Future of TV distribution: Ofcom report and Westminster eForum policy conference

Background to the report

The Initial Market Report on the Future of TV Distribution (the "Report") came in response to a request from the Department for Culture, Media and Sport ("DCMS") in 2022 for Ofcom to carry out an early review of market changes that may affect the way content reaches audiences on digital terrestrial television ("DTT", otherwise known as "Freeview"), satellite ("Freesat") and other distribution platforms such as TV delivered over the internet (internet protocol television or "IPTV").

The Report provides an overview of the current market for TV broadcast over Freeview, the anticipated tipping point where investment in Freeview cannot be sustained with its declining audience, and three broad approaches put forward by Ofcom that could sustain the universal availability of TV.

Current market for TV broadcast over Freeview

In the UK, people spend 3-4 hours each day watching video content. With competition from a range of content providers, such as social media and gaming platforms, TV has had to adapt both in the content in produces and in the way it distributes content with greater online options. TV in particular is increasingly being viewed online, on a variety of platforms and devices such as mobile phones, tablets, gaming devices and PCs/laptops. As Ed Leighton explained at the conference, "changes in the way audiences are viewing content and this fragmentation of the viewing landscape does have an impact on the way that broadcasters deliver that content – broadcasters are… putting their content on a range of platforms: DTT, satellite and a multitude of IP locations…".

The Report found that the average person spent 25% fewer minutes per day watching broadcast TV in 2023 than in 2018. Most audiences are "hybrid viewers" and enjoy traditional live TV channels and supplement this with on-demand and scheduled content over broadband. Some audiences, particularly those who are younger, only watch content over the internet, with little linear TV. Other audiences, who are more likely to include people who are older, rural, live alone, less affluent or have a disability, are more likely to rely solely on Freeview or Freesat for their viewing.

Anticipated tipping point for Freeview

With the trend toward IPTV set to continue, viewing scheduled TV channels through Freeview and Freesat is set to drop to 22% by 2040, with the remaining audiences likely to be the same as those who solely access Freeview or Freesat today.

The less time people spend on Freeview, the less cost effective per viewer it is. If those organisations that sustain the Freeview ecosystem see a weaker case for new investment, they are likely to seek to cut costs, e.g. by reducing the choice or quality of services and channels available on Freeview, but without support for viewers who only access Freeview to watch TV.

For broadcast channels, there are increasing financial and operational benefits to distributing content over the internet. However, the costs of being distributed across multiple platforms to service a wide number of audiences (Freeview, Freesat and over the internet) comes at a price – many broadcasters are therefore considering consolidating to fewer platforms for distribution rather than continue to pay the costs of being across multiple platforms. With cost pressure particularly found with Freeview, broadcasters are increasingly looking towards internet TV services.

In the Report and at the conference, there was a general desire from all stakeholders that any move away from DTT to a more online-focused distribution model should not leave audiences behind. Ed Leighton in particular noted that DTT has been a "key component of the public service broadcasting compact".

However various stakeholders recognised that there were barriers to take-up of IPTV, including lack of connected devices, lack of broadband (reliance on mobile data or no connectivity at all) and lack of essential digital skills. One of the key challenges faced by industry is how to support these unconnected viewers.

Approaches to delivering universal TV in the future

Ofcom found widespread support across the sector for TV services to continue to be available to all, with a strong public service media proposition, but no consistent view on how to achieve this.

In the Report, Ofcom set out its proposed broad approaches to delivering universal TV in the future:

1. Investment in a more efficient (but full) Freeview service: If Freeview is able to deliver a sufficient scale of audiences for the next 10-15 years, or a managed transition away from Freeview is undesirable, then a more efficient but full Freeview service could be considered. This would require upgrading some or all of the current Freeview multiplexes to a more efficient standard, increasing the capacity of the Freeview platform, allowing more services to be carried out or higher picture quality. With this option, Freeview channels would require less radio spectrum to be broadcast, with the remaining spectrum could be put to other uses. 
2. Reducing Freeview to a core service (with a minimum number of core channels): Freeview would maintain a minimum number of core channels either as a temporary transition to switching off Freeview or remaining indefinitely. With less channels per viewer, the spend per viewer would be lower making Freeview more cost-effective. This option would still require the maintenance of the infrastructure requires to deliver Freeview, which would need to be met by the remaining broadcasters and other users of the infrastructure including radio and telecoms companies.
3. Move towards Freeview switch-off in the longer term: This approach would see a coordinated effort across industry, Government and Ofcom to support people switching off from Freeview and onto internet TV services over an 8-10 year period, in a campaign similar to the Digital Switchover from terrestrial TV to Freeview which took place over a seven year period.

Looking ahead to the future

With the general election fast approaching, the Government's response to the Report is not expected imminently and will likely be a job for the next Government. This, combined with the implementation of the Media Act 2024, will give the next Government plenty of food for thought when it comes to the future of TV distribution in the digital age.

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