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.
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