Home > Media News > UK TV Industry Risks Losing £1bn A Year To Amazon, YouTube And Facebook

UK TV Industry Risks Losing £1bn A Year To Amazon, YouTube And Facebook
28 Aug, 2017 / 12:39 pm / OMNES News

Source: https://www.theguardian.com

938 Views

Traditional broadcasters such as the BBC, ITV and Sky could lose a combined £1bn per year if rival services from Amazon, Facebook and YouTube become dominant players in the TV industry over the next decade.

A new report says that UK broadcasters could suffer the same fate as industries including music, news, insurance and property where powerful digital newcomers – including Apple, Google, YouTube, Moneysupermarket and Rightmove – muscled in as middlemen to take a significant share of revenues.

The report, by OC&C Strategy Consultants, argues that broadcasting could be controlled by one or two “super-aggregators” that would act as viewing gateways for consumers looking for a simple way to access a plethora of content.

The modern TV viewer now has an array of viewing options to choose from, with the BBC iPlayer, Amazon Prime Video and YouTube among the platforms vying for the attention of British households. More than 20% of under-35s use more than seven services to keep up with their favourite shows, and 40% say they are becoming confused by how many options are available, according to an OC&C survey.

“Viewers are facing a complex web of different routes to access TV content, leading to an unsustainable level of confusion and inconvenience,” says Mostyn Goodwin, partner at OC&C. “This environment is giving rise to the need for a super-aggregator service that provides a universal access point to content.”

The report estimates that the UK broadcast industry – which include the TV businesses of the likes of Sky and BT, ITV, Channel 4 as well as the BBC’s licence fee and commercial income – is worth up to to £15bn in revenues annually, including advertising revenues and pay-TV subscriptions.

OC&C based the £1bn loss figure – equivalent to the TV industry’s annual profit from broadcasting activities – on an analysis of the proportion of revenue that middlemen, or aggregators, have taken from traditional players in other sectors.

These vary from 5% to 10% in the insurance industry, which has players including moneysupermarket, to 20% in the taxi sector following the rise of Uber, to 20%-30% in music and news.

“This is not theoretical, in other industries we have seen how powerful these aggregators can become,” said Goodwin.

The report identifies Amazon, Facebook and YouTube, each of whom have enormous global user bases, as being potential middlemen for TV viewing and the biggest threats to traditional TV broadcasters.

In May, Amazon unveiled plans to expand its TV ambitions by adding 40 TV channels to its UK streaming service, including ITV and live sport such as Grand Slam tennis and the Olympics. Earlier this month Facebook launched a new TV-like rival Watch, and Google-owned YouTube has a TV channel service as well as subscription product Red.

In the music sector, the world’s biggest record companies frequently complain about YouTube – by far the biggest destination for music video viewing – arguing that it has too much power and does not pay its fair share of royalties.

Earlier this year, Steve Cooper, Warner Music’s chief executive, renewed the company’s deal with YouTube but complained it was struck under “very difficult circumstances” and wasn’t done under “free market” conditions.

“It is about the balance of power,” says Goodwin. “At first there may not be much of a charge [to appear on an aggregator platform], commercial negotiations are easy as the digital players want to grow their businesses. Over time, as they grow scale, the nature of the deals can change. What choices the broadcasters make now will define what scale of ‘problem’ they will face.”