Home-grown ITV output 'at risk if BBC licence fee is axed'

ITV could cut its original production by 20 per cent if the financing of public service television is changed or the network comes under greater commercial pressure, according to new research.

A BBC-commissioned report, by the consultants Oliver & Ohlbaum, warned that home-grown output - currently accounting for three-quarters of UK content - was at risk unless the "ecology" of British television was protected. Analysts said the conclusions of the study suited the BBC, which paid for the research.

The report said the UK enjoyed the highest investment in new, quality programmes of any country in the world, at $75 (£45) per head per annum, compared with $65 in the US, $52 in Germany and $43 in France.

Oliver & Ohlbaum investigated the impact of digital television. It found the BBC "underpins" the £3.2bn a year that is invested in original production, accounting for 40 per cent of this money. It said the £1.3bn spent by the terrestrial networks - ITV, Channel 4 and Five - was driven by the need to compete with BBC expenditure, which is publicly funded through the licence fee. The Government is reviewing funding of the BBC, before renewal of the corporation's charter in 2006.

"Far from crowding out investment in domestic programming by commercial TV, the BBC may well encourage such investment," the report said. The study noted that ITV maintained original production at 20 per cent above the level legally required. This may not be sustainable, it said. Audience fragmentation, increased competition for commercial revenues and possible future pressure on advertising premiums all meant that ITV "may be forced to reduce its originations to the legal minimum".

New laws allow US companies to buy ITV for the first time, leading to fears that such a takeover would cut the level of British programming. The report said the only way of protecting original product was to maintain the BBC's licence fee.

"Redirecting existing or new public funds to commercial broadcasters to subsidise high-cost genres could result in these funds ending up in shareholders' pockets or new ventures which do not rely on quality, home-grown programmes," the report said.