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Chapter!5

Introduction

This chapter considers changes in the supply of television programs in the early twenty"first century, in particular the clash between traditional broadcasters and the!new online providers, such as Netflix and Amazon Prime. The long history of legislation, regulation, and public interest campaigning!–!related to the once"new medium of broadcasting!–!is also examined. For it is this past shaping or regulation of the broadcasting terrain that may affect the take"up of the new services and their broader cultural impact.

In the second decade of the new millennium the newcomers achieved rapid success. Thus, in the United States (US), by the summer of 2018, the trade magazine Variety noted that nearly 150 million people were watching Netflix “at least once per!month.” Meanwhile Deloitte reported that “55 per cent of American households subscribe to at least one video streaming service” (Deloitte 2018; Spangler 2018, p. 4). In the United Kingdom (UK), the regulatory body Ofcom declared “over 39% [of] UK households now take at least one subscription on"demand service” (2018a, p. 8). “Cord"cutting” became a common phrase in the US as viewers cancelled their large pay TV cable packages in favor of the persuasive simplicity, quality, and economy of the newcomer services. The average monthly cost for a full cable subscription was around $70–$100 for a plethora of channels, many of which remained unwatched. The Economist, citing Nielsen data, reported that “Americans aged 12–24 are watching less than half as much pay"TV as in 2010,” paying instead for the new online, on demand services (Economist 2016, 2018). Netflix basic was available for

Broadcasting in!the!Age of!Netflix: When the!Market is Master

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$7.99 or £5.99 in the UK, while in the US, Hulu, along with Amazon and YouTube, had also entered the fray. And the new kids on the block moved at speed without legislative let or hindrance.

Much video"streamed material is now watched via an internet"connected or smart television with some 60% of US internet homes connected in this way in 2017 and an estimated 52% of UK television households thus connected in the first half of 2018 (NPD 2018; Ofcom 2018a, p. 14).

The now standard terms for the new services are Video on Demand (VOD), Subscription Video on Demand (SVOD) and Over"The"Top (OTT). This last term, OTT, refers to the supply of content via online streaming directly to viewers and homes with broadband internet connections and not via the old pre"internet estab- lished methods of broadcast, cable, or satellite transmission. It is also important to note that the new services are always"on and available on demand and that many viewers are no longer tethered to their homes, thanks to the development of smart mobile phones that enable video viewing. In addition, as soon as a distinction is made between traditional broadcasters and the OTT newcomers, the emergence of a new kind of hybridity should also be acknowledged as broadcasters sought to offer newer and always"available online streaming services in addition to their tradi- tional, real"time television (TV) schedule. Examples are the Columbia Broadcasting System (CBS) “All Access” service in the US and the BBC’s iPlayer in the UK.

However, these internet"friendly moves by more traditional providers should not be allowed to obscure the fact that broadcasters in both the US and the UK remain subject to a range of long"established legal requirements!–!for example, to serve the “public interest, convenience and necessity,” to make available a range of genres including news, current affairs, and documentary along with drama and entertain- ment, or to show a mandated proportion of original, first"run programs. These rules do not apply to the on"demand, online providers.

The Social Role of!Broadcasting

From the late 1950s, and since the reduced price of television sets made these more widely available to lower income homes, the new devices were to wreak havoc with the previously widespread habit of movie"going, and with the economic protocols and profitability of the film industry. In the UK, for example, cinema"going dropped from an all"time high of 1635 million attendances per year in 1946 to its nadir of just 64 million by 1982 (UK Cinema Association 2018).1 By the new millennium, the sale of films to TV outlets (the old enemy) had long become an established element of the business plan either to cover initial film production costs or to enhance profitability.

The “box” in the living room was to become the new hearth of the home with the number of sets in the UK rising from 5.7 million in 1956 to 20.3 million by 1981 (BARB 2018b).2 And this box offered nightly entertainment, at more affordable prices than the cinema, as well as including news in the daily schedules.

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The BBC’s declared mission to “inform, educate and entertain” continued into the era of television. And although its monopoly was broken in 1955, some public service values were to migrate across to the new privately owned but regulated broadcaster, Independent Television (ITV). The regionally based companies that made up the new national network were required by law to offer “a proper balance in their subject"mat- ter and a high general standard of quality,” news was to be presented “with due accu- racy and impartiality,” there should be “no matter designed to serve the interests of any political party,” and programs should include “properly balanced discussions.” Advertisements could only be inserted in “natural breaks” and the amount of advertis- ing time should not be “so great as to detract from the value of the programmes as a means of entertainment, instruction and information”; no religious or political adver- tising was permitted (Television Act 1954, Section!3; Second Schedule, Section!4). In addition, the new regulatory body!–!the Independent Television Authority (ITA)!–!exer- cised considerable supervisory power. The network of stations that made up ITV were also well"resourced, effectively enjoying a monopoly in the sale of TV advertising until 1982, since no competing"provider licenses were issued in any region (Sendall 1982).

As James Day, advocate of public broadcasting in the US, noted with interest, part of the strength of the BBC/ITV system in the UK was the “exclusive entitlement to distinctly different sources of income”; the BBC from its license fee and ITV from the sale of advertising (Day 1995, pp. 362–363). The first competition for the sale of advertising airtime in the UK only emerged in 1982 with the advent of Channel 4. As various commentators have noted “riches and regulation” were the order of the day for ITV; it became rich and popular, but also fulfilled various legally mandated social obligations.

The wording of laws is frequently dry, but some of the principles outlined in the British legislation referred to above were more eloquently expressed two centuries earlier by George Washington, when outgoing President of the United States. In his Farewell Address of 1796, directed at “Friends and Fellow Citizens,” he put forward an ambitious goal:

Promote then, as an object of primary importance, institutions for the general diffu- sion of knowledge. In proportion as the structure of a government gives force to public opinion, it is essential that public opinion should be enlightened. (Washington 1796/2000, p. 21)

In 1961, in his first year in office, President John F. Kennedy had expressed his belief in the social significance and power of broadcasting. In a speech to the leaders of the US television industry, he noted:

For the flow of ideas, the capacity to make informed choices, the ability to criticize, all the assumptions on which political democracy rests, depend largely upon communica- tion. And you are the guardians of the most powerful and effective means of commu- nication ever designed. (Kennedy 1961)

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In November of the previous year, a couple of weeks after Kennedy’s close victory in the presidential election, the CBS network had screened the docu- mentary Harvest of Shame (1960), a detailed account of the lives and harsh working conditions of migratory US farm workers and their families. Presented by the journalist Edward R. Murrow, the film ended with a face"to"camera, direct address to the viewer"consumers, considered also in their role as citizens:

The migrants have no lobby. Only an enlightened, aroused and perhaps angered pub- lic opinion can do anything about the migrants. The people you have seen have the strength to harvest your fruit and vegetables. They do not have the strength to influ- ence legislation. Maybe we do. Good night and good luck. (CBS Reports 1960)

In his history of American broadcasting, Erik Barnouw noted a related truth, namely the potential resistance of viewers to what they have seen. And credibil- ity may be scarce where a medium has routinely presented itself as primarily a place of entertainment. Writing about the reception of this film, Barnouw sug- gests that it:

portrayed the plight of migrant workers! –! so vividly that many people rejected its truth. Such poverty and human erosion could not easily be fitted into the world as seen in prime time. This reaction became a familiar one to documentary producers. (Barnouw 1977, p. 284).

Whilst this kind of campaigning documentary might have been seen as a contribution to the spirit of Kennedy’s “new frontier,” it could survive only with! difficulty in a world of relatively unregulated and sharply competitive popular TV.

When the President made his courteous speech to the assembled titans of the broadcasting industry!–! the National Association of Broadcasters (NAB)!–!he was perhaps a little more critical than he seemed, for he had already appointed a new Chairman of the regulatory body, the Federal Communications Commission (FCC). On the day after the President’s address, the new appointee, Newton Minow, was to speak to the assembled grandees in a different way, noting their financial acumen (a 9.7% increase in profits between 1959 and 1960), but famously describing a good part of their industry as a “vast wasteland,” criticiz- ing the “old complacent unbalanced fare of action"adventure and situation com- edies” (Minow 1961).

In this speech and in subsequent writing, Minow might be said to offer a twentieth"century elaboration of Washington’s advocacy of “institutions for the general diffusion of knowledge,” calling for “a wide range of choices, more diver- sity, more alternatives.” And since the three"year broadcasting licenses were granted by the FCC at no charge and since “the people own the air,” he proposed

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that “for every hour that the people give you!–!you owe them something.” The principles behind these observations are expressed in a book he published after leaving the FCC:

I believe television is the most powerful instrument ever created to reach the minds and hearts of man… I believe that the future of this nation! –! of the democratic ideal!–!and the world depends on an enlightened electorate, on an informed citizenry. (1964, p. viii)

Some 10 years later, he expressed with greater frustration his concern that adver- tising seemed to be taking over the public space of TV and that Congress had, in practice, rendered the FCC powerless to prevent this, observing:

The House of Representatives made it clear to the FCC that it should stay out of the area. Thus, we remain the only nation in the world which has no limits on how many commercials a broadcaster may run. (Krasnow and Longley 1973, Preface)

In summary, the development of advertiser"funded, free"to"air services was quickly established as the norm in the early days of US television and only seriously challenged in the early 1970s by Home Box Office (HBO), a subscription service offering original, often challenging drama. HBO signaled the enormous changes that were to come in the growth of a pay TV market.

Over the subsequent four decades, subscription cable services in the US were to emerge as the dominant and increasingly expensive mode of TV recep- tion. Although, even at its height, the pay TV revolution with its rough esti- mate of 100 million subscribers, did not reach everyone. The official census figures taken in conjunction with the Nielsen estimates suggest that as many as 20–37 million US dwellings were without this service (see Note 2). In the UK, working TV sets were estimated to be present in 95.6% of homes (Ofcom 2018a, p. 11).

Pay TV also grew in the UK from around 1990, delivered mainly via satellite, not cable. After a difficult and costly start, BSkyB!–!now Sky!–!emerged as the dominant player with its portfolio of channels that included live coverage of key sports events. By early 2018, pay"satellite TV was present in just over 30% of homes, a slight dip from the figure of 33.6% in 2012 (Ofcom 2018a, p. 12).

As in the US, pay TV in the UK remains a valuable market with revenues of some £6.4 billion in 2017, compared to a revenue for the newer online services (including advertiser"funded material) of just under £2.3 billion (Ofcom 2018a, p. 5). However, as is often the case in the history of technological and cultural innovation, it was the speed of success of the newcomers and the intensity of support for their modestly priced services that indicated a serious shift in the underlying tectonic plates of the broadcasting system.

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Legislation, Regulation, and!the!Shaping of!Broadcasting

A decade before the first major legislation dealing with US broadcasting!–!the 1934 Communications Act!–!the American film industry was already establishing itself as a dominant international player. In Europe, Australia and Latin America, US films were sold at prices that made them more than competitive with local productions. The large population of the US and the emergence of a highly successful studio pro- duction and exhibition system meant that high"budget movies could cover their costs in the home market and be sold at a kind of discount abroad. This was good for the audiences who watched and enjoyed the films, but bad for film writers and pro- ducers in countries with smaller populations as local production could not compete on cost. Cultural tensions emerged along with what some considered to be trade imbalances. As early as 1923, a New York paper noted:

The film is to America what the flag once was to Britain. By its means Uncle Sam may hope someday, if he is not checked in time, to Americanize the world.

A US State Department official was to confirm these sentiments in noting “the people of many countries now consider America as the arbiter of manners, fashion, sports customs and standards of living.” By the 1930s, it was estimated that foreign sales brought the US industry some 35% of its income, ensuring profitability (Maltby and Craven 1995, pp. 68–69). In Britain, the government was lobbied heavily by a film industry in crisis and in 1927!–!a year after the General Strike!–!was persuaded to pass one of the first film quota laws. Many surviving on low incomes continued to be attracted by the vigor and apparently classless nature of American movies. But the Cinematograph Films Act, requir- ing cinemas to show a minimum of 5% of British films, kept the door open for a national film industry and the very low quota was expected to rise over time (Hartog 1983, pp. 59–73).

The success of the US film industry in the period between the two World Wars meant that it required little in the way of government intervention beyond recogni- tion and support for its international role. And Hollywood was able to “make its own weather” by carefully developing modes of storytelling that would work in a variety of world markets even if, arguably, some of the texture and tension of life in the US and its great range of experiences and challenges was ironed out in the process. During this golden age of the studio system, Ruth Vasey notes some homogenizing tendencies in a “deliberate policy of effacing ethnic and cultural difference on the screen.” Thus, Hollywood achieved “a kind of coherence as a fantastic kingdom, both strange and familiar to its diverse audiences” (1997, pp. 227–228). The fictional worlds created by players like Netflix and Amazon almost a hundred years later face a similar problem in crafting narratives that will work for viewers in many different parts of the world, with some looking for sedation, some for excitement, and some for change.

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Aspects of!US Regulation

Unlike the case of the movie business, two major pieces of legislation were designed to shape the development of broadcasting, albeit with a light touch: the 1934 Communications Act and the Telecommunications Act of 1996 (Kahn 1973, pp. 54–111; Aufderheide 1999, pp. 143–182). The 1934 law made clear the public own- ership of the airwaves by creating a new body, the FCC, with the power to license “the use…but not the ownership” of the new channels and to ensure that these were used with regard to “the public convenience, interest or necessity.” This was to be a national service and no license could be granted to “an alien or the representative of an alien.” A positive contribution to the political process was also required and oper- ators had an obligation to “operate in the public interest and to afford reasonable opportunity for the discussion of conflicting views of public importance” (Kahn 1973, pp. 64, 65, 74, 80; Sections 301–315 of the Act).

With wording drawn from public utilities legislation, the Act offered little detail on how the public interest might be served in an industry that dealt with meaning" making and not with pipes and wires. Although, with the wisdom of twenty"first century hindsight, the reference to a requirement that broadcasters offer “reasonable opportunity for the discussion of conflicting views of public importance” seems of great and continuing significance. In the few years prior to the 1934 Act, and in the shadow of the great crash of 1929, there had been strong lobbying of Congress aimed at ensuring that 25% of all available frequencies would be reserved for educational and non"commercial purposes, though with no agreed strategy on how this might be financed. Reflecting on what some had considered to be the chaos and commer- cialization of the airwaves that had preceded the legislation, writer and poet James Rorty believed that “for all practical purposes radio in America is owned by big busi- ness, administered by big business, and censored by big business”; while Roger Baldwin of the American Civil Liberties Union argued that:

anything that breaks up the monopoly and gets non"commercial stuff across is our meat, because only thus do we escape advertiser’ pressure and open up controversial discussion. (McChesney 1993, p. 212)

These lobbies were not successful, although the wish for services that are inde- pendent of big business and advertiser pressure was arguably recognized some 30 years later when President Johnson approved the 1967 Public Broadcasting Act with, at that time, significant federal financial support (Day 1995).

The immediate postwar period saw the FCC turn its attention to the poor perfor- mance of some radio stations, publishing in 1946 the report, Public Service Responsibility of Broadcast Licensees, subsequently known as the “Blue Book.” One of the early historians of US broadcasting, Erik Barnouw, claimed that the profitability of the industry had increased considerably during the wartime years, rising from 67% in 1939 to 223% by 1944 (before payment of federal taxes), with an implication

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that it was investment in content that had suffered during this period. Looking in detail at the output of a number of radio stations, the FCC report had four main concerns: the relative absence of any programs not directly paid for by advertising income (referred to as “sustaining programs”); an insufficient number of local, live programs; the absence of discussion of public issues; and an overabundance of time devoted to advertising. As the report noted, standards developed by the NAB “at present permit as much as one and three"quarter minutes of advertising in a five minute period” (Barnouw 1968, pp. 227–230; Kahn 1973, p. 213).

A measured response from Variety!–!“Obviously the industry has brought upon itself the FCC proposals by its abuses”!–!was soon overtaken by an extensive and angry attack from the broadcasting sector. The NAB President accused the FCC of violating the free speech guarantees of the Constitution (a reference to the free speech rights of broadcasters), while the trade paper Broadcasting saw the Blue Book as an assault on “the pattern of American life.” This was the beginning of the anti" communist blacklisting period that led to the imprisonment of the Hollywood Ten in 1947–1948 and many were to come to fear the accusation of anti"Americanism, arguably the FCC among them.

The Blue Book also came under attack from politicians. Members of Congress who had benefited from making local radio broadcasts to their constituents were mobilized to put more pressure on the Commission and in effect to politicize what were arguably the legitimate issues of quality and standards raised by the regulator. All of this resulted in a retreat by the FCC and by the renewal, without question, of the licenses of the offending stations (Barnouw 1968, pp. 230–236). Media historian Victor Pickard notes both the boldness of the Blue Book and also its relative failure: “It stages nothing less than a full frontal attack on what has since come to be seen as inevitable, natural, and benign: a largely self"regulated commercial media system” (2015, p. 96).

By the 1960s, as blacklisting was beginning to fade away, the climate of opinion became more favorable to public interest intervention and the courts gave more cre- dence to the positive side of regulation. Since 1949, the FCC had supported what came to be known as the “Fairness Doctrine,” advocating the importance of “the mainte- nance of radio as a medium of freedom of speech for the general public” (Kahn 1973, p. 385). The effectiveness of the doctrine arguably reached its peak in the Supreme Court’s “Red Lion” ruling of 1969. Here the Court spoke up on behalf of the interests of listeners and viewers, finding that “the right to free speech of a broadcaster… does not embrace a right to snuff out the free speech of others.” It is, the Court argued, “the right of the viewers and listeners, not the right of the broadcasters, which is para- mount” (Kahn 1973, pp. 380–411, 424, 426). For some, these views were unacceptable and limited the powers of private corporations to run profitable businesses. The Presidency of Ronald Reagan provided an opportunity to abolish the rules on fairness and the finely calibrated political appointments at the top of the FCC ensured that its own Fairness Doctrine was suspended and declared “unconstitutional” by the Commission in the summer of 1987 (Harvey 1998; Stein 2006).

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The Presidency of Bill Clinton saw the enactment of the second major piece of communications legislation, the Telecommunications Act of 1996. Confronting an array of technological changes and driven by the belief that markets not politicians or the public interest were the most effective agents of change, the Act removed many of the rules previously applied to media ownership. One obvious effect was the spate of mergers and buyouts that consolidated the broadcasting and cable indus- tries, allowing greater concentration of ownership. Thus, for example, the Clear Channel network consisting of 40 radio stations in 1996 owned 850 stations by 2014 (Jolly 2016, p. 191). One extraordinary phrase from an abridged version of the Act, seeking to protect incumbent license"holders against newcomers at license renewal time, is resonant with the clucking of feathering your own nest: “Competitor Consideration Prohibited” (Aufderheide 1999, p. 169).

When the FCC moved to further liberalize ownership rules in 2003, eliminating the ban on cross"media ownership, this evoked a wave of public protest that created unexpected alliances. The Republican and libertarian journalist, William Safire, asked in the New York Times “Why do we have more channels but fewer real choices today? Because the ownership of our means of communication is shrinking” (Klinenberg 2007, p. 232). Greater concentration also increased prices and as one report noted: “consumer cable prices have been rising at three times the cost of infla- tion” (Public Interest Research Group [PIRG] 2003, p. 1). These issues of cost and choice are clearly relevant to and even the driving forces behind the cord"cutting phenomenon in the US in recent years, a development that is also driven by the arrival of unexpected competition from the SVODs (Littleton and Holloway 2017).

Aspects of!Regulation in!the!UK, Canada, and!the!European Union

Britain’s oldest broadcaster, the BBC, began as a private company in 1922, becom- ing a public corporation in 1927 and operating since then under the provisions of a series of fixed"term Royal Charters. It is funded by an annual license fee, cost- ing £12.54 per month in 2018, supplemented by income from the sale of BBC programs. In 2017–2018, the fee amounted to £3.83 billion and other income was £1.23 billion (BBC 2018, p. 185). The level of the fee, and the specific provisions of each charter, are decided by the government of the day. However, once the Charter is awarded it is expected that the BBC will operate independently from government and public confidence is largely dependent on this expectation being met (Mair et!al. 2015).

Finance has diminished over the last decade. Since the economic crisis of 2008, the Conservative governments of 2010 and 2015 have diverted significant amounts of license fee income away from BBC program"making and toward helping to reduce the public sector deficit. This amounted to a reduction of around 20% in the value of the license fee on each occasion (author’s estimate) (Hunt 2010; Snoddy 2011; Martinson and Plunkett, 2015).

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By 2018 the BBC’s Director General Tony Hall was arguing that the value of the license fee had reduced by some £800 million since 2008, leaving insufficient resources for original drama. This, he suggested, made the Corporation dangerously dependent on co"production partners!–!including Netflix!–!and could put material of local interest at risk. Three Girls (2017) might be one example. This was a BBC dramatization of the real"life stories of the young victims of grooming and sexual abuse in Rochdale, developed by writer and director Nicole Taylor and Phillipa Lowthorpe, with actress Maxine Peake playing the social worker who had tried to make the case public. The risks taken paid off and the three"part series achieved some of the highest ratings possible for peak"time drama!–!attracting over eight mil- lion viewers on free to air television (BBC 2017b; Hall 2017; Brown 2018).

The BBC has long prized its independence from government, believing that the gold standard of its news, in particular, required this genre to be free of political interference. During moments of particular political crisis, including the decision to go to war in Iraq (2003) and the referendum on leaving the European Union (2016), the BBC found itself under fire in respect of the impartiality of its coverage. Nonetheless, nearly a century after its founding the Corporation’s trust rating as reported by Ofcom, appeared to remain high: “Audiences recognise it as a trusted brand providing reliable, high quality information” (2017b, p. 6).

More detailed studies found that BBC 1 was the “most"used news source” for 62% of those surveyed, followed by ITV on 41% and Facebook on 33%; meanwhile 74% considered TV news in general “helps me understand what’s going on in the world today,” compared with 50% who thought the same about social media sources (Ofcom 2018d, p. 2, 89). It is also worth noting that at least one of the BBC’s News programs achieves a regular place among the list of “Top 100 Network Programmes” published weekly by Broadcast. In the week of 8 October 2018, for example, the number one slot was occupied by the BBC’s Strictly Come Dancing (10.6 million viewers), with ITV’s serial drama Coronation Street at number four (6.7 million), BBC News at Six at number 25 (4.7 million viewers) and the ITV Evening News at number 41 (3.5 million viewers) (Broadcast 2018, p. 24).

The 1954 Television Act ended the BBC’s monopoly, but also placed extensive requirements on what the new commercial providers might do, as indicated earlier. Among other things, the new ITV network was expected to devote significant resources and time to news. It was successful in attracting good audience ratings for this genre, along with some distinguished documentary series, for example Granada’s World in Action and Yorkshire Television’s First Tuesday, notable achievements of ITV’s golden age prior to the damaging 1991 license competitions (Davidson 1992). It may be as a consequence of the early regulatory requirements for factual programs that Ofcom was able to find that documentary was still attracting significant num- bers of viewers in 2013. In that year, an analysis of all viewing to the five main public service channels (PSBs) (BBC 1, BBC 2, ITV1, Channel 4, and Channel 5) indicated three top areas of attraction: entertainment took a 19.2% share; UK drama and soap took 15.7%; and documentaries took 12.5%, with sport and news as the other sub- stantial genres (Ofcom 2014, p. 37).

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Also in 2013, the year after the switchover to digital"only broadcasting, there were a total of 527 free to air and pay TV channels broadcasting in Britain (Ofcom 2014, p. 127). This plenitude was the result of both more efficient digital uses of spectrum and of the Conservative government’s Broadcasting Act of 1990. The law had encouraged the granting of new licenses, including for Rupert Murdoch’s pay TV enterprise, Sky, but had also!–!arguably mistakenly!–!subjected ITV to heavy new costs.

Channel 4, the first publicly owned and advertising"funded broadcaster, was created by the 1981 Broadcasting Act. The new broadcaster was expected to exper- iment and innovate in the form and content of programs and required to operate as a publisher"broadcaster!–!commissioning programs to be made out of house. It was subsequently credited with having created an extensive and successful inde- pendent production sector. However, by 2015, as small independent companies became large ones, a significant number were bought up by major US media inter- ests (Harvey 1994; Goodwin 1998; Elwes 2015). Channel 5, last of the analog, free to air broadcasters, was launched in 1997, enabled by the 1990 Act. It was privately owned and advertiser"funded, though later designated as a public service broad- caster. With no absolute legal prohibition on foreign ownership in the 1990 Act, Channel 5 was subsequently to be bought by a major US media conglomerate, Viacom, in 2014.

The last relevant piece of the regulatory jigsaw in the UK is the Communications Act (2003), introduced by a Labour government; it combined free market friendly policies with selected acts of public intervention. The four broadcasters designated as public service!–!the “PSBs”!–!BBC, ITV, Channel 4, and Channel 5!–!were given the following obligations, outlined in Section!264 of the Act. They must be free and universally available to viewers in all parts of the UK. They must include current affairs and impartial peak time news, a significant proportion of original programs, and a series of “opt out” programs of special interest to those living in the UK’s regions and nations (not applied to Channel 4 and Channel 5). They must broadcast a significant number of original programs made outside London. The programs should be of “a high general standard” with respect to “the contents of the pro- grammes, the quality of the programme making; and… the professional skill and editorial integrity applied in the making of the programme”; they should facilitate “civic understanding and fair and well"informed debate” and “reflect the lives and concerns of different communities and cultural interests and traditions within the United Kingdom” (Communications Act 2003, Section!264).

Three final factors indicate ways in which broadcasting provision has or might be strengthened in relationship to the rapid adoption of SVOD services in the UK: firstly, the invention and rapid take"up of the Freeview platform created to provide easy access to free digital TV content; secondly, the steps being taken by the Canadian gov- ernment to consider the best ways of defending and increasing national audio"visual content; and, thirdly, the recently agreed revisions to the European Union’s Audiovisual Media Services Directive (AVMSD) designed to ensure that a significant proportion of the catalog offer of SVOD services includes work of European origin.

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The Freeview platform was launched by the BBC and its consortium partners in 2002, and was designed to offer an easy way for viewers to watch programs from a range of digi- tal providers. BSkyB’s pay TV service had switched from analog to digital in 1998 and for a while it seemed that this subscription platform offered the only route to the digital future. The new Freeview platform was designed for the “pay television rejecters” (Dyke 2005, pp. 183–187). With the one"off purchase of a set"top box and using existing aerial connections, viewers could then obtain access to digital TV even from an old analog TV set. By 2014, Freeview was present in nearly half of all UK homes and advertised itself as offering access to “95% of the nation’s favourite shows at 0% of the cost” (Freeview 2018).

Ofcom’s report on the state of play in 2018 found that the largest proportion of UK homes, just under 40%, appeared to be satisfied with free to air digital terrestrial television (DTT) services only; 34% subscribed to a pay TV satellite service, and 15% had signed up to a pay TV cable service. The regulator noted a rise in the gen- eral popularity of digital terrestrial services and suggested that this increase “may have been driven in part by consumers moving away from traditional pay"TV plat- forms in favour of combining a free"to"air DTT service with online SVOD services” (Ofcom 2018a, p. 12). If true, this could be good for Netflix and its SVOD rivals.

In Canada, the government has stepped in on a number of occasions to ensure that some space is retained in the national media for the expression of Canadian voices and not only American ones. In September 2018, an ambitious inquiry was established to review Canadian legislation, arising from a concern that “digital disruption has had a significant effect on creators, culture and content.” Concern has arisen because the new online SVOD services “are exempted from Canadian content requirements” and, as a consequence, it has become more difficult to maintain production of “quality Canadian content!–!particularly drama and children’s programming” (Government of Canada 2018). Canada has a population of some 37 million, compared with a US population of 326 million, and this has arguably made the successful production of national content difficult, since it is almost always cheaper to import from the US. The SVOD providers appeared initially to have resisted the notion that they might be accountable to Canadian legislators, though this could change as new national plans emerge.

The European Union has come up with a way of supporting local culture and audio"visual production by requiring a “30% share of European works in on"demand catalogues” (European Union 2018). Following approval by the European Parliament, it is envisaged that this new Directive came into force at the end of 2018. However, without vigorous national commitments to invest in national film and TV produc- tion, it could be difficult for the “30 per cent” rule to deliver larger audiences for local production.

What Do Audiences Want? News and!Drama in!the!Age of!Netflix

Television is changing as an object, an industry, and a cultural form. The internet challenges broadcasting and cable; the flat, smart TV replaces the cathode ray tube; the cost of drama production rises because of increased demand; serial drama is

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binge"watched at weekends or viewed on buses and trains on the way to work; the SVODs position themselves in different ways in relationship to national broadcast- ing or cinema (Jenner 2016; Ryan and Littleton 2017; Wayne 2018; Lobato 2019).

Some comparative figures contrasting the US and the UK markets may be useful. As already indicated, the US population is nearly five times larger than that of the UK, but its TV market, according to Ofcom, is more than nine times as large, with revenues of some £132 billion in 2016, compared with a UK figure of £14 billion (excluding revenues from online/on demand services in both cases [see Note 2]) (Ofcom 2017c, p. 86).

In respect of pay TV (mainly cable in the US and satellite in the UK), as might be expected from the figures above, Ofcom found significant differences between the two countries: in the US, 81% of homes subscribed to these services, with a significantly lower figure of 58% for the UK. Likewise, in the case of take"up of online SVOD services (for the same year, 2016), these were believed to be present in 84% of US homes, compared with a presence of 41% in UK homes. The value generated by the online TV sector was estimated to be just under £14 billion in the US, compared with just under £2 billion for the UK (Ofcom 2017c, p. 86). It could be just a matter of time before the UK increases its rate of online subscriptions. But more recent figures from 2018!–!relating to only one kind of SVOD subscription (Netflix)! –! suggest that the UK with a 33.8% user penetration rate ranks only tenth in a list of the top 10 countries subscribing to this service (Lynch 2018).

Some Examples from!the!UK

To date the top five TV channels in the UK have remained, perhaps surprisingly, those of the four broadcasters designated in law as the public service providers. Two of the four are publicly owned (BBC and Channel 4) and two privately owned (ITV and Channel 5). In 2017 the top five PSBs, along with their subsidiary or “portfolio” channels attracted a 71% share of the “live” national TV audience (Ofcom 2018c, p. 5; see Table!5.1). These figures are difficult to compare with the US Nielsen rat- ings, which tend to emphasize viewers aged 18 to 49 years as judged to be especially attractive to advertisers; in the 2017–2018 season, NBC was judged to be the winner with a 2.2% share (Maglio 2018).

In addition to the above five individual channels, in 2017, BSkyB was the most successful of the pay TV services. Delivered mainly by satellite, it is present in around half of British homes. Its most popular single channel in the autumn of 2018 was Sky Sports Main Event, with a share of 1% of the UK audience. Across all of its channels in 2017, it had an 8.3% share of all UK broadcaster viewing (BARB 2018c, 2018d).3 Sky News attracts small audiences compared with BBC or ITV News, and viewing figures are difficult to obtain as “reach” rather than share figures tends to be made available.

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Despite its relatively modest share of the UK audience, Sky received annual sub- scription revenues of £7.1 billion in the UK and Ireland in 2017. This revenue is nearly twice the amount of the BBC license fee of £3.8 billion in the same year (BBC 2017a, p. 125; Sky 2018, p. 96).

The popularity of the main BBC channels and ITV1 might in part be attrib- uted to the regulatory framework stemming from the 2003 legislation. Ofcom limits the scope for production cost"cutting on the BBC’s main channels by requiring a high proportion of original material to be shown (effectively quota obligations). Thus, for channels BBC One, Two, and Four, an overall figure of 75% original content is required; but this rises to 90% in peak time for BBC One and Two. BBC One is also obliged to show 1520 hours of network news per year (Ofcom 2017a, pp. 15, 11). Similar but slightly lower obligations apply to the most popular privately owned channel, ITV1, which is required to show at least 65% of original programs rising to 85% in peak time (Ofcom 2018b, p. 54).

Non"broadcaster viewing in the UK, including that devoted to the new OTT sub- scription providers! –! mainly Netflix, Amazon Prime, and Sky’s NOW TV! –! has grown considerably in recent years, even if at a slower pace than in the US. In 2018, SVOD subscriptions at 15.4 million have, for the first time, overtaken pay TV sub- scriptions at 15.1 million, mainly paid to Sky (Ofcom 2018a, p. 13). This could be Britain’s cord"cutting moment when subscribers begin to shift from one type of pay provider to another; though sport remains an effective driver for Sky and, like other powerful players in the US, it is hedging its bets with the provision of the successful online NOW TV service.

In the five years after 2012, the average amount of daily broadcast TV watched went down by 38 minutes, including a drop of nine minutes in the year 2016–2017. The new daily average in the UK for 2017 was 3 hours and 23 minutes. But these reductions have been matched by increases in internet"enabled viewing to services like Netflix, Amazon, or YouTube (Ofcom 2018a, pp. 4, 14).

Table 5.1 UK television channels’ shares of!national television audience, 2017.

Terrestrial TV by individual channel

% share of all UK broadcaster viewing in 2017

BBC 1 22 ITV1 15 BBC 2 6 Channel 4 5 Channel 5 4 Plus all other PSB portfolio channels

Source: Ofcom (2018c), p. 5; BARB (2018a, Table 5).

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Other research indicates that the viewing of time"shifted or on"demand programs from the main broadcasters had risen to some 12% of all TV viewing time by 2014 (informitv 2015). And Ofcom recognized the popularity of these services, referring to the BBC iPlayer as “the most popular on"demand service with 63% of adults saying they use it” (2017d, p. 4).

Age has been understood for some time to be a key factor in determining the amount of TV watched. A 2018 study indicated that adults over 55 years watch on average 321 min- utes of TV per day; those aged 16–34 watch 123 minutes and children watch only 86 min- utes a day. And there is also a link between age and the take up of SVOD in the UK; a 2017 study noted that 76% of young people aged 16–24 used an SVOD service, compared with only 19% of people over the age of 65 (Ofcom 2017d, p. 3; 2018c, pp. 6–8).

A 2017 study by Enders Analysis contrasted the TV viewing habits of the whole UK population with the viewing habits of younger people between the ages of 16 and 34 years. This broadly reflected the Ofcom findings, but Enders also found a larger gap in watching “Broadcaster: live” TV (42% of viewing by younger people contrasted with 66% by the population at large), and a much smaller gap for watch- ing the online catch"up services like the BBC’s iPlayer categorized as “Broadcaster: non"live” (17% for younger viewers and 16% for the whole population).

Catch"up services using, for example, BBC iPlayer or ITV Hub, increased steadily across the population as a whole, rising from an average 23 minutes a day in 2010 to 39 minutes a day by 2017 (Enders Analysis 2018, Figures 4 and 5, pp. 4–5, 1). We can infer from this that the online catch up services offered by the PSBs are popular across different age groups. However, without the cooperation of the online sub- scription providers, there are still no credible ratings figures available for the new- comers in the UK, and the term “unmatched viewing” has emerged to designate this gap in our knowledge.

The Netflix Offer

Developments in 2018 demonstrated both the strength and the weakness of Netflix and its competitors. Dominant players in the US cable TV industry have felt the cold blast of change. Comcast, for example, lost just over a third of a million cord"cutting subscribers between 2017 and 2018 (down from 21.34 million to 20.98 million); however, it did correspondingly well as a provider of residential high"speed internet access, taking over a third of a million new customers in the US (informitv 2018). It also succeeded in purchasing British pay TV provider Sky. But a combination of US subscriber irritation at the rising prices of unnecessarily large cable TV packages, accompanied by significant cultural change, kept the door firmly open for Netflix to continue to “make the weather.” As an Economist journalist put it:

Cheap, personalized, advertising"free, binge"released video is widely seen as having hastened a decline in audiences for broadcast television… (2018, p. 5)

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Netflix in the early twenty"first century was arguably doing what Hollywood had done almost a hundred years before: investing large amounts in original production with the aim of creating a new home market and using that as the launchpad for suc- cess in global markets. Here was an anti"television, television provider recovering the good name and success of a cinema industry (the “flicks”) that had been so badly humiliated some half a century earlier by the domestic talking box with pictures.

However, many powerful players in the US film production industry and in the European film distribution industry (for example, the Cannes Film Festival) did not see it quite like that. For some, the threatening newcomer was an unwanted guest at their party. Having all but boycotted Cannes in 2018 because of the latter’s rule on eligibility for the main prize (limited to films intended for theatrical release in France), Netflix appeared to soften its position a little. Speaking at a festival in France, celebrating the best of television drama series, Chief Executive Reed Hastings noted: “Sometimes we make mistakes. We got into a bigger situation with Cannes than we meant to.” Variety reported that he also showed some awareness of the forthcoming European Union regulation requiring SVOD operators to include 30% of works of European origin within their catalogs. Recognizing the need to seem regulation"compliant in a country!–!France!–!that had historically fostered its film industry with more determination than the UK, he noted that the new catalog quota would be a “little tough,” but expressed a willingness to:

work within the systems…Regulation is critical to order. There is great regulation that is very useful. It’s up to us in every country to participate and follow those regulations. (Grantham 2000; Hopewell and Lang 2018)

It remains to be seen if Netflix is willing to operate within the spirit of these new European rules. Meanwhile, the US movie business, in some quarters, is recognizing the opportunity for peaceful and profitable co"existence with the newcomers. The Chief Executive of Paramount (owned by Viacom) announced a production part- nership with Netflix in November 2018, noting a significant business opportunity in that Netflix, Amazon, Apple, and Hulu were now collectively investing more than $20 billion in content (Nicolaou 2018).

The overall financial picture is still risky for Netflix as its subscription rates remain attractively low, while its continuing investment in expensive new content and its level of debt financing remains enormously high (Ovide 2018). The compa- ny’s plans spent $12 billion on content in 2018. As a consequence, attracting new subscribers, worldwide, remained a key priority. One Financial Times journalist referred to it waspishly as “the junk bond financed content factory” and the eyes of investors are trained sharply onto the quarterly reports of growth in subscriptions. In July 2018, the target figure for increases was not met and the company’s share price took a noticeable dip. But targets were then exceeded by the end of the third quarter with an extra 1.1 million subscribers in the US and an extra 5.9 million worldwide making a new global total of 137 million (Bond 2018; Powell 2018). A

Broadcasting in the Age of Netflix 123

further key feature of the October reporting is not only that sales rose by 34%, but that international increases in revenue were outpacing US domestic sales. Thus, the third quarter of 2018 saw international sales of $1.97 billion slightly outperforming the US sales of $1.94 billion (Ramachandran and Maidenberg 2018).

Conclusion

This brief comparison of the British and American television markets, together with a consideration of the associated cultural, political, and regulatory issues that shaped them, indicates that the jury is still out on the extent of the impact of the SVOD newcomers. However, as audiences reach for new pleasures, the impact on produc- tion sectors that are some 70 years old is already considerable. And, as an exception- ally dry summer may reveal long hidden patterns of land use, so the impact of the newcomers tells us something about the histories and foundations of two national broadcasting systems. It is perhaps the reliance on market competition principles, along with some rather uncompetitive and incumbent"supporting legislation in 1996, that made the US cable TV industry more vulnerable to attack from the SVOD disrupters – while in the UK, it may be too soon to tell to what extent the PSB system will be damaged or even destroyed by the newcomers and to what extent it will sim- ply co"exist with them.

Looking ahead, from US history we may take the advice of George Washington to promote institutions “for the general diffusion of knowledge” and the words of the 1934 Communications Act that broadcasters should offer “reasonable opportunity for the discussion of conflicting views of public importance.” The internet and social media have brought great opportunities for learning and sharing but equally they have created echo chambers or bleak wind tunnels where human speech is vocifer- ous but also corralled and sometimes less (not more) able to impact on the cultural and political institutions that we encounter!–!and criticize!–!in daily life.

Broadcasting was born in the, early days of universal suffrage; sometimes it sup- pressed, sometimes it enabled an extension of those freedoms that “having a voice and a vote” proposed. In his book 6, The Good Citizen, Michael Schudson reflects on the pessimism of Walter Lippmann writing in 1920 about the inadequacies of jour- nalism and the difficult prospects for democracy when “the manufacture of consent is an unregulated commercial enterprise” (1998, p. 212). Some of the campaigning around both broadcasting and social media has been about seeing these two differ- ent entities as potentially the way"markers for egalitarian social change, for a world where “each has enough” and respect replaces fear. Renewing these way"markers is now an important objective for those traveling towards the “city on the hill.”

Netflix can never offer the light, sometimes called “the news,” that will illuminate the pressing concerns of a thousand different cultures and societies. But the greatest storytelling is never far away from truth"telling. What kinds of stories is Netflix going to tell us?

124 Sylvia Harvey

Notes

1 Cinema"going in the UK rose from its lowest point in 1982 to a modest 171 million attendances per year in 2017. The small screen or, rather, the increasingly large, flat, and smart TV screen in the home was to remain the focus of attention.

2 In 2017, the US population was estimated at 326 million with 137 million “housing units” (US Census Bureau 2018). The “National TV Household Universe” was estimated at 120 million (Nielsen 2018). In the same year, the UK population was estimated at 66 million, with the number of homes estimated at 27.2 million and the number of TV homes at 26.7 million (BARB 2018b; Office for National Statistics 2018a, 2018b).

3 Some Sky services are also relayed by subscription cable providers in the UK. In the week ending 28 October 2018, Sky’s top"rated channel was Sky Sports Main Event with a 1.05% share of all viewers and with Sky 1, Pick, and Sky News varying between a 0.8 and a 1.0% share in that year (BARB 2018d).

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A Companion to Television

SECOND EDITION

Edited by Janet Wasko and Eileen R. Meehan