Executive Summary

This report on Broadcasting in the UK examines the influences which are shaping the future of TV and radio. It covers both BBC TV channels (BBC1 and BBC2) and BBC Radio including Radio 1, 2, 3, 4 and 5 Live and Local/Regional. Commercial broadcasting includes commercial terrestrial TV, i.e. ITV (Channel 3), Channel 4 as well as the proposed Channel 5 (scheduled for launch in 1997), and cable and direct-to-home (DTH) satellite dish TV. It also includes independent commercial radio which now has three national radio stations, i.e Classic FM, Virgin UK and Talk Radio UK (launched in February 1995), plus 173 local and regional stations.

Since the commercial sector (both terrestrial TV and radio) are heavily dependent upon advertising revenue, this report also reviews the activities of the major advertisers and their agencies. Another sector covered by this report is independent film and TV programme producers. A provision of the Government's Broadcasting Act 1990 is that both the BBC and ITV should acquire at least 25% of non-news related programmes from independent producers.

The Broadcasting Act 1990 has been a dominating influence upon the present structure of commercial TV and radio. It was instrumental in the setting up of the Independent Television Commission (ITC), which is responsible for the allocation and monitoring of regional and breakfast time licences for both terrestrial and cable/satellite channels, as well as The Radio Authority, which is responsible for the issue and control of all national and regional/local franchises. As a consequence of the Broadcasting Act 1990, the ITC presided over the famous franchise auction in which four new companies took over from four previous franchise holders in 1993. A key issue yet to be resolved is the question of ownership upon which the Act initially placed restrictions. In 1993, these were relaxed leading to the mergers of Carlton with Central, LWT with Granada and Anglia with Meridian. With the moratorium on foreign ownership of UK media companies ending after 1996, the commercial broadcasting industry wants the Government to relax the ownership rules even more in order to create large UK-owned companies which can resist the continental media giants.

The other big issue is the future of the BBC. Its Royal Charter is due for renewal in 1996. Prevailing opinion holds that the BBC will continue to exist. The question is in what form. In particular, will it continue as a public service broadcaster funded by licence fees which it collects from the public or will it compete with commercial TV, radio and indeed all other media for advertising revenue? The BBC itself wants to remain a public service broadcaster funded by licence fees, a view which the ITC also shares. The ITC points out that should any channel or station (e.g. Radio 1) take advertising, it should have to leave the BBC.

Over the last 2 years, both the ITV and BBC TV channels have been losing audience share. This is due to the growth in household penetration, first of all by BSkyB's DTH satellite dish channels and more recently by cable TV. This has created a multiplicity of channels available to a growing number of people. It is also leading to a growing fragmentation of the TV audience. The implications for advertisers and their agents is that they will have to become increasingly more sophisticated in their media strategies and much more precise in targeting their consumers.

The report also highlights the recent emergence of commercial radio as the fastest growing advertising medium. For years it was known as the 2% medium because of its constant 2% share of total advertising expenditure on main media. In 1994, its share nearly doubled. The principal reasons for this are: a dramatic decline in the BBC Radio audience, especially Radio 1 following replacement of its established presenters with nine new young presenters; the success of Classic FM and Virgin 1215 in attracting audience; the increase in the numbers of local stations; and the practice by sales houses of offering packages of local stations to advertisers. In short, commercial radio is able to offer even larger audiences to advertisers. It now has a portfolio of famous high budget names.

Cable TV, whilst still in its infancy, is also growing very rapidly. Its main attraction is being able to offer cheaper telephony to subscribers and it can also transmit not only cable channels, but also all the terrestrial channels as well as BSkyB channels. DTH satellite dish cannot pick up the cable channels.

Research specially commissioned by Key Note among a representative national sample of over 1,000 adults found that the majority of respondents (62%) like TV programmes to be educational and informative. However, nearly one in two of these adults believed that the quality of TV programmes has deteriorated in recent years.

Whilst both the BBC and the ITV now meet the condition in the Broadcasting Act 1990 of buying 25% of non-news related programmes from independents, this sector is still struggling. It is made up of hundreds of very small companies who mainly operate on turnover rather than profit. It has been difficult for them to assert their rights in dealing with such powerful clients.

Key Note forecasts that between 1995 and 2000:

• The BBC TV audience will continue to decline slowly.
• At the same time, ITV and Channel 4 audience shares will also decline slowly.
• The growth of cable/satellite dish is the main reason for loss of share by the BBC and ITV/Channel 4.
• Channel 5 will take no more than 2% of the total audience because its reach will be 66% of the population.
• BBC radio's audience will continue to decline and BBC1 will not recover its lost audience from commercial radio.
• By 2000, commercial radio's share of total advertising expenditure will reach 5%.
• Major advertisers and their agents will continue to use commercial terrestrial TV as the main medium. Its revenue will grow by some 59% to £3.5bn by 2000.

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