ITV, the broadcast group, has secured a victory over its licence fees after Ofcom, the communications regulator, agreed to slash the licence fee for running Channel 3 and Channel 5 to just £90 million from last year’s £230 million.
Ofcom said this morning that the move was designed to help broadcasters prepare for the switchover from analogue to digital TV and recognised the lower advertising revenues generated from analogue-only households.
As it completed its two-year review into the financial terms of the Channel 3 licence held by ITV, SMG, Ulster Television and GMTV Ltd - which runs the breakfast show of the same name - as well as the licence to run Channel 5, Ofcom said its decision should “allow commercially funded public service broadcasters the scope to plan with certainty for all-digital television services across the UK”.
Currently, more than 60 per cent of households have access to some form of digital TV, with a minority relying entirely on analogue for the daily television diet.
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The regulator said it recognised that once the switchover to digital TV is complete, the analogue licences will be worthless and the advertising revenues generated would be zero.
Stephen Carter, the chief executive of Ofcom, said: “Digital television transfer control from broadcaster to viewer. This process puts pressure on commercially-funded public service broadcasting.
“We have now done all we can to give broadcasters regulatory certainty. It is now up to the broadcasters to deliver; and it is for Government to assess whether other sources and recipients of funding for public service broadcasting will be needed. We believe that they will be.”
Taking account of the expected completion of the digital switchover by 2012, Ofcom said it estimated that total payments collected by the Treasury for the Channel 3 and Channel 5 licences would be about £90 million in 2005. Last year, the combined payments were £230 million, and the previous year they were £270 million.
The licence consists of two payments - an annual cash fee and a percentage of advertising and sponsorship revenues generated by broadcasters on the analogue channels.
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As the move to digital progresses, the fee gradually dwindles to nothing.
The BBC is a publicly funded broadcaster and none of the channels operated by it, Channel 4 or BSkyB make any licence payments.
ITV this morning welcomed Ofcom’s decision, saying it believed payments for this year would be less than £80 million, “a fall of £135 million compared to total 2004 payments of £215 million.
Charles Allen, the chief executive, said: “These terms mean a very significant reduction in licence payments for ITV plc this year, with further steady reductions to come.”