03 June 2013

UK Retransmission Consent Dispute: BBC versus Sky

The BBC is in a retransmission consent dispute with British Sky Broadcasting in the UK which will seem positively quaint compared to the current status in the US. The BBC, which operates the most popular broadcast channel, BBC One which has an average viewing share of about 20%, actually pays Sky, the Murdoch-controlled dominant UK DBS provider £10m a year (approximately $15.3m at today's exchange rate) for the carriage of this service and its many other television and radio services on Sky. There are significant differences between the US and UK pay and broadcast television structures, but, taking all of them into account, the current arrangement seems incredibly favorable to Sky by the standards of the US.

  • Sky has approximately 10.36 million television subscribers (making the payment from the BBC to Sky approximately $0.123 pspm).
  • Sky has roughly two-thirds of the UK pay TV market; Virgin Media, the dominant cable operator has most of the rest.
  • The BBC used to pay Sky considerably more on an annual basis.
  • Virgin Media does not receive carriage payments from the BBC.
  • BBC One and BBC 2, which has over 5% of the viewing audience, are commercial-free services.
  • The BBC is funded by the public through a mandatory tax (on each UK household that has a television set) called the "license fee".
Sky's leverage over programmers is much greater than any US distributor's over any US programmer, still it seems hard to see how the UK consumers are well-served by a public service broadcaster funded by the taxpayers paying a for-profit pay TV company for carriage of popular services that clearly make its pay TV offering more attractive.

In the US, it is fair to say that the distributors typically are paying the top programmers more than double the amount that Sky is receiving from the BBC.

I found this an eye-opener about how much the business terms of pay-TV are determined by historical and regulatory legacy issues.

I originally stumbled across this story on the Media Talk podcast from The Guardian.

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