Examination of Witnesses (Questions 40-59)|
WEDNESDAY 17 JULY 2002
40. Is that the young audience? The sports audience
is certainly the young audience.
(Mr Dyke) The football is certainly a young audience.
Although it is not in the year that we are talking about but in
the year since, our audiences for the World Cup are remarkable.
Then we may talk about the audience on radio.
(Ms Abramsky) If you take Radio 1 in the last year,
we have actually increased our reach amongst 15 to 24s by just
under half a millionjust for Radio 1. We have slightly
lost share. We have more people listening, but they are listening
for a slightly shorter length of time. We have also increased
the reach on Radio Five Live, which again is the sport factor.
Overall on radio we have therefore increased the reach amongst
young people. But they are now listening, and one of the interesting
things about young people is that they listen to more radio stations.
The length of time they spend listening to a radio station may
be shorter, because they are listening to others, but more of
them are listening than were listening a year ago.
(Mr Davies) This is an objective which we have also
set for next year. We have set the objective of bringing younger
audiences to BBC services by developing bold and innovative programmes.
We are therefore well aware of both of the areas that you have
41. I am on page 68, which is about salaries
and pensions. I note that there are 19 Executive members who earn
more than the Prime Minister. In fact, there are 19 who earn more
than any chief executive of any National Health trust, which is
also a public service. Can I talk you through the bonuses for
a moment? I see that six bonuses are more than the total of an
MP's salary. I can understand Mark Byford getting £69,000
as an additional bonus, because he has done such a phenomenal
job after September 11. He and his staffand I hope that
it is his staffshould absolutely get that. I cannot quite
understand, say, £58,000 for Mr Yentob. I do not recall that
he is a director of either BBC1 or 2. How do you decide that,
for someone who is already getting £221,000, they get £58,000?
Because of the commercial deals that he has done? Because of his
success? How do the audit committee evaluate the difference?
(Mr Davies) The first thing I would like to say is
I think it is unfair to comment on individual people but I am
very happy to give you an answer about the compensation policy
for the BBC's executives as a whole. I do not think it is customary
or right to pick out individual people. We have adopted this year
precisely the same policy that we have had for as long as I could
find, at least ten years and probably much longer, which is to
pay the executives of the BBC on average the median that applies
to a group of comparator bodies, including many in the private
sector and many in the public. This year we have not been able
to achieve that. These levels of compensation are below the median
for this outside group of bodies that we compare with, and this
year we have paid around 89 per cent of that median. Last year
we paid I think 95 per cent of the median so interestingly, although
some other media companies seem to have had a hard time in terms
of revenues, they have not had that hard a time in terms of what
they paid their executives. We have not increased our executive
compensation, even this year, in line with what has happened outside.
Now could I comment on the difference between the public sector
and the public service and what we are doing at the BBC? The BBC
is a public service entity but it operates in the private market
place. The people who run the BBC are outstanding people and they
have very ready access to jobs in the media industry. If we were
simply to compare BBC salaries and compensation with public sector
bodies we would lose most of the outstanding people who are running
the BBC, so we have always had this view that we should pay median
amounts of money to what are outstanding people, and I can tell
you these people, from my experience of the private sector, would
be enormously better paid if they moved into the private sector.
They would also have access to share option schemes which would
potentially make them very rich which do not apply in the BBC
so, although we try and get this group towards the median for
the comparative group, the people concerned could do a heck of
a lot better if they moved into the private sector.
42. On the pensions side, could you explain
column three where you have against Jenny Abramsky £109,000,
against Richard Sambrook £321,000 and against Alan Yentob
£211,000. That is the amount paid into their pension fund
currently, is it?
(Mr Smith) No, it is not. The best way of looking
at it is, first of all, just at column one which is the increase
in the amount of pension the person is entitled to as a result
of the expiringin other words, another year's entitlement.
Column three is what the net present cost of that increase would
be to the pension fund if the person left and took it with them
in one go. So it is the cost of fund net present value of the
annual increase that is in column one, and it is not paid in cash.
(Mr Dyke) For instance, taking the case of Richard
Sambrook, he was promoted during the year from deputy head of
news to the head of news and therefore he gets quite a significant
increase, and the implications of that in the pension fund are
quite high. The other thing is, and I would hate to tell you the
age of everybody here but the age of people also changes that
figure. In some ways, therefore, that figure is an actuarial calculation
and nothing else.
(Mr Davies) We do also take into account the pension
benefits when we make the decisions in the Remuneration Committee
43. I have the BARB figures here for April to
June of this year and, just to try and help the Chairman a little
bit, BBC4 is 0.05 per cent for three minutes in that period and
the reach is two per cent in that period, so whilst we have some
differences about the 15 and the three I think what would really
help me is you writing to me, if not to Chairman, to give me the
cost per hour of the digital channels when they are on air and
then, if it is possible, the cost per viewer because it seems
to me that while, on the one hand, the chief executive is saying
that he is driving ratings on BBC1, you cannot have the same philosophy
for digital channels, so my question is at what stage do you decide
as the Governors that BBC4 will never get beyond what it is, and
at X amount per hour or viewer this is not sustainable? What sets
of objectives, and can they be put in the public domain, have
you set for each digital channel?
(Mr Davies) I think it is hard to do this on a formula.
I would love to have one because it would make life easier but
there will be some services that we should have and should feel
enormously proud of that will have permanently a high cost per
listener hour or cost per viewer hour, for example, Radio 3. I
do not know if Jenny has the figures but Radio 3 will typically
have quite a high cost per listener per hour but it is something
we are proud of and it is something the BBC should do, and it
is something no other broadcaster is likely to replicate. The
key for me is whether across all of our services we are giving
value to all of our licence fee payers; it is not so much to compartmentalise
the services one by one and think whether all of them are giving
equal value in terms of cost per hour. As Greg never ceases to
remind me, if we wanted to reduce the cost per viewer per hour
we would have EastEnders on seven nights a week four hours a night.
There is a balance here and we have to do it subjectively; I do
not think we can do this through a formula.
44. What you are suggesting is that, irrespective
almost of the cost, you would not take the arts off because it
is low, because you feel that fits the public service because
it fits you currently, but surely the Governors as a whole would
be concerned about the money, as Chris has said10 per cent
at some stage. You have more DTT coming at more expense, so at
what stage do you say we are not hitting the targets?
(Mr Davies) I think there would be a time we would
become concerned about that and I do not deny it. It also makes
plain why the relative budgets of BBC4 and BBC3, if we get permission
to do BBC3, are as they are because essentially we think we might
get more viewers on BBC3at least initially. So these things
are taken into account. But I think you need to give it time and
make the judgments as best you can taking all the evidence into
account as opposed to trying to do it through a formulaic approach.
(Mr Dyke) For instance, rugby cost per viewer hour
is one of the most expensive things we do. Should we not do it?
Those decisions have to be made as judgments. BBC4 I think costs
us £32 million a year.
Mr Wyatt: I was going to ask you about
that because I was going to come on to sport.
45. I am sorry, Derek. If there is time later
on I will come back to that but I would just like to ask two questions
concerning what Mr Wyatt has been asking you about. Mr Davies
and Mr Dyke have explained that when you have got very few viewers
you are proud of it because of the quality of the programmes,
but when you outdistance ITV because ITV's audience has shrunk
then you boast about the fact you have more viewers than ITV.
You are having it both ways, are you not?
(Mr Davies) I think the BBC is a selection of different
services and they are not all going to give equal value for money
in terms of cost per viewer per hour or listener per hour, and
I think that is inevitable if you run a series of different channels
aimed at different objectives. In my mind, it is a strength not
a weakness that we have this selection of different services.
However, overall, the BBC has to serve the entire public and certainly
in some parts of its services it needs to attain reach and audience
approval from nearly everybody, so I agreeit is a difficult
circle to square but I think it has to be squared in the BBC.
(Mr Dyke) Also, if you come into some of the questions
that Rosemary McKenna was raising, for instance we are expanding
the Asian network to try to take it digitally to as many places
as we can, which includes probably creating an Asian soap, and
if you start looking at that just in terms of cost per listener
hour you would not do it in a million years but that is a part
of our audience that we do not think is being properly served.
46. Mr Wyatt asked you about the remuneration
of members of the Executive Committee. There is no member of the
Executive Committee whose total remuneration over a whole year
falls below a quarter of a million pounds, yet on page 67 under
Benefits you say, ". . . new appointees to the Executive
Committee are only eligible for a company car and fuel for private
use". On the basis of those gross remunerations, ought they
not to pay for their own car and petrol?
(Mr Davies) The current custom and practice in terms
of executive compensation is often still to include car benefit.
It is becoming rarer and at the BBC the old practice used to be
to include both a chauffeur driven car and a car for personal
use, and the former of those two has by and large gone now. I
think the trend, Chairman, is moving in the direction you say
across the whole of British industry and we are changing in line
with that, but these numbers relate to the year that has just
(Mr Dyke) We are changing our policy right across
the BBC away from cars to giving people choice in-car allowances.
It is much more environmentally friendly, and that will happen
over the next six to nine months right across the BBC. It is not
always the most popular decision, let me tell you!
47. One of the successes of this Committee was
when we discovered the way the Chairman of the Board controlled
the Director General by taking his specs off, and it must be true
because he mentioned it on Desert Island Discs and now we have
this wonderful photograph on page 7 of the Director General welcoming
the new Chairman and formally handing over his specs! It is good
to see the confidence that the Chairman has because he has got
them back again now.
(Mr Davies) I find it improves his mood to leave him
with his specs, so I am making that exception today.
48. Can I come back to BBC News 24 on page 82?
I did not quite follow the answers that were given earlier. Originally
when we first queried this a year or more ago we were told that
the cost of BBC News 24 was £50 million. I was a great supporter,
and still am, of News 24 until my colleagues were being critical
by saying that the cost must be very high. We were told at that
time that that included a fair proportion of the cost of collecting
news. I have noticed that BBC News 24, from early mornings when
it is the main news through to the night, fits smoothly into becoming
the morning news programme in a way. Presumably that was partly
common sense in that it saves money, but these figures do not
show the cost of news anywhere else. Is that £50 million
the cost of collecting the news worldwide for all the news programmes?
(Mr Smith) There is a figure on page 10 which breaks
down total spend by genre, of which one is news, and the figure
is £395 million.
(Mr Dyke) But that includes current affairs as well.
That is the whole news division.
49. And obviously the news programme on BBC1
(Mr Dyke) I am sorry, I am told it does not. I have
(Mr Smith) It is just the news.
50. So that £50 million is an allocation,
I think we discovered before, of the news gathering around the
(Mr Smith) Within the £395 million there is a
figure of about £80 million odd for news gathering.
51. And is part of that allocated to News 24
in this £50 million figure, or is that just the production
costs in the studio?
(Mr Smith) From memory the costs of News 24 are largely
the marginal costs of having the channel over and above those
which we would have anyway. I can set out the exact picture for
you in a note.
52. It is an important question because my colleagues
were critical of the costs of News 24 against its value. As I
say, I did not agree with them but if that is just the cost, I
believe in questioning a year or more ago it was said that if
24 hour news was shelved, ditchedand I am not advocating
thatnot all the £50 million would be saved because
there was news gathering in that figure, but from what you are
saying now that is not really true.
(Mr Smith) Let us give you the precise answer in a
(Mr Davies) I think, Mr Keen, you are right: not all
the £50 million would be saved.
(Mr Dyke) Also, if ever we have seen a year of the
value for News 24 it was this year on a number of occasions because
where, on other occasions, we would have gone across to a news
flash on BBC1 for September 11, the period of the Afghanistan
war, the Prime Minister's announcement of warall those
sorts of thingsthis year we cut straight to News 24 and
put it on to our main channels. It has been brilliant for that
(Mr Davies) We think for a couple of months it has
overtaken Sky News in terms of audience reach. The Chairman wrote
a piece in The Independent last week saying that we were counting
the overnight BBC1 figures in our News 24 figures but that is
not true. News 24 for the last two months has overtaken Sky in
digital homes, not counting the overnight show on BBC1.
(Mr Dyke) To be fair, Sky News still is not in digital
terrestrial homes, which it will be from later this year.
(Mr Davies) Yes, which will make a difference.
53. BBC 24 is under digital services and not
under analogue. I have not got digital but I have been watching
24 hour news for a long time.
(Mr Dyke) Then you have a trick that the rest of us
have not, Mr Keen!
(Mr Davies) I think you have been watching it overnight
(Mr Dyke) On analogue cable?
54. Yes. That is why it is digitalI see
what you mean. Can I come back briefly to the balance sheet and
the valuation of films? On the archives, for instance, presumably
there is no market value of the vast archives. I agree with John
Thurso's inference when he said that, if you do not put a value
somewhere in the accounts, it does give a false picture. I was
brought up in accounting in the old daysnot as Andersen
and others have been operating in the States recentlyand
I guess in this country as well in some cases where as long as
you valued the balance sheet as low as possible that was what
was needed, but it does give a false position really and I do
not agree with what John was saying about the possible reasons
for doing that, but we are trying to show the public the value
of the BBC and what assets it has. You could not guess really
at the value of the archives, could you? You do sell the use of
the archives, am I right?
(Mr Dyke) You could put a value on it because you
could value it according to what you sell it for and multiply
it up, but I would caution against that. Having run a media company
in the United States let me tell you that if ever there was an
area of suspect accounting it is the value of libraries on American
55. I am not advocating putting it into the
(Mr Dyke) You could certainly do a valuation of it
based upon its potential income, because we know what that is.
56. Can I suggest that we look at the possibility
of putting it as a note but definitely not in the balance sheet?
(Dame Pauline Neville-Jones) On the value of the archive,
undoubtedly you could value the archive and there is a value there,
clearly, but it is also a cost because it is only a value if you
can use it. A great deal of the material there has to be got into
a useable form and there is a big backlog of work to be done on
the subject of cataloguing. You can imagine that previously, when
people did not think of using archives in this way, both contracts
governing the material and also the quality of the material itself
had to be sorted out. It was not ab initio put into a form
where it could readily be used so we have a big job in sorting
out rights and also putting that kind of film material very often
into good physical order, as well as locating it. What I would
say, therefore, is I absolutely take your point: it is quite a
big task and you cannot simply say, "We have this lovely
lot of material and it is valued at X".
57. When you carry out the work to bring it
into useable form, is that just charged as a cost? You do not
put it into the balance sheet?
(Mr Smith) We just charge it as a cost. Also, the
most valuable output tends to be the most current and BBC Worldwide
you know exists to invest in BBC programmes that are currently
being made in order to exploit them around the world. Insofar
as Worldwide do invest in programmes, the value in Worldwide's
balance sheet is also on the BBC's balance sheet at £111.8
million, so where we are actively planning to exploit current
output by selling it around the world and therefore Worldwide
have actively invested in it that figure is put on the balance
sheet because that is the thing we are planning to export commercially.
Most of the back catalogue is used for BBC public services rather
than commercial exploitation. There is a bit of commercial exploitation
but it is not massive.
58. Firstly, can I be nice and congratulate
the BBC on winning the DDTV franchise from the Independent Television
Commission? I think the BBC was absolutely right to say that the
only way DDTV is going to survive is if free-to-air channels are
provided and they are exclusively free-to-air and that is absolutely
right, so well done. Now I am going to obey the injunction of
(Mr Dyke) I thought we could end there!
59.and refer you to page 17, particularly
the section which says, "Connecting with all audiences",
I am sure you are going to guess what I am going to say. Gavyn
Davies said just now, talking about Radio 3 and his pride in Radio
3 and I agree with what he said, "This is something the BBC
ought to do which no other broadcaster is likely to replicate".
Now, in "Connecting with all audiences" it talks about
having "a particular focus on making the BBC's news and current
affairs more relevant and engaging for this group"this
is talking about young people"without diminishing
the BBC's commitment to parliamentary reporting". Now, you
will have read the newspapers recently and I quote The Guardian
from July 15 with an unkind headline because I do have very high
regard for Greg Dyke not just currently in the BBC but also his
previous career in broadcasting, but the article was called "Dyke's
dumb idea, BBC must defend political programming" relating
to this very item, and it goes on to talk about the future of
programmes like On The Record and Despatch Box and
others, and changing the whole style of political reporting so
that it will appeal more to young people. Apparently you have
a board meeting this afternoon and you are going to come up with
some sort of compromise. Can you let us into the secret?
(Mr Davies) Firstly, we do not have a board meeting
this afternoon. There is one tomorrow