Des Freedman from Goldsmiths, University of London, responds to DCMS’ Comms Review seminar arguing that the consultation runs the risk of cementing deregulation as the preferred policy approach.

‘Open and competitive markets support growth and further the interests of citizens and consumers’ reads the opening line of the accompanying paper to the DCMS’ Competition in Content Markets seminar. But purposeful regulation can also support growth and protect the interests of citizens and consumers and it is this latter approach—of intervention that is designed to sustain the public interest— which is almost entirely absent from the assumptions underlining the DCMS paper.

I welcome the opportunity to review existing mechanisms to ensure adequate competition in content markets but my reading of contemporary trends inside UK media leads me to the conclusion that, far from abandoning sector-specific regulation, there is a case for making it more robust and effective. Calls made at the seminar on 9 July, for example, to scrap Ofcom’s competition powers were firmly rebutted but it is clear that there is a mood amongst some in government and the industry to treat the media—despite their major contribution to citizenship and democracy—as little different from other industries.

Indeed, the second paragraph of the DCMS position paper opens with the revealing proposition that ‘[a]s with markets more generally, media markets need to have a stable, robust and clear competition regime’ and goes on to consider whether competition issues within broadcasting ought to be treated more like the telecoms regime – which prioritises issues of infrastructure far more than those concerning how best to protect pluralism and diversity. Furthermore, reflecting on the Competition Commission’s (CC) recent investigations into the Pay TV market, the position paper argues that the CC’s provisional findings ‘suggest that the market itself may be able to adapt to meet consumer demand in an open and competitive way’ (p. 4), advocating a clearly deregulatory position.

However, beneath the headlines of the CC’s rulings in relation to pay TV sports and movie rights, there lies a series of trends that should concern us deeply and that do not point to an overall assessment that the market is, spontaneously, resolving competition concerns.

First, far from describing UK pay TV as some kind of competitive nirvana, the CC has just concluded that ‘competition was not effective’ because of ‘the very high and stable level of concentration, the low level of switching between suppliers, the difficulty of large-scale entry/expansion as a traditional pay-TV retailer and the absence of countervailing buyer power in pay TV.’ The fact that it noted that even though ‘competition was not effective in this market did not of itself lead to the conclusion that there was an AEC [adverse effect on competition]’ suggests limits to contemporary competition law more than a satisfactory assessment of the pay TV market.

Second, the market has not generated a level playing field in the allocation of resources inside broadcasting. Having increased from 34 per cent in 2004 to 41 per cent in 2010, subscription is now overwhelmingly the dominant source of revenue in UK TV, well above that of advertising (less than 30 per cent) and licence fee income (22 per cent). Effectively, nearly a half of total revenue now goes to support the 27 per cent of audience share commanded by pay-TV (Ofcom 2011).

While it is true that, overall, more money is now being invested in TV content, that increase is systematically skewed away from particular genres. Much more money is being spent on film and sport channels, up by a third since 2007 (Ofcom 2011), in comparison to a 22 per cent decrease for BBC1 since 2006, a 14 per cent drop for BBC2, a 21 per cent decline for ITV1 and an 18 per cent decline for Channel 4, as revealed in Ofcom’s latest PSB Annual Report.

Total hours of first-run originated peak-time output on PSB channels is pretty much the same as it was in 2005 though it has substantially decreased outside of peak hours and rather dramatically in terms of regional output. Spend on original material, however, has been really squeezed: down by 17 per cent on BBC1 since 2006, 13 per cent on BBC2, 22 per cent on ITV1 and 18 per cent on Channel 4.

What has been affected is PSB output: news budgets in 2011 down by 15 per cent since 2006, arts by a huge 39 per cent, education 38 per cent, children’s 22 per cent, factual 17 per cent (despite a significant increase in the number of hours – perhaps a redefinition of ‘factual programming’ towards lower cost, lifestyle output). It is precisely those genres at the heart of the public service project that have been hit hardest while only one genre has seen spending increased: feature films. Of course, this is all relative and we still see over half a billion pounds spent on original drama by PSBs in 2011. But the direction of travel is a warning Spending is being directed towards those genres that are likely to be most profitable – or rather removed from those genres with little obvious commercial viability.

But we should also be concerned about the wider implications of a shift to subscription-based viewing and, especially, by BSkyB’s market power that was identified by the CC. We are seeing the enclosure of content that citizens are saying are key: for example, according to Ofcom’s evidence to the DCMS seminar,  59 per cent of regular sports viewers see Premier League football as ‘must have content’ yet they are forced to pay premium prices for it, in part to cover the enormous costs of acquiring football rights – most recently the £3bn paid by Sky and BT for 3 years’ rights.

But this enclosure is also happening in relation to quality drama and original progammes. Sky has signed an exclusive deal with HBO of around £150m over five years to have exclusive access to both first-run and archive HBO programmes. Should this be a public policy concern? Perhaps it should we are concerned about ensuring that quality output is available across the system to a full range of audiences. Mad Men, for example, has moved from a channel which had a 7 per cent share to Sky Atlantic, a channel with a 0.3 per cent share in May 2012. Even more intriguingly, Sky famously promised to spend £600m in original UK material by 2014 to go on channels like Sky One, with a 0.7 per cent audience share and the two Sky Arts channels, each of which in May 2012 had an average weekly viewing of 1 minute, with Sky Arts 1 registering a 0.1 share and Sky Arts 2 registering nothing. Yes, we should welcome any new investment into original programming but it becomes a public policy issue if this output is channelled into gated communities aimed thus far at a minority of people who happen to get the channels because, by and large, they are sports or film fans. Public money aimed at mass audiences is being replaced by private money aimed at lucrative subscription audiences with the consequence that content markets are not likely to operate in an open and competitive fashion.

These are just some of the reasons why one suggestion contained in the DCMS position paper, that ‘[t]here may be a role for sector-specific regulation in addressing any bottlenecks’ (p. 5), needs to be confirmed and strengthened. Scrapping sector-specific mechanisms is precisely the wrong way to go at this point in time if we are interested in preserving public service outcomes, protecting diversity, and challenging the logic of concentrated markets.

Media pluralism and diversity are not likely to be secured through a reliance on market behaviour but, instead, by acting decisively and using a range of financial and regulatory tools which remain open to policymakers and regulators and which should be at the heart of any review of UK communications media.