Shott briefs Jeremy Hunt on local TV findings

Nicholas Shott today warned that fewer than a dozen local TV services may be viable in the short term, broadcasting no more than two hours of locally-produced content a day.

Following a review by the Steering Group, the investment banker briefed the culture secretary Jeremy Hunt on his findings, saying that around 10 to 12 local TV services could work in major conurbations, but only broadcasting two hours of “reasonably low cost but high quality content” a day, and only with a national “backbone” to fill the rest of the schedule and attract viewers, extensive cross-promotion on other channels and a prominent position on the EPG.

However, Shott was positive that in the long term, “local TV can be commercially viable as and when IPTV gains sufficient market penetration; and that, in the short to medium term, commercial viability of local TV delivered by DTT is achievable”.

In summary, Shott’s letter said: “In the long term, the Steering Group is optimistic that IPTV will help to sustain local TV, within the context of a re-shaped and more vibrant local and regional media sector.

“For the short to medium term, the Final Report sets out the minimum conditions that we believe would be required for local TV to be commercially viable, within the context of your stipulation that it should be delivered principally by DTT.  If these conditions are met (including importantly the £15 million per annum of underwriting of national advertising sales), and £5 million per annum of local revenues can be achieved as discussed above, then we can see that commercial viability is achievable, at least in the medium term while a £5 million per annum commercial agreement with the BBC can be replied upon until 2016/17.”

In his interim report earlier this year, Shott warned Hunt off of his original vision of 80 local television stations all over the country.  In September, Hunt outlined a more modest plan for local TV, although the next stage of his strategy will not be unveiled until the new year.

In the past, the government said it expects to begin licensing the first of the local TV companies by next summer, with aim of creating between 10 to 20 by the end of the current parliament in 2015.

A network of 10 local TV services would have a combined cost base of around £25 million, according to Shott.

In response to Shott’s final brief, Hunt said: “I am considering [Shott’s] report carefully, which gives us a solid foundation to take forward the necessary steps to bring about local TV in the UK. I will publish a plan early in the new year setting out those steps.”

Hunt’s plans for local TV services have instigated much debate among industry executives.  On Newsline, Raymond Snoddy wrote an article titled ‘Local TV… is Jeremy Hunt serious?’ back in September, which suggested that “there might be fundamental economic reasons why this sector has not flourished, or even managed to establish itself at all in the UK.”  In reponse, Robert Kenny, MD at Human Capital, said: “Local TV has a high hurdle to clear to reach profitability, and with waning consumer interest and increasing competition for ad revenue the bar is getting higher all the time.”

A week later, Jim Marshall questioned the commercial viability of local TV – unless, of course, “the government is willing to cough up”, he said.  However, to Hunt’s credit, Phil Redmond of MerseyFilm said in places like Liverpool, the ethos of local TV has been alive and well for a great many years.

However, for Snoddy, “the really big question to look for in the Shott report is to see what he makes of a rather disruptive idea which could makes serious waves – Channel 6″.