Investment banker Nicholas Shott, asked by the Government to investigate the viability of local TV, has recommended that between 10 and 12 state-supported local TV pilot stations are set up.
In addition to the £25m start-up costs being provided by the BBC, plus £5m a year, Shott suggested that the government will need to underwrite a contract with a national public service broadcaster to sell £15m a year of national advertising in to the service.
Shott identifies a number of major hurdles for local TV and admits that it will not be viable if it is dependant on local advertising alone.
Under current Coalition Government proposals the first new independent local TV stations will be launched in 2014.
Regional news broadcasting outside the BBC is currently subsidised by ITV to the tune of around £50m a year. But culture secretary Jeremy Hunt has said that his aim is for ITV to lose its local news public service broadcasting commitment when its licence comes up for renewal in 2014.
According to Shott, in the long-term local TV will be delivered via the internet (IPTV) but he says that initially it will go out via existing terrestrial TV transmitters. Shott notes that there are significant problems with this, such as the fact that Liverpool and Manchester share the same transmitter.
He recommends that the first 10 to 12 local TV services should be based around conurbations and should seek to produce a core of two hours of ‘reasonably low cost but high quality content’per day. This will be supplemented by shared ‘national backbone’content.
And he has suggested that the new broadcast licences should not go the highest bidder but rather to those who offer the most ‘innovation, quality and level of service”.
Shott’s report estimates that a 10-station local TV network will cost £25m a year to run. This equates to a budget of around £1,500 per hour of production costs per station for 14 hours of original programming per week – or £11m for 10 stations.
To put this into context, Press Gazette understands that the cost for national high-quality broadcast documentaries currently runs at around £150,000 per hour.
Shott suggests a further £6m in ad sales and commercial costs and £9m to pay for the ‘national backbone’which will include some further locally-produced content as well as general entertainment, documentaries and films.
The report suggests that ‘automated content’such as ‘text-based local news and information, imagery, weather and music’could be used to fill less important times within a schedule for limited cost.