What do we do about retransmission fees?

Is it time the UK’s public service broadcasting rivals finally worked together to shake more money free from the US players?

No demonstrators are ever going to march down the street shouting: “What do we want? Retransmission fees. When do we want them? Now.”

If there is a more unsexy, implausible issue to go to battle on, it is difficult to imagine.

Even Saatchi & Saatchi and the combined forces of the policy wonks of Westminster would find it difficult to move the dial on such an unlovely, theoretical concept as retransmission fees.

It is unfortunate then that it just happens to be a very important issue that should translate – if there is enough political will – into a significant additional stream of revenue for the UK’s public service broadcasters, the BBC, ITV and Channel 4.

Many media issues come down in the end to a matter of opinion, or prejudice, not susceptible to rational engagement. On the one side, for example, are those who believe the BBC is an unwarranted interference with the operation of the free market and is anyway an organisation run by a bunch of pro-Europe pinkos, and those who believe that the Corporation, despite all the warts, is one of the defining institutions of what it means to be British.

Retransmission fees – let’s call them just content fees for the sake of brevity and accuracy – do not fall into that category.

The issue is remarkably simple and is one that can be debated in a rational way, although vested interests are never far away behind the arras.

You have got to set aside one obvious assumption that the fat cat broadcasters, whether on the public or commercial side of the fence, are behaving like greedy farmers again, putting their hands out to the politicians for money: needy cases.

In fact the argument for a re-negotiation of the terms of trade between the broadcasters who are responsible for creating most of the content audiences value, as opposed to those who pump them out on cable and satellite, is not primarily based on need.

There is no hole in the trousers of ITV. The commercial broadcaster’s share price and profits have been rising and not only does Liberty Global own a stake but could easily bid for the whole lot. Cries of poverty will not get ITV very far.

Channel 4 has, in the past, tried running around with the begging bowl and got precisely nowhere accept for attracting well-deserved derision.

Knock off the froth and Channel 4’s underlying performance, despite ever increasing competition, has been strong and in many ways admirable.

Throughout the deepest recession since the channel was founded more than 32 years ago, total Channel 4 revenues have remained above £900 million a year and there has always been reserves of around £200 million.

Peanuts it may be compared to the big new beasts in the jungle but the channel has had enough self-confidence to start taking minority stakes in the next generation of small to medium independents.

There is no need for their bank manager to be concerned any time soon.

The case of the BBC is a little more problematic. The combination of poor management decisions when combined with new responsibilities and a flat licence fee for five years is seriously biting.

The political balance following next year’s general election is almost impossible to predict.

The one thing that is virtually certain is that a “good” outcome for the BBC, and possibly the best on offer, would be another flat licence fee settlement.

Because of inflation, such a deal would mean a further 15 per cent cut in real terms over five years.

Some services would have to go, possibly even a channel or two.

It would be difficult though for the BBC to be able to plead poverty. The ability to levy a £3.7 billion compulsory charge on the UK population remains a mighty privilege, so even with the BBC, the argument is not about supplementary benefits.

In the case of ITV, Channel 4 and the BBC the issue is one of fairness.

The US companies who own or control the UK’s cable and satellite networks understand this issue very well. In the US the cable and satellite operators pay the American networks for the right to sell on their channels. For the cable networks it is a multi-billion dollar business.

As a result, last year America’s free-to-air broadcasters received around $3.3 billion in retransmission fees, about 15 per cent of total broadcast television revenues, according to a report from NERA Economic Consulting for ITV and a number of European broadcasters.

Even in the UK the principle has, in effect, already been conceded. BSkyB is happy to pay broadcasters such as UKTV for its channels.

The present anomaly dates back more than 25 years and was designed to encourage the growth of the then cash-strapped new media players such as cable and satellite.

It means that the multi-billion pound Virgin Media pays nothing at all to the UK’s public service broadcasters while BSkyB receives around £10 million a year to carry the PSB channels.

As David Abraham, the Channel 4 chief executive, noted in his MacTaggart lecture in Edinburgh, last year alone BSkyB returned £750 million in dividends to shareholders.

It really is a matter of historic imbalances and unfairness.

What to do about it of course is the problem. Neither Virgin nor Sky is likely to hand over any wonga voluntarily, and withholding of channels – which would hit millions of viewers – is hardly a practical option.

There have been suggestions that the mechanism for reform could be an amendment to the up-coming Intellectual Property Bill, though it is unlikely that the Government would accept such an amendment. The Government’s position is one of payment neutrality – no payments in either direction – thereby missing the point entirely.

The only way to make anything happen is for the UK’s public service broadcasting rivals – the BBC, ITV and Channel 4 – to do something really unusual and get together to campaign and shake some more money free from American-owned billionaire players to invest in more original British programming.