Mr. Paul Fleming:

In order to test the value that accrues on both sides, namely, the platform on the one hand and the free-to-air channel on the other, RTE undertook two surveys in 2014 and 2016, respectively. The key message is on page 6 of the document circulated. We can answer any questions in detail from the committee. The survey asked subscribers what they would do if the free-to-air channels were no longer available on the Sky and Virgin platforms and 50% of Sky homes in 2014 and 2016 said they would leave the platform. Equally, somewhere between 60% and 70% of Virgin media homes said they would leave the platform. A further significant proportion of homes of 15% to 17% in relation to Sky and 17% to 18% in relation to Virgin Media said they would stay on the platform but expect a discount in the price they pay on a monthly basis of somewhere in the region of 20% to 30%. What underpins this is the importance of the free-to-air channels to those subscribers. According to the data at the bottom of the page, 57% of people said RTE 1 was the most important channel to them on the Sky platform. A similar percentage is true for Virgin Media.

To some extent, this underpins the reason people make these decisions on leaving a platform if RTE and other free-to-air channels are no longer available. In effect, a large proportion of the value Sky and Virgin generate is underpinned by the fact that they carry the free-to-air channels. Of course, there is value for RTE also because a material percentage of people, 30% in relation to Sky, said they would stay on the platform if RTE was no longer available. They would either cease to watch RTE altogether or they would make alternative arrangements to watch it on Saorview or via another device. As such, there is a potential revenue risk to RTE from no longer being on the platform in that they would lose access to viewers and, hence, advertising revenue. As Mr. Horsman said, there is value for both sides and potential risks to revenue for both sides. Our analysis is about determining how large these risks are on both sides and what the relative value at stake was.

Turning to page 7, we can run the committee through some of the headline statistics. The Irish situation is set out on the left hand side. We looked at a number of scenarios. We looked at RTE coming off Sky and Virgin and then at all the free-to-air channels coming off. In each case, the value to the platform is materially larger than it is to the free-to-air broadcaster. That suggests the revenue at risk from the loss of subscribers and having to impose discounts is far greater than the potential loss of advertising revenues to RTE and the other free-to-air channels. Given these benefits, a fair settlement if commercial negotiations were possible, might suggest the midway point between those two by splitting the difference. This implies a payment from the platform operator to the free-to-air broadcaster in each case.

As Mr. Horsman said, we undertook a similar exercise in the UK in 2014 on behalf of Channel 4 and ITV across similar scenarios. We looked at all the PSBs or FTA broadcasters and just ITV and Channel 4 as the main commercial broadcasters. The patterns are more or less the same. The benefits to the platform are materially larger than the benefits to the free-to-air broadcaster which implies a payment from platforms to FTA broadcasters under some kind of commercial agreement. In practice, of course, outcomes will vary depending on the time, risk attitude and nature of the people involved in a negotiation. We have attempted here to simulate what we think a commercial negotiation might look like. In practical terms, it is impossible to model what the actual outcome of commercial negotiations will be. We have tried to simulate what it might look like.