MEMORANDUM SUBMITTED BY THE BBC
BBC ANNUAL REPORT AND ACCOUNTS 1999-2000
SELECT COMMITTEE HEARING 13 JULY 2000—FOLLOW-UP ITEMS
As discussed and agreed, there were a small
number of items requiring clarification that arose during the
course of questions from members of the Select Committee to the
BBC's Governors and Executives on 13 July when the Committee considered
the BBC's Annual Report and Accounts.
The Committee asked for clarification on the
following:
1. BBC News 24—a separate note is attached;
2. Licence Fee Collection—quarterly
budget scheme—a note is attached;
3. Second Homes and TV Licensing Legislation—an
information note is attached;
4. BBC Worldwide—cash flow returns
to the BBC in 1998-99 and 1999-2000—an information note
is attached;
5. Radio 3—an explanation of the Radio
3 share figures 1998-99 and 1999-2000—a note is attached;
6. Casualty on BBC television—an explanation
of editorial approach—a note is attached.
I hope that these comprehensive explanation
notes will provide the Committee with the information that they
have sought and will be duly recorded within the proceedings of
the Committee as matters of clarification upon request from members.
BBC NEWS 24
Audience measurement
BBC News 24 has been on air for less than three
years, and in that time has succeeded in building a significant
audience despite the eight-year start of our main competitor,
Sky News. The chart below shows the total audiences for BBC News
24 against the total audiences for Sky News over the last year.
These figures are for three minute weekly reach on all platforms.
This is an industry wide standard measure monitored independently
by the BARB. These are the statistics quoted by the BBC's Annual
Report and by BBC managers, who are always careful to stress that
we're talking about all platforms. (Note that Sky News is not
available in terrestrial homes and BBC News 24 is not available
on analogue satellite.)
BBC News 24 and SKY News reach trends:
All platforms
There has never been any attempt to obscure
the fact that our figures include overnight viewing figures when
BBC 1 closes down and hands over to BBC News 24. However, when
Sky cites figures for "all multi-channel homes" it does
not flag up that News 24 is not available in a significant proportion
of them.
There is also a lack of consistency on the part
of our competitors in that they prefer not to discuss total audience
figures, but they are happy to criticise total costs. Our critics
cannot have it both ways when they criticise us for the cost of
the channel: they must, for consistency, include all its audience.
Nobody splits off the cost of the overnight service, in the way
that they seek to discount our overnight audience. The fact is
that this service is paid for out of News 24's budget and is produced
by News 24. Viewers are watching News 24 output and BBC 1 and
BBC 2 hand over to the channel.
Meanwhile, we accept that our reach and our
share are lower in digital homes, but this year's digital figures
show us gaining ground. This was always our toughest market—partly
because many digital viewers have migrated from Sky Analogue,
where they've become familiar over the years with Sky News. But
in digital homes we've recently been turning in a consistent 0.3
per cent share compared with Sky News on 0.l5 per cent (in the
four weeks ending 11 June).
In cable homes, the gap is narrower still: a
0.5 per cent share for News 24 compared with 0.7 per cent for
Sky in May 2000.
Some of the figures cited by Sky are contradictory
and misleading. It is, for instance, impossible to reconcile the
4:1 UK-wide viewing ratio implied by the ITC figures with the
later claim that "across all multi-channel homes . . . Sky
News has attracted twice the number of viewers and share of viewing
as BBC News 24 this year". But if we accept the latter figure,
of a 2:1 lead in multi-channel homes for Sky News, that would
actually be a reasonable showing because:
— Sky News had an eight year start
on us with all first-mover advantages;
— we've had cases where BSkyB has not
made available viewing cards to businesses wanting News 24 instead
of Sky News;
— the 2:1 ratio appears to include
the remaining analogue satellite homes where News 24 is not available
at all;
— News 24 aims for a distinctive service
with more emphasis on international news and a broadsheet agenda.
For instance, we use more specialist correspondents and more foreign
reports—and our built programmes include lengthy interviews
in "Hard Talk", and global perspectives in "Dateline
London" and "Simpson's World". We don't have built
half-hours for entertainment, fashion or more lifestyle-oriented
programming.
Funding: value for the licence fee payer
The published cost of News 24 is £50 million
a year. This covers the entire cost of running and distributing
the channel. The figure includes support for the BBC's network
of bureaux and correspondents around the world. Our competitors
count things differently, but it now seems to be widely accepted
that Sky News costs more than £30 million a year—without
including its interactive services, and with what we understand
to be a different set of charges for transmission. (For instance,
the BBC's commitment to making new services available on all platforms
means that News 24 is supplied on digital terrestrial transmitters—which
are more expensive than D-Sat and are part of the £50 million
figure.)
Our belief is that the basic cost of running
the channels are broadly similar, but the BBC's investment in
news-gathering enables us to offer a better-resourced service
of which we are proud. We offer twice as many live reports, twice
as many international reports and twice as many reports from all
around the UK as Sky News.
The value of News 24 as a public service was
upheld when the European Commission rejected a challenge by BSkyB
that News 24 constituted unfair competition. The fact that News
24 remains free of commercial pressures is a further guarantee
of the channel's quality and distinctiveness.
We reject the view that we are not meeting our
original promises; and it's disingenuous of Sky to express worries
about political pressures on BBC News 24. It's Sky News who are
pressing for a review of the channel, and it's newspapers connected
with the Sky business which have repeatedly called for News 24
to be shut down—which would be the ultimate political pressure.
So our case, at its simplest, is:
— News 24 offers a range or quality
not guaranteed in the commercial market;
— BBC audiences recognise the value
of News 24: in opinion research, the channel was identified as
being the second strongest reason (after Radio 5 Live) for people
to have improved their view of the BBC as a whole in recent years;
— more than six million people a week
gain direct benefit from viewing BBC News 24's output. More still
gain an indirect benefit from the News 24 video streamed on the
Internet or from News 24 reporters who appear on terrestrial output.
Finally, we'd note that the Television and Radio
Industries Club voted News 24 as its digital channel of the year
in a recent award presentation. Tim Sebastian's Hard Talk programme
won a Royal Television Society award (April 2000); and the channel's
coverage of the Paddington train crash was nominated at the same
ceremony.
LICENCE FEE COLLECTION QUARTERLY BUDGET SCHEME
(QBS)
A customer joining the QBS is issued with a
"Premium Instalment Television Licence" as described
in Schedule 3 to the Wireless Telegraphy (Television Licence Fees)
Regulations 1997. This scheme is governed entirely by the Regulations
and dates back to February 1989 when it was first introduced with
the Regulations.
The Quarterly Budget Scheme allows a customer
to purchase a TV Licence in four instalments (currently £27.50).
The first instalment is due on issue, and the remaining payments
are made at three monthly intervals thereafter. Three of the payments
are therefore in arrears. The total amount payable under this
scheme is £109 rather than the normal fee of £104. Those
buying a licence in full, at the time of issue at a Post Office
counter for example, would pay £104.
The premium of £5 involved arises because
the Quarterly Budget Scheme is the only scheme where the full
licence fee is not fully paid until nine months after issue—an
average "loan" length of four and a half months. Other
licence payers who pay in advance would rightly object to their
payments being used to subsidise those paying in arrears were
this premium not in place. The size of the premium is also defined
in regulations, not by the BBC.
It is worth mentioning that the Government sponsored
Davies Panel reviewed all of the many licence payment schemes
and recommended a change to only one of them. That is the timing
of the payments due under the Cash Easy Entry Scheme to reflect
the same payment cycle as a Monthly Cash Plan which is currently
being trialled. The change will be introduced in the Autumn.
Since QBS became available we have added other
payment schemes and channels as follows:
Monthly Budget Plan—a monthly (non premium)
direct debit scheme;
Cash Easy Entry—a weekly/fortnightly cash
(non premium) scheme;
Monthly Cash Plan—a monthly cash (non premium
scheme).
In addition payments can be made through the
PayPoint outlets, via the telephone for credit card and debit
card and via the Internet. We believe that the customer now has
a wide range of choices over where, how and when to pay. The fact
that some licence payers wish to pay by QBS is entirely at their
discretion. We actively promote all the schemes.
SECOND HOMES AND TV LICENSING LEGISLATION
Under the legislation, one licence covers the
installation and/or use of television receiving equipment at a
single specified place by the licensee and family members living
at the same address. If a television is installed and used at
another address, regardless of whether or not there is simultaneous
use or not a separate licence is required if the address comprises
of a permanent structure—such as a bungalow, flat or cottage.
If the licence for the second home is not required
for the full period of validity, a refund can be obtained on complete,
unused quarters provided the licence will not be needed again
before its expiry. Licence payers may, therefore, take advantage
of this if use of a holiday home is purely seasonal.
Where the home is not a permanent structure,
eg static caravans or mobile homes used as second homes, then
use of the television is covered by the licence held at the main
address as long as there is not simultaneous use in both places.
This measure was introduced by Parliament in The Wireless Telegraphy
(Television Licence Fees) Regulations 1997; there is no provision
within this legislation which allows exceptions for permanent
structures and the BBC have no discretion to vary the Regulations.
Similarly, a touring caravan, vehicle or boat
does not require a separate licence as long as the primary residence
is properly licensed.
It is also worth noting that television sets
powered by internal batteries—ie truly portable—are
also covered by the licence held at the main address.
BBC WORLDWIDE
In the year ended March 2000 BBC Worldwide's
cash flow available to the BBC increased by £1 million to
£82 million. This is shown on page 21 of BBC Worldwide's
Annual Report & Accounts 1999-2000 and is summarised below.
| £m | 1997-98
| 1998-99 | 1999-2000
|
| BBC cash flow before sale of Flextech shares
| 52 | 73 | 82
|
| Sale of Flextech shares | 23
| 8 | - |
| BBC cash flow | 75 | 81
| 82 |
Headline BBC cash flow increased by £1 million but previous
years benefited from the exceptional sale of shares so the underlying
cash flow growth is actually much better.
BBC Worldwide's long-term financial targets are set for the
company to deliver cash flow back to the BBC of £212 million
by 2006-07 along the lines shown in the table below:
| £m | 96/9 |
97/9 | 98/9 | 99/0
| 00/0 | 01/0 |
02/0 | 03/0 | 04/0
| 05/0 | 06/0 |
| 7 | 8
| 9 | 0 | 1
| 2 | 3 | 4
| 5 | 6 | 7
|
| BBC cash flow | 53 | 75
| 81 | 82 | 92 |
106 | 122 | 140 |
161 | 185 | 212 |
| CAGR 15% | |
| | | |
| | | |
| |
To achieve the £212 million target BBC Worldwide will
need to increase sales to a level in excess of £1 billion,
achieving a compound annual growth rate well above the rate of
average sales growth of leading competitors over the past five
years.
This target was considered to be challenging by Pannell Kerr
Forster.
RADIO 3
The audience figures for R3 changed because RAJAR, The radio
industry joint audience measurement system, was changed in January
1999.
The two audience measurements are not comparable. It was
known before the change that the new system would mean a lower
audience figure for R3 due to the different sampling system.
Pilots held by RAJAR in 1998 showed that for R3 and for a
small number of commercial radio stations audiences would appear
to go down but for the vast majority of radio stations the audiences
would remain stable or improve.
The figures in the Annual Report for 1998-99 are the average
audience from April 1998 to April 1999. Radio 3 has in fact kept
a stable audience since the introduction of the new methodology.
The four quarters of the 1999-2000 Annual Report shows R3
as 1.95 million, then 1.92, then 2.02 and finally the first quarter
of this year 2.14 million. So R3's audience has gone up across
the year rather than declined.
The cost associated with R3 in the Annual Report include
the vast majority of the cost of the five BBC Orchestras and the
BBC singers as well as the cost of the Proms.
Without R3 neither the Proms or the Orchestras could survive.
R3 broadcast every concert which helps fund the event and the
Radio and Music division is responsible for the funding of the
Orchestra. In the Annual Report this mainly appears as cost from
R3.
CASUALTY
The question refers to the CD of the single "Stay with
Me Baby" performed by Rebecca Wheatley which was released
by BBC Music on 14 February 2000. Rebecca Wheatley plays Amy in
Casualty.
There is often strong popular demand for a song or theme
music from a drama to be released by the BBC as a commercial CD.
The BBC often has a lot of calls from people asking "how
can we get the music?" To cater for this sort of demand,
BBC Music division may decide to release a recording. Of course
the profits from the release of CD's by the BBC are returned to
the BBC's programme making budget.
The release in question, "Stay with me Baby", was
featured in a series of Casualty at the beginning of this
year. The character who sings the song, Amy, had been attempting
a singing career. This was a dramatic story line, not a ploy to
promote a CD. The song was performed twice in Casualty
before the CD was released. Amy first sang the song in the series
when rehearsing for a forthcoming concert. The sentiment of the
song was designed to tie-in with the death of a main character
and make the drama even more emotionally charged. We then saw
her sing the song properly in the subsequent episode, again to
reflect the emotional ramifications of the death.
The single was released by BBC Music the following week.
It was only heard in Casualty once more, some six weeks
later in the final episode of the series to tie in with the emotional
strands of the drama.
We are of course acutely conscious that we must not use our
airwaves to plug commercial products including BBC commercial
products. However, in this case the record was released after
the song had been sung twice on air and we were not including
it in order to plug the CD. After the record had been released,
BBC Drama included the song just once more for strong editorial
reasons.
BBC Drama has a policy of never releasing any CD featuring
artists from its shows unless the song and tune have been integral
to the drama. They have in recent years refused many requests
from EastEnders cast members to release records.
July 2000
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