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Market Impact Assessment of proposed changes to BBC Three, BBC iPlayer, BBC One and CBBC

30 Mehefin 2015

1.1 The BBC’s Royal Charter and Agreement requires the BBC Trust (the Trust) to undertake a Public Value Test (PVT) before a decision is taken to make a significant change to the BBC’s UK Public Services.

1.2 In January 2015 the Trust launched a PVT in response to the BBC Executive’s application to proceed with the following proposed changes:

  • the closure of BBC Three as a broadcast channel;
  • the reinvention of BBC Three as an online only service;
  • the launch of a BBC One+1 channel;
  • the extension of CBBC by two further hours to broadcast from 7am until 9pm;
  • the development of BBC iPlayer beyond existing catch-up services to include an increased number of premieres and selected content commissioned by third party partners; and
  • increased investment in first run drama for BBC One (though in isolation this does not require formal approval).

1.3 In preparing a PVT, the Trust takes account of two separate reviews:

  • a Public Value Assessment (PVA), carried out by the Trust, which assesses the likely value of any proposed changes to the licence fee payer, particularly in terms of its contribution to the BBC’s public purposes; and
  • a Market Impact Assessment (MIA), carried out by Ofcom, which assesses the effect of the proposed service changes on other services in the market. It considers both the direct impact on consumers and producers of other services, for example in terms of price and choice, and the likely impact on competition and market development, which will affect consumer and citizen interests in the longer term.

1.4 We have identified the following product and service providers as being most relevant to this MIA: commercial broadcasting channels; video on demand (VOD) providers and subscription VOD providers; pay TV retailers and independent production companies.

1.5 In assessing the potential impacts of the BBC's service proposals we have considered:

  • The static impacts in relation to affected products and services – these are the direct effects of the BBC's service proposals on affected services without taking account of how other service providers might respond. Where possible, we have sought to quantify these impacts in this MIA over the period 2015 to 2018.
  • The dynamic impacts in relation to affected products and services – these are the effects that result from changes in competitor behaviour as a result of the BBC's service proposals and potentially broader market trends. We have not quantified these effects, which are inherently more uncertain.

1.6 In developing our findings we have received written responses from 13 stakeholders, commissioned our own qualitative consumer market research and sought additional data from various media tracking agencies including BARB and 3 Reasons.

1.7 Our assessment is based on the proposed set of changes set out in the Trust’s service description for this PVT. We understand that the BBC has continued to develop its proposals beyond the service description, which may merit further assessment before being taken forward.

Context

1.8 The BBC’s proposals state that it has to adapt to two aspects of change in the TV landscape: an increasingly complex value chain for distribution; and increasing competition from global players. In addition the BBC observes that there has been a structural shift in media consumption habits that is contributing to lower reach for BBC linear broadcast services, particularly with 16-24 year olds.

1.9 The BBC has noted that current proposals, to reinvent BBC Three as an online channel and extend BBC iPlayer, are part of a series of responses to these changes that focus on creating and adding more content and ensuring wider availability, with a greater emphasis on online distribution. In its role as the cornerstone of public service broadcasting (PSB), there are clearly public benefits to be gained from the BBC using new technology and new media to enhance and extend existing services, delivering benefits to consumers in the form of new and improved services.

1.10 In addition, we note that the BBC has the potential to act as a catalyst for market development. For example, BBC iPlayer has helped build consumer interest and take-up of on-demand services, providing opportunities for other providers to deliver new, innovative services beyond traditional TV. However, there is a balance to be struck. The BBC’s involvement in new services should contribute positively to the market outcomes as a whole, rather than act to restrict competition, innovation or choice.

1.11 Recognising the importance of the changing TV landscape, and the fact that the BBC’s proposals are part of an ongoing response, many stakeholders’ comments have gone beyond considering the direct static and dynamic effects of these proposals to discuss broader issues.

Update 14/07/15

Please note: Ofcom has updated the MIA statement after learning of a discrepancy in the BARB data used for aspects of the analysis, linked to the way in which HD channel viewing data was reported for 2014. The corrected data has been reflected throughout the document.

This update does not change the findings reported in the MIA statement.

The full print version is available below.