Examination of Witnesses (Questions 340
- 359)
TUESDAY 30 NOVEMBER 1999
MR LESLIE
HILL, MS
KATE STROSS,
MR CLIVE
JONES AND
MR CHRIS
HOPSON
340 But you would not object to advertising?
(Mr Hopson) There is a very important
principle to be drawn between funding the main BBC service, ie
BBC1 and BBC2, out of advertising, to which we are completely
opposed for the reasons we have set out in our submission, and
the BBC funding new niche services out of advertising where they
are addressing a very small part of the market where our concerns
would be less.
341 But because of their brand they are highly
attractive, even in niche markets, a highly attractive market
for high quality advertising and, therefore, high cost advertising
because they go into a market which would be, with all due respect,
a higher income level than yours. Are they not, therefore, going
to take a large amount of advertising from you and from other
commercial broadcasters?
(Mr Jones) If you look at their current
niche channels, for all their brand, for all their quality, their
audiences are nil, nil, 0.1, 0.0001 and that continues.
342 So why are you wanting to run a 24 hour news
service?
(Mr Jones) ITN wants to run a 24 hours
news service, not necessarily ITV.
343 They cannot operate on their own.
(Mr Jones) No, ITN will go to its shareholders
which are not simply drawn from people in ITV, it is also drawn
from Reuters and the Daily Mail and General Trust and they
will have to convince their shareholders that they have a business
plan going forward.
344 What is the total revenue of your companies?
(Ms Stross) The ITV's revenue in 1999
will be just about £1.9 billion.
345 That is to run at the present time one channel,
yet you object to the BBC running all the channels they run, the
radio stations and everything else, on £2 billion. I do not
understand that.
(Ms Stross) It is one channel with very
significant regional commitments.
346 So does the BBC have regional commitments.
(Ms Stross) I think, with all due respect,
ITV's regional commitments are significantly greater than the
BBC's. We have 15 different regions within the UK and some of
those regions are producing up to 20 hours a week of local programming
for that particular region.
347 Increasingly there are fewer and fewer companies.
(Ms Stross) There are fewer companies
owning the regions but under the terms of the 1996 Broadcasting
Act as consolidation between those companies has occurred the
existing regional output that existed prior to the takeover has
continued to be delivered. The ITC is able to insist that the
new owners of a licence continue to deliver the same level of
regional output as the previous companies.
348 Have you yet allowed your channels on to
Sky Digital?
(Mr Hill) The answer is no, we have not.
349 You do not have a barrier to take-up?
(Mr Hill) Picking up this difference
between ITV and the BBC, ITV has to sell its airtime and it has
to make profits because of the present structure. What is interesting
is that the BBC spent something like £1.37 billion on its
two television channels, that is more than ITV, Channel 4 and
Channel 5 together. I think that is the most interesting comparison,
that the three terrestrial commercial channels actually spend
slightly less than the BBC does on its two channels.
350 They also do a lot more production work.
(Mr Hill) I do not know that is true,
they do not.
Mr Keen
351 I am beaming because I think we are beginning
to get some clarity of thinking coming out. We have been hidebound
by the fact that what we boast of at the BBC is public broadcasting.
We are proud of the educational services the BBC produce. If we
reduced the BBC's public broadcasting it would only do education
and provide information to people. Would we not be better to look
at it clearly? I agree with Leslie when he says we should look
at broadcasting in total. Should we not forget about the fact
that we tend to keep thinking the BBC is a public broadcaster,
I am sure nobody would really advocate taking all the entertainment
out of the BBC and reducing its broadcasting? Why not look at
it the other way round: would you agree with me that we should
just regard the licence fee as a different way of raising money?
Instead of going out and competing for a subscription, it is just
a different way of raising money. In fact, would it not be better
for the BBC to charge for the education rather than that being
their main focus and compete with you directly? The BBC would
purely be a different way of raising money, a very efficient way
of raising money and an efficient way of providing broadcasting
and you can compete.
(Mr Hill) Yes. We have always said we
believe the BBC should cover the whole range of programmes. We
do not want to ghettoise the BBC because you can only justify
the licence fee if the BBC does something for everybody. So we
are very much in favour of the BBC covering a whole range of programmes
and doing things like Eastenders, Only Fools and Horses
or whatever. I think what you are saying is exactly what we are
saying, although we are not saying the BBC should do this channel
or that channel or the other channel, what we are saying—and
I have said it before—is that we should work out what it
is that we want the BBC to do on the licence fee and then the
rest of what they do they should do commercially. Whether that
is where we deal with the children's channel or the educational
aspect, I do not know because we have not had the public consultation
and we do not know exactly what it is that we want the BBC to
do. Let us find out. Let us decide what the BBC's role is on the
licence fee and then it can do whatever else it likes commercially.
352 Let the Department for Education ask for
people to tender for providing education, putting their own ideas
forward and some ideas developed by the education department and
do not say that is the BBC's job, it is anybody's job.
(Mr Hill) Yes. Very simply what we do
not want to see is that the BBC distorts the market, whether it
is children's programming or whatever else.
353 What I am saying is just accept the funding
by licence fee. You talked about the BBC getting to bursting point
where the public or the politicians will not accept more increases.
That really is the control over the licence fee and it gets to
the point where you cannot raise more money. Politicians have
to make that decision. Let that be the controlling aspect. Let
them do whatever they like within those bands, what is the matter
with that?
(Mr Hopson) I think that is absolutely
right. As I have said, we are not sitting here saying the BBC
should not be allowed to go into these services because clearly
the BBC has got resources, expertise and an archive that we want
it to exploit properly. All we are saying is exactly the same
point you are making which is that it should be done on a fair
and proper basis and all of us should be allowed to compete equally.
The problem is if you allow a state broadcaster to have access
to licence fee payer's money to compete directly for these new
services with commercial broadcasters you get a completely unlevel
playing field and you get very unfair competition. You get into
the situation where we could be put in the situation of having
spent £3½ million, 10,000 man hours and see the whole
thing actually not get off the ground because the BBC has undercut
us.
354 How will it be fair competition if the BBC
is restricted by the fact they cannot compete otherwise everybody
is a target, how is it going to be fair competition? Surely they
should be allowed to do whatever they want to do within that restriction?
We are all here looking at the BBC: how much, how high should
the licence fee be? Should they get extra money for digital television?
That is the restriction. They should be able to do anything within
that and compete with you quite fairly within those restrictions.
(Mr Hopson) The reason is because these
services cost an enormous amount of money to launch in the first
place. They run at a loss—most new channels run at a loss—for
three, four, five years. We have to fund that money by going to
capital markets and paying interest on it and therefore the BBC,
it just gets that money straight from the licence fee payer and
has a huge commercial advantage in that respect. Secondly, the
BBC, because it is using licence fee payer's money, is able to
not charge for its service whereas clearly if we are a commercial
company, like book publishers, like CD rom providers, we would
certainly charge an amount of money for our service. Clearly it
is very difficult to compete against somebody who is providing
a service for free. I take the point about the fact that education
is provided free and education is a public good but nevertheless
we are competing in the market against book publishers and CD
rom manufacturers who are charging for a service. I find it very
difficult to see how you can justify us not being able to charge
for a service because the BBC is providing it for free and it
is the same service.
Mr Faber
355 I asked Mr Davies when he appeared before
us about a line in the Report which says "We decided that
we may not be able to offer a tight new definition of public service
broadcasting, but we nevertheless each felt that we knew it when
we saw it". Do you think they did know what public service
broadcasting was? Do you think anyone at the moment knows what
the public service remit of the BBC is or should be?
(Mr Hill) We have discussed a definition
of public service broadcasting for years and never come up with
a satisfactory one. I think actually what they say there is quite
a reasonable way of looking at it, we know it when we see it.
People argue about what you would include as public service broadcasting
and what you would not.
356 We have discussed as a Committee what is
meant by what constitutes public service broadcasting? We have
discussed News 24, the BBC on line, you must have some slightly
more specific views about it than that.
(Mr Hill) I can give you our views about
what we would regard as public service broadcasting. If you look
at the announcement we have just made about our winter schedule
and our Christmas programmes, if you like I will go through that
and read you 12 programmes which we regard as very much public
service broadcasting. Do you want me to do that, Chairman?
Chairman
357 Not at this point.
(Mr Hill) No, I thought you would not.
Oliver Twist and documentaries, Savage Skies, these
kinds of things we regard very much as public service broadcasting
programming. We are very proud of them. Our people love doing
them and we love showing them. We are committed to showing those
kinds of programmes. That is not all we do, we do some programmes
which I do not think I, or we, would regard as public service
broadcasting programmes.
Mr Faber
358 In an earlier answer Mr Hopson, I think it
was to Claire Ward, took us through some of the points in your
10 reasons document which you produced originally before the Davies
Panel met. Would you agree that the document is a mixture of concern
for the public good and a bit of healthy self-interest thrown
in as well?
(Mr Hopson) Yes. Clearly, we have invested
significant amounts of money in trying to build digital businesses.
With the encouragement of the Government, both in fact the previous
Conservative Government and this Government, both of them have
encouraged us to do this. Therefore we would be concerned if there
was a putting of the whole thing into reverse, which is effectively
how we would legitimately interpret it and actually threatening
the investment we make. Equally there are some much wider public
policy issues involved here. The Secretary of State, Chris Smith,
has said he wants to go to analogue switchover as quickly as possible.
There is an enormous public benefit in doing so, not just a financial
benefit but also an educational benefit, and a benefit to UK citizens.
We are very concerned as the NERA Report shows that the imposition
of a digital licence fee would push that off by at least three
years. I will give you one very simple figure, it could cost the
Treasury as much as £680 million.
(Mr Hill) Let me just add a point to your question
about public service broadcasting. The Chairman of the BBC was
kind enough to make some comparisons between the BBC programming
and ITV programming. We do not think much of those comparisons.
I have been analysing the Radio Times in the last week
and quite often we score as well if not better than the BBC does
on public service broadcasting which I find very strange indeed.
If you look at BBC2, and I have said this directly to the Chairman
of the BBC, you can look at whole weeks when there is nothing
of any great cultural significance whatsoever, full of lifestyle
programmes about cooking and fashion and gardening. No ballet,
opera, classical music, single plays, nothing of that kind whatsoever,
which I find quite extraordinary from the BBC. I just wanted to
add that, Chairman.
(Mr Jones) What might be of great value, in terms
of including the BBC into a debate in the context of a new Broadcasting
Act, is I can tell you what public service broadcasting is not.
It is not simply what the BBC says it is or holds up the BBC schedule
and says "This is public service broadcasting". It is
not that. It does mean a commitment to children's programmes,
it means a commitment to drama, it means a commitment to current
affairs, it means a commitment to documentaries. One can say glibly
one does not know what it is, we know it when we see it. It is
possible to define it and I would have thought one of the key
issues going forward for the BBC in terms of recognising it cannot
be all things to all men and all women and sitting down to work
out its priorities, there should be a public debate and public
consultation to actually define what public service broadcasting
truly is.
359 My last question is on again your 10 reasons
document, points one and two. Point one says the BBC has enough
money to pay for digital services; point two it can raise money
from other sources. I think many people would agree on both those
points. If I can just read another line from the Davies Report.
"Either it receives additional funds to compete in the digital
arena or it is in effect consigned to a slow demise trapped in
a world of disappearing old technology". That is a strong
comment from Davies and indeed the BBC last week defended to Mrs
Golding—defended very strongly—the efficiency savings
that Davies claims they have been making. Where do you feel the
extra efficiency savings can be made and what do you think about
Davies' very strong words in saying that the BBC is in a world
of disappearing old technology?
(Ms Stross) I think there is plenty of
opportunity for the BBC to make efficiency savings. The statistic
that is quoted most frequently is the cost of their corporate
centre. They carry an enormous overhead in terms of policy makers,
strategists, etc., certainly by comparison with ITV. We are absolutely
dwarfed by the capacity at the BBC. I think there is enormous
opportunity there to realise funds which can then be ploughed
into digital investment rather than taking it from the licence
payer. I have no doubt at all that there are other elements in
their expenditure which could be looked at very carefully. For
example, they are making very substantial payments in order to
deliver their services to absolutely everybody, services that
are simply not being watched. I believe that BBC Choice is produced
in four national versions. Now the viewing to BBC Choice just
does not register at all so even within their digital investment
there may well be areas where a lot of money is being spent but
is not yet at least delivering value to the licence payer.
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