Amazon's LoveFilm deals with BBC and ITV in UK

LoveFilm, Amazon’s streaming and DVD rental service, is boosting its subscription VOD portfolio through major deals with both the UK’s major Free To Air broadcasters, the public service BBC and commercial-advertising funded ITV. The deal highlights efforts being made by both public and commercial FTA broadcasters in Europe to seek new revenues from online subscription sales to offset expected declines from traditional sources. European governments are reducing the real purchasing power of income from license fees that traditionally have funded public service broadcasting, while the fragmentation of advertising revenue (caused largely by a switch to online outlets in general) threatens the longstanding linear spot ad income of commercial FTA services.

The growth of online subscription sales means that public service and commercial broadcasters are increasingly competing for revenues as well as for viewers. The original purpose of public service broadcasters like the BBC was to provide programming deemed of public interest or of appeal to minorities that would not attract sufficient advertising as to be commercially viable. But, over time, this principle has been eroded somewhat by the pressure on public service broadcasters to compete for audience ratings to justify their license fee. This rather contradicted the whole notion of providing programming to serve all the population rather than just pandering to popular demand. But, now the maturation of online services is making it more commercially viable in any case to appeal to a broad spectrum of tastes by reducing the cost of distribution.

For the BBC, prohibited by its license terms from charging for scheduled or catch-up content in the UK, overseas sales represented the first major revenue opportunity for its commercial arm, BBC Worldwide. This led to the BBC making its iPlayer online catch-up service available in 13 countries, including 11 in Western Europe, plus Australia and Canada, by the end of 2011, with a U.S. launch imminent. The overseas version, currently available as an iPad app, offers some content free funded by pre-roll ads, but the main business model is subscription based, with customers paying €6.99 a month or €49.99 a year. This global iPlayer app includes some features not in the UK version, including ability to stream shows over 3G as well as Wi-Fi, and a download feature to store content for offline viewing.

Across continental Europe, many broadcasters are hoping the Hybrid Broadcast Broadband TV (HbbTV) standard will make their content available online through a growing number of pay TV outlets. France Télévisions, the country’s public service broadcaster, is betting particularly heavily on HbbTV, because it is in the unusual situation of having its commercial source of funding cut by government legislation. Unlike the BBC, but like many of its other European counterparts on the Continent, France Télévisions has been funded through a combination of public license fee income and commercial advertising within programs. However, a new law on public broadcasting will phase out commercial advertising on the public television channels, in the evening to start, but eventually throughout the day as well. France Télévisions is therefore hoping to make up these lost revenues through subscription sales. The first step came in July 2010 with the launch of the France Télévisions catch-up TV portal, which will continue to be allowed to include advertising, and may also add subscription services.

One potential online market for both public service and commercial FTA broadcasters lies in charging for archived content, including old drama series that in the past would be repeated perhaps once and then never seen again, except for highly-acclaimed ones. This does not contravene the broadcasters’ remits, which only cover content at the time of scheduled delivery and not afterwards. Indeed, the LoveFilm deal with the BBC and ITV would not work if all the content were available free on the broadcasters’ websites.

In Sweden, the leading commercial channel TV4 has started making money this way. It provides access to all scheduled programming free for up to seven days after broadcast in line with its remit, but then charges a small fee for access afterwards. TV4 is also experimenting with other models, including provision of unique content available only online, and providing access to series a week before scheduled broadcast in return for a fee. This could be a revenue avenue for public broadcasters such as France Télévisions and the BBC, which could monetize their online portals for such services without breaching the terms of their license since all content would still be free at the time of scheduled delivery. Some people, though, might consider this to be against the spirit of their licenses given that making content available only for a fee before broadcasting is not quite the same as doing so afterwards, but that is another matter.