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On-demand TV service Project Canvas to cost £115m in its first four years

BBC Trust reveals bill for joint digital TV venture between BBC, ITV, Channel Five and BT


Project Canvas, the joint venture from the BBC, ITV, Channel Five and BT to bring on-demand programming to digital TV viewers with Freeview and Freesat, will cost more than £115m in its first four years of operation.

The figures, provided by BBC management to the BBC Trust, show that cash-strapped ITV and Five may have to find as much as £25m each to back Project Canvas in its first four years from launch.

According to the BBC, the total cost of Project Canvas will be £115.6m, including development, launch, and to the end of the first four years it is running. During this time the BBC estimates that Project Canvas will be have a marketing budget £48.4m.

However, by the end of the period the BBC reckons that there will have been £17m in "cost recovery" - revenues the service brings in - meaning the partners will be left with a bill of £98.6m.

Project Canvas has four partners, leaving each with a bill of £24.7m. But BBC management is confident it can sign up two more partners, making the cost £16.4m for each of the partners.

In addition the BBC has already spent £715,140 on its submissions to the trust about Project Canvas.

The re-evaluation of Project Canvas's costs forms part of more detailed proposals about how the on-demand platform would work, including governance, that the partners were asked to submit to the BBC Trust, which is assessing whether to give the venture the green light.

A key revision by BBC management is to allow non-public service broadcasters to become partners, a U-turn on the original plans.

Project Canvas was conceived as one of the BBC's "partnership proposals" to help cash-strapped PSBs, allowing other players such as BSkyB to offer services on the platform - but not as a joint-venture partner.

Sky has been critical of the BBC Trust's decision not to conduct a full market impact assessment for Project Canvas, arguing that the corporation's proposals for the initiative are not clear enough for a proper consultation. A market impact assessment would entail Ofcom conducting a study of its affect on commercial rivals.

The satellite broadcaster has also called on the BBC Trust to assess the risk of the project falling foul of European Union state aid rules before deciding whether to go ahead.

In May Sky also said it believed Project Canvas was "likely to qualify" for an investigation by the Office of Fair Trading as a "relevant merger situation".

The new governance model will give each partner an equal share of the venture and equal voting rights.

Despite the change in governance the BBC has attempted to maintain the original idea that the service will benefit PSBs by adding several clauses that all partners must adhere to.

"Without a guaranteed PSB majority there is concern that the free-to-air and open principles of Canvas, which are central to the rationale for BBC involvement, will no longer have adequate protection," said the BBC in its revised proposal.

"The venture will enshrine these principles within the objects of the venture in the articles of association of the joint venture company."



Mark Sweney
Wednesday 4 November 2009 13.11 GMT
guardian.co.uk © Guardian News and Media Limited 2009

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