UK media regulator Ofcom has recommended that the country’s wildly popular television tax break system could be expanded to encourage increasingly dominant platforms, such as streaming giant Netflix, to invest in local public service content.
Ofcom said the government should consider broadening the high-end TV tax credit, which has incentivized Netflix to spend $1 billion on UK shows like Sex Education, as part of long-awaited reforms to British media regulation.
Ofcom made the recommendation as part of its landmark review of public service broadcasting. It has today published a 70-page document calling for a series of changes to the UK’s 2003 Communications Act in order to protect public service content and its main proponents — the BBC, ITV, Channel 4, and Channel 5 — amid the digital revolution.
Ofcom said “fiscal incentives” could encourage Netflix and others to invest in less commercially attractive genres of content, ensuring that UK audiences continue to be fed a diet of public service programming at a time when the power of traditional broadcasters, like the BBC, is in decline.
Tax incentives could also support off-screen ambitions, Ofcom noted, such as growing the production sector outside of London. This idea was endorsed by the likes of the BBC, Sky, and ITV in their responses to Ofcom’s consultation on the future of public service broadcasting.
“A new tax relief for out-of-London TV production might stimulate higher regional investment,” Sky said. In its submission, Directors UK added: “We support proposals for further tax reliefs as a way of achieving increased investment in content and in growing and maintaining a flourishing UK production sector.”
Ofcom commissioned consultancy firm Ernst & Young to examine the idea of expanding tax breaks. “For multinationals who can produce content anywhere, tax incentives can be a reason to invest in the UK, rather than a different market, which could support the production sector and deliver economic, social and cultural benefits to the UK,” EY said.
But the consultancy warned that tax credits may “not be sufficient” to outweigh streamers’ existing commercial priorities and that the scheme would need to be “carefully designed to avoid diluting the success of existing tax incentives.”
Ofcom added that other financial incentives should also be considered by the government, such as contestable funding pots like the Young Audiences Content Fund, which is administered by the British Film Institute.
“Incentives could be particularly important to encourage new complementary PSM [public service media] provision,” Ofcom said. “Many are already in use across the media sector, but there may be potential for new ones to be introduced. They would need to be designed to ensure they don’t undermine existing provision.”
Ofcom’s recommendations come as the government works towards overhauling UK media regulation next year. Ministers have signaled that new rules could be introduced for streamers, meaning they would be subject to standards on impartiality and accuracy for documentaries and news programming.
Ofcom holds British broadcasters to certain standards on impartiality, fairness and harm and offense, but the likes of Netflix and Amazon do not fall under its remit. Netflix, for example, is regulated in the Netherlands, its European headquarters.