcom would no longer monitor and regulate a diverse range of national and local analogue stations.
  • The Draft Bill has reduced the requirements when applying for a radio multiplex licence and a local analogue services licence, allowing easier access to licences and providing greater discretion to Ofcom.
  • Ofcom will also have an increased role in relation to licencing of overseas radio stations.

3. Channel 4 and S4C reforms

The plan to privatise Channel Four was announced in April 2022. This was met by opposition from both the public and the industry, particularly due to Channel 4’s unique relationship with independent producers. The Draft Bill confirms that the privatisation of Channel 4 will not be going ahead, albeit reforms to Channel 4 and S4C (a Welsh language free-to-air public broadcast television channel) will be taking place.

Proposals 

  • The Draft Bill removes the requirement for Channel 4 to be involved in the making of programmes to be broadcast on Channel 4. This will remove its “publisher-broadcaster” status, which meant the Channel had to commission or acquire all of its content from third parties. The Draft Bill also adjusts the current quotas that Channel 4 is required to meet across the board.
  • The Channel 4 Board will have to present an annual report demonstrating that Channel 4 are acting in a way which allows them to “at least sustain the level of their activities” over the long term and to “be securely in a position to meet costs incurred in carrying on their activities”.
  • The DCMS press release stated that the reforms will make it easier and simpler for Channel 4 to draw down on its large credit facility, which will provide greater access to private capital for ambitious investments and help to promote Channel 4’s long-term sustainability. However, we note that these measures are not included in the current Draft Bill.

Similarly to the above proposals, S4C’s public service remit has been increased. S4C now has more flexibility around investing and generation of revenue.  Further, the geographic restrictions have been removed, allowing S4C to broaden its reach and offer its content on a range of digital services.

4. Revised Prominence Regime

As it stands:

The “Prominence Framework” set out in the Communication Act 2003 ensures that PSB linear channels have the top billing on electronic programme guides, including when any British viewer switches on the TV.

Proposal

With on-demand and online viewing reducing the impact of the regime, the Draft Bill seeks to introduce a revised Prominence regime. Who this regime will apply to (“Regulated Television Selection Services”) is not yet finalised, and again includes designation by the Secretary of State, but it is assumed that all TV selection services (including online, streaming sticks and smart devices that provide an order or menu) will be captured.

Those captured will be required to offer designated internet programme services chosen by Ofcom with the appropriate amount of prominence on their platforms. Further, specific content will also be afforded prominence. Ofcom will be responsible for administering and enforcing the new Prominence regime.

This section of the Draft Bill is still lacking in detail, but it has already been the subject of significant criticism. 

5. Changes to Listed Events

Under the Broadcasting Act 1996, the Secretary of State can draw up a list of sporting events which are of national interest and therefore must, at first, be offered to “qualifying services”. A “qualifying service” is essentially a free service that can broadcast to 95% of the UK population, which typically would be a PSB. Changes in the market, however, mean that an alternate service (such as Amazon Prime Freeview) may soon be able to meet the requirements.

Proposals

The Draft Bill amends the “qualifying conditions” to require a PSB. This restrains the definition and will likely be disappointing news for sports rights holders. However, the changes also allow scope for internet content to be included.

6. PSB reforms

As it stands:

The definition of PSB includes the BBC and S4C along with licensed public service channel providers – e.g. Channel 3, Channel 4 and Channel 5.

The scope of these bodies is currently set out in the Communications Act 2003. This Act requires PSBs to provide a wide range of socially valuable programming that is high-quality, balanced, educational and representative, and also meets the needs of the wider public.  To ensure these objectives are being met, and to ensure that diversity of content and regional production are being similarly fulfilled, the Act sets quotas for the PSBs to attain. Presently, only content on the respective main linear television channels can go toward fulfilling these quotas.

Noting the change in the market with players such as Netflix, Disney+ and Amazon Prime firmly on British TV Screens, as well as a corresponding reduction in linear TV viewing, the government concluded that a refresh of the Communications Act 2003 was needed. 

Proposals

The Draft Bill reduces the statutory burden on PSBs in order to allow them to compete more readily in the current market. The Draft Bill does this in 3 key ways:

  • The Draft Bill allows PSBs to fulfil their obligations and quotas by making content available through “relevant audio-visual services”, reducing their reliance on linear channel programming. There is a caveat in that content must be received or accessed by as much of its intended audience as is reasonably practicable, in an intelligible form and free of charge content will not contribute to the obligations/quotas unless it is available for viewing for at least 30 days.
  • The Draft Bill replaces the 14 programming purposes and objectives with a more streamlined set, requiring “comprehensive and authoritative” coverage of news and current affairs that allows for debate, British content, regional and minority languages, children and young person engagement, and original, independent and regional productions.
  • The Draft Bill would grant Ofcom new powers to issue information notices, requiring PSBs (other than the BBC) to provide information for Ofcom’s operation. Ofcom will be able to impose financial penalties in relation to any failure to provide information up to a maximum of £500 per day or £250,000 overall.

Next Steps

The final evidence session for the Draft Bill took place on the 4th of July 2023, where the DCMS Select Committee heard oral evidence from Ofcom, Voice of the Listener and representatives of DCMS.  Before the Draft Bill can come into effect, it will be further scrutinised by the DCMS Select Committee, following which a final version will be formally introduced to Parliament. Despite broadcasters and industry stakeholders pushing for updates across the board, it may still be some time before we see the proposals put forward in the Draft Bill receiving Royal Assent.

If you have any questions or would otherwise like to discuss any issue raised in this article, please contact David Varney.

This article was written by Abbie McGregor