Mr. Mathew Horsman:

Members need not worry; we will not go through this rather dense document page by page. Hopefully, all the answers members ever had about retransmission are in there. I will make a few opening comments and then Mr. Fleming will take us through some of the modelling we have done to look at retransmission fees and then I will come back and talk a bit about the overall revenue impact and what is going on in the Irish market.

At Mediatique we have worked on retransmission consent for some years now. We started in 2012 for the Department for Digital, Culture, Media & Sport, DCMS, where we did one of the first big reports in the UK on this topic. We have worked for other broadcasters in the UK - Channel 4, the BBC and ITV. Most recently, we have been working with RTE. We have been working with the team here on this issue since 2014. Our background is that we look at this pretty objectively.

What I am about to say is the view of Mediatique, albeit we are here at the invitation of RTE. There is an imbalance in the Irish market between free-to-air channels on the one hand and pay TV platforms on the other. There is no doubt about the imbalance. Pay TV operators in particular benefit from access to the linear channels, the underlying RTE 1 and RTE 2 channels, and all the associated services that come with that, which help pay TV operators sustain the subscription revenues they get from their users. It would not be as attractive were not for RTE channels being available, which as we heard from Ms Forbes are very popular channels, but also the content on those channels is there to be time shifted and watched on a personal video recorder. The content can be available through a player proposition from RTE. All of those services are hugely fundamental to the value proposition that is offered by Sky and Virgin in particular in this country and yet they do not pay anything for the underlying channels.

RTE has been held back from openly negotiating the terms of those particular services going to the pay TV operators because of the copyright exemption and because of the "must-offer, must-carry" issues about which many people in the room have been talking. What we are going to address is what might need to happen for those payments to be made. I should point out that I hear a lot from Virgin and Sky as we are very close to them in the UK and they will probably check with me first about what they will tell the committee. Payments are made in the US and in European countries and territories. It is not unbelievable that payments would be made by pay TV operators for free-to-air public service broadcasting services. We include a review of the markets where that is the case. We can talk about them if members wish. We talk about one particular market where retransmission fees are huge, namely, the least regulated broadcast market in the world, the US, where retransmission fees this year will be $7 billion paid by the pay TV operators to free-to-air channels in return for having the right to put those channels on their platforms.

I am not as expert on the US market as the person whom I am about to quote. Here is something to conjure with: "Asking cable companies and other distribution partners to pay a small portion of the profits they make by reselling broadcast channels, the most-watched channels on their systems, will help to ensure the health of the over-the-air industry in America." So said one Rupert Murdoch to the News Corporation annual meeting in 2009. Fox, the free-to-air service in the US, is heavily helped by retransmission fees. Where Mr. Murdoch has channels to sell, he thinks retransmission is a quite a good idea. Where he has a platform, such as in Ireland and in the UK, he is not so interested in the retransmission system. That is interesting from our point of view.

Why is this coming up now? Why is there suddenly this talk about retransmission fees? In fact, it is not quite sudden because as members have just heard, we have been talking about this issue since 2012 in the UK and since 2014 in Ireland. There are some issues that have to be addressed. The business models of the broadcasters are increasingly under pressure and they are being put under pressure by the very propositions that pay TV operators provide to their consumers. Members should not get us wrong; it is terrific that these wonderful platforms are launched and they have time-shifting capabilities, Internet protocol, IP, delivered services over the top or within the services themselves. That is terrific for the consumer. The consumer is happily paying between €30 and €50 a month for the services overall.

That includes pay TV channels, sport and everything else. The part of that proposition in the value is derived from the channels for which they pay nothing. This weakening of the business model which the committee has heard of from many people in the room today is only going to accelerate through changes in things like navigation, home screens and the like where it is harder and harder to find the content the Government has intervened to ensure is produced, namely, original Irish content made by RTE in particular.

The other "why now?" point is very much up to the committee. It is first of all the reform of section 103 to recognise this particular exemption for cable operators is no longer fit for purpose given what is happening in the overall marketplace. I suspect that argument has been won. It has certainly been won in the UK in the Digital Economy Act passed earlier this year and mentioned by the previous speaker. According to the Act, it will be the case from this month or early next month that there is no copyright exemption for cable operators in the UK. That will be the starting gun for really serious negotiations between broadcasters and the pay TV operators, in particular initially Virgin, as a result of these changes.

There are other things going on in the UK which I am very happy to share with the committee if it so desires. Before we get into the numbers, the point we are trying to make is that negotiation is now possible or may be as a result of section 103 and just a few changes in the enabling legislation around "must offer" which are necessary to create the conditions for a level playing field whereby broadcasters, in particular RTE, and the platform operators at least enter negotiations on an equitable and fair basis. That is not the case currently. Perhaps it would be easier to see a positive outcome for RTE and broadcasters were these changes made. They are no guarantee of this happening nor are they mandated payments, but it would allow free and open negotiations to occur between, in this case, RTE and the platform operators.

A question we have asked ourselves is how much we are talking about and what it is in relation to other payments that go on in the Irish market. First, we have to concede one important point, which the platform operators like to point out. Both channel suppliers and platform operators benefit from the channels being available on those platforms. The channels can charge advertisers reached via the platform to generate advertising revenues, while the platform gets to derive subscription income by being able to offer a full range of popular services. The question is who benefits most. Absent these commercial negotiations, the only way to estimate is to ask consumers what they would do if certain services were no longer available on the platform. That is the big test. In other words, what revenues from advertising and subscription are at risk if the channels were not carried? The flip side of these negotiations for the channels on the platform is what would happen if they were not there. With RTE, we asked consumers in the Irish market in 2014 and again in 2016 and Mr. Fleming will take us through the results of that survey.