Select Committee on Culture, Media and Sport Eighth Report



Programming and Expenditure

(i) Audience share and reach

15. Much of the BBC's Report and Accounts is devoted to its programmes. This accurately reflects the primacy of programming content in the BBC's strategy.[44] Sir Christopher Bland said that "It is by our programmes that we seek to be judged".[45] Ultimately, it is the viewing and listening public's assessment of the BBC's programming which matters. The BBC justifies its unique position as beneficiary of the licence fee with reference to its capacity to provide value to each household from its services.[46] This it seeks to measure both through figures on audience share and on audience reach.

16. In the face of growing competition from Channels 4 and 5 and satellite and cable television, a fall in the BBC's overall share of television audiences has long been forecast. At the beginning of the 1990s, the BBC expected the combined audience share of BBC1 and BBC2 to fall to a third or less of television viewing over the decade.[47] So far, the fall has not been as great as the BBC itself feared. BBC1's audience share has fallen from 34 per cent in 1991 to 31 per cent in 1997, but this has been partly off-set by an increase in the share for BBC2 from 10 per cent in 1991 to 12 per cent in 1997.[48] Mr Will Wyatt believed that "competitively with the other terrestrial broadcasters, the story was not a bad one".[49]

17. In the future, Mr Will Wyatt considered that audience share would "not be the most important" measure of the industry. The BBC was increasingly concerned to measure the extent to which "each household that pays a licence fee gets sufficient value from the BBC over the year from their usage of all our services—from local radio, regional services, radio, television—for them to be getting a fair return".[50] According to Sir John Birt, the BBC's aim was to ensure that "as far ahead as we can see, ten or fifteen years, the BBC will still have an extremely substantial place in every household and in the horizons of every individual".[51]

18. To this end, we were told that the BBC monitored "very keenly" whether households continued to consume BBC television and radio each week.[52] The BBC's overall audience reach across radio and television—measured as the estimated proportion of all UK households viewing and listening to at least two hours of programming per week—was 94 per cent in 1997-98; this had fallen very gradually from 96 per cent in 1993-94.[53] The figures for reach in particular genres appear to have fallen more significantly. A table in the BBC's Report and Accounts suggests that combined reach fell in every genre between 1996-97 and 1997-98. In some genres, such as sport and current affairs, the fall seems particularly sharp.[54] However, in evidence, Mr Will Wyatt informed us that the figures for 1997-98 were formulated on the basis of a different methodology from those for 1996-97, making comparison difficult. No reference to this change is made in the Report and Accounts and Mr Wyatt admitted that "it should have been pointed out".[55]

19. Mr Will Wyatt accepted that, as competition increased following the introduction of digital television, the BBC's share of the overall television audience would fall, but thought that it would be difficult to forecast the rate of decline.[56] We understand the importance which the BBC attaches to audience reach—and accordingly regret the failure to clarify the different methods by which reach figures in successive years were collected—but we are concerned that the BBC should not underestimate the continuing linkage between audience share and public perceptions of the value of the licence fee. The BBC must not neglect its core audiences and its core services as it seeks to diversify its range of activities.

(ii) Sports Rights

20. For some years after the BBC ceased to have a monopoly on television audiences, it retained its primacy as the natural home for sport on television. In recent years, this primacy has been eroded with growing speed. The rights to broadcast major sporting events live have increasingly been lost, in some cases to other terrestrial broadcasters. Two losses in 1997-98 were the FA Cup Final and England's Rugby Union Internationals at Twickenham.[57] In the Report and Accounts for 1997-98, the Governors state, "We were sorry that the BBC was outbid for some key sports rights during the year. There are many calls on the BBC's resources, but it must do all it can to retain rights on behalf of licence payers."[58]

21. A few days before we took evidence, the BBC suffered arguably its most serious loss yet in terms of sporting rights, the centre-piece of the cricket schedule, England's home Test Matches. We pressed witnesses from the BBC on whether they had fulfilled their own intention to do all they could to retain rights. Mr Will Wyatt admitted that the loss of Test cricket was "a great disappointment".[59] Sir John Birt believed that such losses could not be attributed to the quality of the BBC's sports coverage.[60] Mr Wyatt denied a suggestion that sporting authorities saw the BBC as "lazy and arrogant" and said that sporting rights were sometimes won by the BBC with a lower bid than another broadcaster.[61]

22. The witnesses from the BBC were convinced that the loss of cricket rights was solely a matter of "simple economics"; they claimed that they had not been caught by surprise by the main successful bidder, Channel 4, but had been outbid; they claimed that their bid would have to have been increased by at least another £10 million in order to be competitive.[62] The BBC's overall commitment to sport was demonstrated by the fact that the sports budget had increased as a proportion of the total programming budget in recent years, but this increase could not keep pace with the overall increase in the costs of top level sporting rights, which had increased at around 30 per cent a year in the last nine years.[63] Sir Christopher Bland considered that further increases in the sports budget to secure the cricket rights would not be justified: "I do not believe we should have put more money on the table". He would not have changed the resource allocation decision for sport even if the money to be spent on News 24 had become available.[64]

23. We are not convinced by the BBC's account of the reasons for the rapid decline in its share of rights to televise major sporting events. The witnesses' conviction that money and money alone explained certain recent defeats appear symptomatic of a complacency in the approach of the BBC's senior management towards sports coverage. We believe that there are those in the BBC Sports Department who share our view of the complacency and lack of commitment at senior management level. We recommend that, where future bidding contests occur, the BBC should prepare more thoroughly and professionally and should take the advice of the first-rate sports specialists working for the BBC who have accumulated great experience and expertise over the years.

24. In convincing licence fee-payers that they receive value for money, the BBC seems to under-estimate the importance of maintaining its appeal to its existing audiences through existing services. It is unquestionable that the costs associated with the acquisition of major sports rights have risen well above the rate of increases in the licence fee. For this reason, we recommend that the forthcoming review of the BBC's funding should examine the scope for commercial partnerships as a means of supporting BBC acquisition and retention of sports rights in future.

(iii) Sources of production

25. The last decade has seen a major shift in the sources of production for the BBC. Formerly, about 90 per cent of all BBC production was in London and the South East. Since then, there has been a shift towards independent production and a shift of more BBC production to the rest of the United Kingdom. About 25 per cent of BBC programming is commissioned from independent producers, another 25 per cent was made by the BBC outside London and 50 per cent made by the BBC within London. Sir John Birt saw this as "a healthy balance" and "broadly right".[65] He believed that the independent sector had served as "a vital stimulus to greater efficiency" within the BBC.[66] Sir Christopher Bland also thought that the growth of independent production had been "beneficial creatively and financially".[67]

26. For 1997-98, one of the BBC's promises was "to spend one-third of the BBC's network programme budget outside London and the South East".[68] This target was not met: only 31.3 per cent of the budget was spent outside London and the South East.[69] Mr Will Wyatt said that this failure was due to a delay in the delivery of a major production by BBC Scotland from the last to the present financial year.[70] For 1998-99, the target has been redefined to "spending broadly one third of the BBC's network programme budget outside London and the South East".[71] Sir Christopher Bland admitted that the addition of the word "broadly" was "a bit weaselly", but he and Mr Wyatt assured us that a third remained the target.[72] We consider that the commitment to spend one-third of the BBC's network programme budget outside London and the South East should be understood as the bare minimum acceptable and should be stated without ambiguity.

(iv) The challenge of devolution

27. One of the BBC's ten key objectives for 1998-99 is to "agree and implement plans for responding to new political institutions in Scotland, Wales, Northern Ireland and London".[73] The importance of this matter is referred to in the contributions to the Report and Accounts from the National Broadcasting Councils who advise the Governors on programmes and services in Scotland, Wales and Northern Ireland. The Broadcasting Council for Scotland notes the need to ensure that, following the creation of the Scottish Parliament, programmes are "relevant, accurate and appropriate for Scottish audiences".[74]

28. Sir Christopher Bland told us that the impact of devolution was "one of the most complicated issues that the BBC has faced, certainly in my time as Chairman". Programming plans in Scotland would be presented in November or December 1998. Before the plans were finalised, there would be "an extremely healthy and energetic debate" involving the Broadcasting Council for Scotland.[75] We look forward to an early announcement of proposals on this matter to allow for adequate consultation before the Scottish Parliament becomes operational.

(v) BBC Online

29. In 1997-98 the BBC spent £18.7 million on the establishment of BBC Online, its non-commercial web-site.[76] In 1998-99 such expenditure is likely to rise to about £22.5 million.[77] Mr Will Wyatt said that this expenditure led to a web-site that was "one of the richest in content" in the world, composed of content created within the BBC rather than collected from elsewhere as was the case with many other web-sites.[78] Sir Christopher Bland felt that the scale of investment amounted to "a sensible allocation of resources" into "the third broadcast medium" which was "rapidly, rapidly expanding".[79] The BBC was looking to expand the services it offered, for example, through the greater availability of video and audio clips.[80]

30. The BBC had been astonished at the rate at which the audience for BBC Online was growing. It was the most used content site in Europe and had reached "30 million hits per month at the last measure". The growth rate was about 30 per cent per month.[81] Sir Christopher Bland had no doubt that BBC Online ought to be regarded as "an integral part of our public service offering" and ought to be funded from the licence fee accordingly.[82] Sir John Birt believed that this approach was essential since BBC Online might become a highly significant medium for the delivery of the BBC's public service proposition.[83]

31. We agree that BBC Online represents an important and worthwhile investment by the BBC. It provides diverse content of high quality. It is very likely to become an important means of delivery for audio-visual services in years to come. The BBC leads the field among the British media in recognising this.

(vi) News 24 and digital channels

32. In our Report on the Multi-Media Revolution earlier this year we surveyed the prospects for digital television both in overall terms and in its competing formats.[84] We noted then that the BBC had sought to maintain its position in the digital era by providing compelling content to be available on all digital platforms.[85] The first additional digital channel, BBC Choice, has already been launched on digital satellite television and that channel will be followed by BBC Parliament in digital format, by BBC Learning and by the BBC's Children's channel.[86] Investment in new channels was felt to be justified by the BBC in part by the channels' capacity to help compensate for any fall in viewing of BBC1 and BBC2.[87] Also, Ms Hodgson contended that, due to the very high investment in the core networks, it would be possible to deliver new digital services "at a marginal extra cost", thus producing "a higher value pay-back to the licence fee payer for their investment".[88]

33. The claim that the BBC's digital services will be provided at only "a marginal extra cost" can be more fully assessed when information on the costs of the new channels becomes available from the Report and Accounts for 1998-99, but the costs associated with one new channel are already known. BBC News 24 was launched in advance of the availability of digital television. In 1997-98, when transmission began, it cost £26.5 million.[89] In 1998-99, its first full year, the costs will be between £30 and £40 million.[90] At present, News 24 is only available to households with cable television and during the early hours of the morning to those with terrestrial analogue television. Viewing figures are consequently low—in the order of 600,000 on BBC1 overnight—and Sir John Birt admitted that, "in the short-term, it is a high cost to reach very few people".[91]

34. Nevertheless, the BBC was confident that News 24 represented a sensible long-term investment for the digital era. Like BBC Online, it was viewed "an integral part of our public service offering".[92] It enabled the more effective utilisation of the BBC's vast news-gathering operation. In the longer term, as digital television became widespread, it would become "an extremely important means by which people will receive their news in this country".[93]

35. It is tempting to view BBC News 24 as a mis-placed investment by contrasting its high costs with its relatively small audience. Nevertheless, News 24 is designedly a long-term proposition and such a judgement would be premature. If it attained a quality sufficient to compete with other news providers in a more open market, it might form a valuable addition to the BBC's programming. We are not, however, convinced that News 24 should remain indefinitely as an element of the BBC's licence-funded provision and we expect the forthcoming review of the BBC's funding to examine the scope for the commercial development of News 24 in a fair market.

36. In advance of its launch as a digital channel, the BBC has assumed ownership of the Parliamentary Channel, now BBC Parliament. This is already widely available to cable subscribers; it will be available early in 1999 on digital satellite television and it will be extended in due course to digital cable and digital terrestrial television. Together with BBC Online, digital transmission should enable the BBC to extend its coverage to take account of the Scottish Parliament, the Welsh and Northern Ireland Assemblies and other assemblies which may be established.[94] We welcome the BBC's commitment to comprehensive Parliamentary coverage on television demonstrated by its operation of the BBC Parliament Channel. We wish that this commitment extended to radio coverage, and await the listening figures for Yesterday in Parliament that the BBC seems somewhat tardy in providing.[95]

(vii) Efficiency

37. As we noted earlier, the last independent review of the BBC's finances commissioned by the Government argued that the costs of introducing digital services could be broadly balanced by efficiency savings within the BBC. It viewed the BBC's internal targets for future efficiency at that time to be insufficiently "stretching".[96] Sir John Birt confirmed that increased costs in future could be partly off-set by "further major improvements in efficiency" as well as increased commercial revenue.[97]

38. Both Sir John Birt and Mr John Smith, the BBC's Finance Director, believed that the search for efficiencies was and should be a continuing process. Sir John Birt pointed to a fundamental reform of the BBC's accountancy support systems as an example of a reform which would bring "a big annual saving to the organisation".[98] Sir Christopher Bland said that a recently initiated review of central overheads and services would produce significant savings.[99] We presume that this will have the effect of reversing the increase in the proportion of total operating expenditure spent on corporate management and governance from 3.0 per cent to 3.2 per cent between 1996-97 and 1997-98.[100] We expect that the forthcoming review of the BBC's funding will include a thorough examination of the scope for efficiency savings in the Corporation in future years as well as the potential for partnerships with commercial organisations.

(viii) The BBC's Strategy

39. Our exchanges with the BBC about their spending priorities have put into sharp relief the dilemmas which face the BBC. It makes much of its long-term strategy to maintain its position in ten to fifteen years time. It has accordingly made a number of major investments in new channels and new technologies. We have supported some of these decisions. However, the BBC needs a strategy to maintain the appeal of its core programming over the next nine years when it will continue to be financed primarily by the licence fee. There is a danger that, in pursuing a strategy to maintain the legitimacy of the licence fee in ten to fifteen years' time, the BBC will lose sight of elements which many see as integral to the licence fee's justification right now.


44 HC (1997-98) 520-I, para 88. Back
45 Q 1. Back
46 Q 69. Back
47 Q 68; HC (1993-94) 77-I, para 36. Back
48 BARB TV Facts (www.barb.co.uk). Back
49 Q 66. Back
50 Q 69. Back
51 Q 70. Back
52 IbidBack
53 Report and Accounts of the BBC for 1997-98, p 78; Report and Accounts of the BBC for 1994-95, p 93. Back
54 Report and Accounts of the BBC for 1997-98, p 78. Back
55 QQ 77-78. Back
56 Q 68. Back
57 Q 39. Back
58 Report and Accounts of the BBC for 1997-98, p 37. Back
59 Q 22. Back
60 Q 37. Back
61 QQ 49, 45. Back
62 QQ 37, 47, 43. Back
63 QQ 37, 22. Back
64 Q 77. Back
65 Q 32. Back
66 Q 56. Back
67 Q 56. Back
68 Our commitment to you: BBC statement of promises to viewers and listeners, 1997, p 3. Back
69 Report and Accounts of the BBC for 1997-98, p 50. Back
70 Q 31. Back
71 Our commitment to you: BBC Statement of Promises to viewers and listeners 1998-99, p 4 (emphasis added). Back
72 Q 31. Back
73 Report and Accounts of the BBC for 1997-98, p 51. Back
74 Ibid, pp 47-48. Back
75 QQ 26-27. Back
76 Report and Accounts of the BBC for 1997-98, p 62; the web-site address is www.bbc.co.uk. Back
77 HC (1997-98) 520-II, Q 777. Back
78 Q 9. Back
79 Q 11. Back
80 QQ 19-21. Back
81 QQ 9, 76. Back
82 Q 35. Back
83 Q 35. Back
84 HC (1997-98) 520-I, paras 12-24. Back
85 Ibid, para 88. Back
86 QQ 23, 79. Back
87 Q 69. Back
88 Q 36. Back
89 Report and Accounts of the BBC for 1997-98, p 62. Back
90 Q 73. Back
91 QQ 74-75. Back
92 Q 35. Back
93 QQ 75-76. Back
94 Q 87. Back
95 Q 80. Back
96 Setting the Level of the Licence Fee, December 1996, p 13. Back
97 Q 37. Back
98 Q 33. Back
99 Q 64. Back
100 Report and Accounts of the BBC for 1997-98, p 82. Back

 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 1998
Prepared 5 November 1998