Examination of Witness (Questions 120
- 142)
TUESDAY 23 NOVEMBER 1999
MR PAUL
BROWN, MR
CHRIS CARNEGY,
MR DAVID
MANSFIELD AND
MR TIM
SCHOONMAKER
120. May I say that sometimes it seems to me
with commercial radio that more stations does not actually mean
more choice, it just means you listen to a different pop record
on a different station. It is not actually more choice.
(Mr Mansfield) That is not a particularly fair observation.
If you take the London marketplace, there are 17 commercial radio
stations and six BBC stations. There is a huge amount of choice
from talk radio to news radio to jazz to classics to pop radio
to gold records. The overlap inevitably really occurs between
the BBC in London and commercial radio because they are the people
who are playing the overlap records as it were.
(Mr Brown) I cannot let this opportunity go by without
just reminding you that digital radio has started nationally on
the commercial front now. It has yet to get up to full steam and
will not be up to full steam until early spring next year. Five
services are currently available on the national multiplex: there
will be another five at a stroke—almost at a stroke—by
the middle of next year. There will be twice the number of national
radio stations available to the British public than they have
ever had before and there will be quite a variety on the digital
national multiplex. There will be a sports talk station, there
will be a story books and plays station which certainly the protagonists
of that particular multiplex, GWR, who own Classic FM, see as
doing for speech radio what Classic FM has done for classical
music listening. There is a much bigger variety.
121. May I just clarify this? As I understand
it, I will be able to get digital television and watch it on my
existing television without buying a wide screen and digital and
all the rest of it. That is not true of radio, is it? I have to
buy a digital radio in order to listen to digital radio.
(Mr Brown) Yes, you do, or you have to have some kind
of digital card in your computer or in your mobile phone, in a
whole variety of things as will develop over time.
122. What are the costs at the present time
of a digital radio?
(Mr Mansfield) A digital radio set at the moment will
cost around £800. There is a very good reason for that really
and that is that very few of them are being produced. The UK is
in a very strong position here and we have to decide whether we
can take advantage or not. The UK is the world leader in digital
radio, even outside territories like Japan. The broadcasting standard
which has been set in Europe is now being picked up by the other
countries in the EU but they are some way behind. Until the manufacturers
can get some sort of scale, then we are now at the first part
of the S-curve if you like in terms of this new technology. It
is our view, the view of my colleagues, that the cost of digital
radio will fall quite dramatically but it will probably take ten
years for that to happen. We are looking forward to the day when
people can go into Dixons and buy a radio set which will pick
up digital radio plus FM and maybe AM as well and there will be
no price premium. That is the point we are trying to get to. To
go back to the point you made a few moments ago, my company, Capital
Radio, now own 16 digital licences, none of which are on air yet.
We would not expect to get any money back from our several million
pound investment for about another eight years. We will invest
in a lossmaking system.
Chairman
123. Is the fact not this? The commercial sector
has been licensed to provide a digital radio service. It is doing
so at its own financial risk. If people do not choose to buy digital
radio sets or having bought digital radio sets they do not choose
to listen to you, you come a cropper based upon the market. It
is fair, it is right, you are taking that risk. If people on the
other hand do not want to listen to BBC digital radio services,
the BBC is still going to spend their money on providing them.
(Mr Brown) That is a very good assessment.
Mr Maxton
124. Equally, as someone, with all due respect
to my good friend Jimmy Gordon, who rarely listens to commercial
radio in the west of Scotland but listens to BBC almost all the
time, if I have a digital radio, I want to be able to listen to
BBC programmes on it and therefore the BBC should provide those.
I think a lot of people will want to listen to BBC programmes.
By the way, I do not understand this argument about radio sets.
As far as I understand it, certainly when you get a cable digital,
you will be able to listen to almost any radio station through
your television set as you can at the moment on digital satellite.
You will be able to listen not only to the existing radio programmes
but also a large range of radio stations from all round the world
on your computer, so why you would put a radio card into it I
have no idea. It seems to me the car market is the one area where
the radio has a future rather than anywhere else. What are you
doing about ensuring the car manufacturers are putting digital
radios into their cars?
(Mr Carnegy) It is worth stressing that
the television through which you will experience all these things
for sure is a regular television but only in so far as it has
a screen. Behind it there is a lot of new technology. It is not
quite fair to say that digital television will just happen.
125. You will have to have a box.
(Mr Carnegy) There will be transmitters and receivers
and so on and so forth. In the same way, digital radio services
will appear through your digital radio or television but that
is just the final experience. There will have to be digital radio
transmitters and receivers behind that. It is not quite as simple
as that.
(Mr Brown) Commercial radio companies are talking
to car manufacturers in some detail now. As far as manufacturers
are concerned, the answer is simple: they are looking for a large
market. The UK on its own is not a large market. We are ahead
of the rest of Europe but I am happy to be able to say that in
Germany now the licences are being awarded for digital radio services;
some already exist but Germany will be covered by digital radio
by the end of 2001. Spain is awarding licences over the Christmas
period. Spain will be covered by digital radio services by the
end of the year 2001. Sweden is getting a good move on. The only
country which is not moving as fast as we should like in this
area is France but once all those countries are on board there
is a large market there for manufacturers and we think they will
answer that with lower cost sets.
Mr Maxton: When our Chairman buys his
next BMW it will have a digital radio in it, will it?
Chairman: I am thinking of moving up
to a Jaguar actually.
Mr Keen
126. It does seem this morning that we are hearing
a lot of comment saying the BBC have no constraints, they can
do whatever they want to do, they can go as wild as they like.
Is it not true that we are really all here today constraining
the BBC? We are all here discussing how much money they should
get, therefore in a way it is up to them to make the judgements
they make and it is up to us to decide whether they should get
more money or not. They are restrained, not by the market as you
are, but they are restrained by the fact that they have to come
before the public and then they are criticised because they are
spending too much money or not. It is not as though they have
no restraints.
(Mr Brown) I refer back to Lord Gordon's answer to
a similar question and that is that it is one thing to look at
your resources and decide to do something and it is quite another
when you are half way through to decide you need more money for
it. They are in a position where they can do that. It is not a
position we can sustain in the commercial sector.
(Mr Mansfield) One of our concerns in the comments
Gavyn Davies has made is that he seems to regard increased accountability,
and we would call accountability arm's-length scrutiny of the
value for money that the BBC delivers, as part of a package with
increased funding. Just on behalf of the licence payers, we should
quite like to know in some detail where the first £2 billion
went. That is what it boils down to. We live in an age when service
chiefs, doctors and professors get arm's-length value for money
scrutiny but BBC disc jockeys and game show hosts do not. That
seems to us a little odd.
127. Do we not want the BBC to be inventive
and to look forward, not sit back and just do what they have always
done and never be adventurous? You are saying that they should
not be allowed to be inventive.
(Mr Schoonmaker) That is about the way an organisation
is run, it is not about how much money you throw at it.
128. Can I come back to the first point I made?
The only way they get the money is if we all agree they should
get it. I am just asking whether it is not right that they take
these risks and look to the future and they are making a judgement
all the time in the same way they do in the commercial world.
(Mr Carnegy) It is very important to stress that our
argument has never been that the BBC should not be a creatively
free organisation, just that it would be nice if they explained
how they were spending the money as they went along. To take the
bête noire of this Committee, News 24 is now actually
a relatively stable service run for not very much more money than
they spend on running BBC Radio 2. That begs the question. Where
does the money go in Radio 2? We do not know.
(Mr Schoonmaker) Also, the innovations we have been
describing often come from entrepreneurial organisations and I
do not think that most people would describe the BBC as particularly
entrepreneurial. That is not where it comes from. They have a
dilemma trying to be both commercial operator and public service
operator at the same time; those two cultures are in real conflict.
My suggestion—and I think our suggestion—overall is
if you want to back innovation and risk taking and entrepreneurial
behaviour, do not do it through the BBC because it is not the
best place for that to happen.
129. One more thing which is not irrelevant
this morning but it may seem so at first glance. One of my big
problems nowadays is to find jazz on Jazz FM; that is to do with
regulation and it is not working very well.
(Mr Mansfield) It is. That is to do with the Radio
Authority. To pick up my colleague's point, I suspect the BBC
could be far more creative on a far smaller budget but I do not
agree with Lord Gordon's comment that inefficiency is the price
you pay for creativity. That is absolutely not right at all. Most
people who come in touch with the BBC find it quite a bureaucratic
and arrogant organisation. It is not accountable, it is not accountable
at any level; we have talked about its remit, its accounts are
not accountable, there is no transparency in there, you cannot
actually find where the money goes. If it were disciplined and
if it were made to be far more accountable and if the BBC's remit
were defined, it would produce better products, I have no doubt.
Mr Faber
130. I attended a meeting with senior members
of BBC management in the summer and I was asking them about the
issue of Radio 1 and its competition to many of your members over
a number of years. The same senior member of management, whom
I suspect the Chairman was referring to a little earlier, asked
me whether I listened regularly to Radio 1, to which I replied
not regularly but from time to time. They said therefore I could
not possibly understand Radio 1 because it has its own unique
feel to it. What do you make of a statement like that? What do
you think the unique feel of Radio 1 is that means that it should
continue to have licence payers money when none of you does?
(Mr Brown) BBC Radio 1 has gone through a number of
changes. Certainly when the Charter was last being reviewed it
set out to be a minority current music station seeking to broadcast
at peak time those things which commercial radio would not broadcast
simply because of the pressure to build audiences that we have.
Four years have elapsed since that and it is true to say that
Radio 1 has become deliberately a far more populist radio station
than it was.
131. So it has come back onto your ground again.
(Mr Brown) It is back on our ground again. Do not
forget that Radio 1 was first launched as a response to the popularity
of the North Sea pirates back in the 1960s which was early commercial
radio here and that was the response made by the Government of
the day.
132. May I follow on a few of the points you
make in your submission which Lord Gordon mentioned as well about
the competition between yourselves and BBC Radio. For instance,
in terms of the payments made to presenters and the poaching of
presenters, is it not the case that it is actually in radio where
this problem is the worst between the BBC and commercial radio
stations, far worse than in television?
(Mr Mansfield) I do not know whether it is far worse
than in television but certainly the BBC set the pace and they
are able to do that. We understand that part of their strategy
over the last two years has been indeed to price commercial radio
out of the market. As far as my company is concerned and Mr Schoonmaker's
and others, we are up against competition from the BBC who are
prepared to pay what it takes and often what it takes is more
than we can afford.
133. Lord Gordon mentioned cross-promotion,
cross-advertising as well, which is something which I find the
BBC always rather brush aside and say it is their right to do
that. As well as advertising their own television programmes at
differing times, they are able to advertise radio programmes,
often on the back of a presenter who appears both on radio and
television.
(Mr Mansfield) Yes and there really are no rules which
apply to the BBC, so they are able to feature all sorts of editorial
content across television, across radio and cross promote it.
The BBC are quite dismissive about this, as you say, because they
point to the Broadcasting Act which requires them to promote their
programmes or to make the listeners and viewers aware of those
programmes. In reality they have a marketing department of a considerable
size and they have employed a significant number of people from
the marketing and advertising industry and they use the opportunity
they have to buy themselves millions of pounds worth of space
to promote their products. We buy millions of pounds worth of
space: the difference is we pay cash for it to Carlton and London
Weekend in London. That is the difference between what we do and
what they do. We think that it is really a grossly unfair situation.
We do not want it to sound as though we are here to whinge about
the BBC. What we are really asking for is a level playing field.
134. I was going to ask about Online. Presumably
the same problem exists there. Many of you have your own web costs
as well and you are competing again directly with them on that.
(Mr Mansfield) Indeed. I know the people following
us will give a much better view but I do not really see why the
BBC are giving away free Internet access. I do not understand
the public service remit that covers that. The BBC are selling
advertising very heavily on their Internet sites and that will
stifle the growth of the commercial operators, not just in radio
but in other markets as well. I do not understand why they need
to do it and why they are allowed to do it.
(Mr Brown) May I come back on the point made by Mr
Mansfield about bleating about the BBC? It is something we try
to avoid doing. One thing I want to make sure that we all understand
is that we actually favour deregulation of our own sector and
this is what we think should be happening at the same time as
the BBC's concerns are being considered. There is one thing in
the Davies Report which I want briefly to remind you of and that
is where the BBC is described as a necessary player in the broadcasting
market: "to act as a counterweight to the private concentration
of ownership" were the words used. It is our view that commercial
media ownership will prevent concentration of private ownership
in media sectors and therefore further increasing—which
is what we are actually discussing and this Committee is discussing—the
resources and widening the activities of the BBC possibly means
that effectively we in the commercial sector are being hit with
a double whammy. What we are really asking for is room to compete,
please.
Derek Wyatt
135. You have mentioned regulations. Are you
happy with the Audit Office and the idea that the BBC should come
under the ITC? Is that what you are really saying is a good scheme?
(Mr Brown) Yes.
136. Both those?
(Mr Brown) Yes.
137. May I push you a little harder? Do you
think the BBC should be a mutual society?
(Mr Brown) Would you just like to explain what that
means in your view?
138. That would mean the governors would actually
be responsible for the licence fee payers. The licence fee payers
would have a locus on what the BBC was.
(Mr Brown) By some voting mechanism?
139. Possibly, but let us explore that. It is
how it happened in the old days when we used to have a thing called
building societies.
(Mr Brown) Which tended to be regional. We are talking
about national broadcasting and I think it would be very complicated.
We have not given it sufficient thought to be able to give you
a proper answer on that.
140. If you have not, who is going to drive
a different view of the BBC other than just "Ting. More money".
Where is that going to be driven from?
(Mr Brown) Partly out of this Committee, I would hope
and think.
(Mr Carnegy) Investigating as best we could the arm's-length
relationship within BBC and BBC Worldwide, we went to the Charities
Commission to find a model as between a charity, its trustees
and its trading arm and how that relationship would then be governed.
The BBC appear to have tried to establish something a little bit
like that. However, if you think of that model, a charity with
trustees, with a certain amount of income which somehow comes
into it—and public funds go into charities under service
level agreements in all kinds of areas nowadays—an external
regulator, the Charity Commissioner, keeps the charity on track,
there perhaps is a model.
141. Do you think the dilemma for the BBC is
that somewhere in the last five years it has decided it wants
to be a global player? It does not actually really care how it
gets there but it wants to be a commercial player in about 2005
when the licence fee is under proper discussion and therefore
these are steps to make it actually the largest global media players
in the world.
(Mr Carnegy) It is abundantly clear, if you read the
most recent Report of the BBC Worldwide Report and Accounts, BBC
Worldwide is meant to be set up at arm's-length but the Director
General introduces it by describing BBC Worldwide as one of the
two international directorates of the corporation.
Chairman
142. Is it not a fact that, as several questioners
this morning have pointed out, the BBC as a public service organisation
is increasingly anomalous. If the BBC were indeed a commercial
company, seeking to be the kind of world player that Mr Wyatt
says, and I believe, such an organisation can be, then if it were
a commercial organisation the sheer lack of strategy, drive and
competence to be a world company would make heads roll.
(Mr Carnegy) You might say that. We could not possibly
comment.
(Mr Brown) No comment.
Chairman: Thank you very much indeed
for coming.
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