APPENDIX 43
Supplementary memorandum submitted by
Channel 4
NEW BBC3 DIGITAL TELEVISION SERVICE PROPOSAL
EXECUTIVE SUMMARY
Channel 4 questioned the need for BBC 3 when
it was first proposed in January 2001, arguing that any licence-funded
service needed to be more distinctive and "provide a significant
amount of news, current affairs, educational and multi-cultural
content for young people". Further information published
by the BBC responded to these criticisms and was welcomed by Channel
4, which made it clear that it had no objection, in principle,
to the new channel going ahead if the proposed changes were implemented
and there was a proper process to ensure they were implemented
on an ongoing basis.
The current and far more detailed proposal from
the BBC exacerbates rather than allays Channel 4's concerns. It
also appears in a very different economic climate which has had
a significant impact on all commercially funded broadcasters,
including Channel 4, but has had no impact at all on the BBC with
its guaranteed licence fee income. It is Channel 4's emphatic
view that to allow BBC 3 to go ahead in this climate, and on the
basis and at the level of funding currently proposed, would have
a serious and damaging impact on E4 and, more seriously, on Channel
4 itself.
Channel 4's main concerns are these:
— The remit. The proportion of the
BBC3 schedule devoted to news, education and factual programming
is minimal. Some of the specific proposals and much of the aspirational
language duplicate rather than complement what Channel 4 already
does as part of its public service obligations.
— The budget. The proposed budget of
£97 million, plus a proportion of a £20 million marketing
budget, is out of all proportion to existing digital channels
and to the other proposed BBC digital services, being greater
than the budgets for the other three new BBC channels combined.
— The target audience. By redefining
its target audience as 25-34 year olds, rather than 16-34 year
olds as originally proposed, the BBC undermines its declared intention
of providing a range of digital services for all. 14-24 years
olds would be left with no service.
— The approval system. Firm evidence
is needed of the extent to which the BBC will be held accountable
for meeting commitments made in its submission on a regular, annual
basis, and of the extent to which that process of accountability
will be public.
— The contribution to driving digital
take-up. Part of the justification for the whole suite of proposed
BBC digital channels is to drive digital take-up. The BBC 3 target
audience already has a high take-up of digital services and is
better served by existing digital channels than other sections
of the population. To devote more public money to new services
for this group than for the rest of the population together is
inappropriate.
INTRODUCTION
Last September the Secretary of State found
that the original proposals for BBC 3 did not describe a service
that was distinctive, had clear public value or would have a significant
additional impact on its target audience. Channel 4 believes that
the current, more detailed proposal for BBC 3 raises new questions—about
how distinctive this service would be; about whether it would
contribute significantly to digital take-up; and about the extent
to which it would impinge on other broadcasters, including public
service broadcasters and in particular Channel 4 itself.
Channel 4 is also concerned that the sharp drop
in advertising revenues since the summer have altered considerably
the balance of advantage between a licence fee funded BBC 3 and
those commercially funded channels aimed at younger audiences.
CHANNEL 4'S
ATTITUDE TO
BBC 3
Channel 4 questioned the need for BBC 3 when
it was first proposed in January 2001, arguing that such a service
needed to be more distinctive and "to provide a significant
amount of news, current affairs, educational and multi-cultural
content for young people". The channel also said it did not
believe it contained "any unique programming ideas to suggest
it will grow the digital youth market any further", but that
it would "draw its audiences from existing services and threaten
their commercial success as a result".
The further information about BBC 3 issued in
June 2001 responded to these criticisms with programming proposals
in the areas of news, factual and education programming. It stated
unequivocally that BBC 3 "would be a mixed genre channel".
Channel 4 welcomed this "redefining of
BBC 3 as a genuinely multi-genre channel", believing that
this validated its launch as a service that would make a distinctive
contribution to digital viewers' choice—but remained sceptical
as to whether it would "prove a significant force in winning
new audiences for digital overall".
However, the new, far more detailed proposal
gives more serious cause for concern. It is clear that although
BBC 3 will be a mixed genre channel, the overwhelming majority
of its output will be in entertainment and drama (precisely those
genres that provide most of the schedule of E4 and other digital
channels pitched at a younger audience). Many of its detailed
programme and off-screen proposals mirror work already being done
by Channel 4. And the research document that accompanies it states
that it is seeking to build its audience by taking viewers away
from Channel 4, Channel 5 and E4 (among others).
Channel 4 welcomes increased competition in
the multi-channel environment, but does not see the case for so
much licence fee money to be spent duplicating the other main
public service broadcaster and potentially depriving it of revenue
it needs to fulfil its public service goals.
THE BBC 3 PROGRAMME
OFFERS
The BBC 3 proposal makes much of providing "a
unique public service to young adults, with much clearer commitments
particularly in news, current affairs, education and music and
arts programmes". But on examination the number of hours
to be devoted to these genres is less impressive.
The Table below compares the hours to be devoted
to these genres with the hours transmitted on Channel 4. Even
taking account of the fact that Channel 4 is a 24 hour a day channel
with a programme budget several times larger than that currently
proposed for BBC 3, the latter's commitment to factual genres
is vastly less than that of a public service broadcaster committed
to a wide range of output.
Hours per year dedicated to different programme
genres
"Key commitments" in BBC 3 proposal document,
compared to Channel 4
output detailed in Report and Financial Statements
2000, page 65
| | BBC3
| Channel 4 |
| News | 65 |
305 |
| Current Affairs | 26
| 247 |
| Education | 30
| 1,000 |
| Music and Arts | 50
| 247 |
The number of hours devoted to the genres of news, current
affairs, education, music and the arts would be around 15 per
cent of all output (page 46)—only the same proportion that
the BBC says is devoted to factual genres on E4 (page 15). The
bulk of output will be entertainment and drama—precisely
the genres specialised in by commercially funded channels with
an orientation to younger viewers, such as E4, Sky One and Paramount.
If BBC 3 is to add value in a public service broadcasting
environment it must include a much greater proportion of public
service programming.
Some of the ambitions set out for BBC 3 ignore the strengths
and reputations of other channels, including BBC1 and BBC 2. Statements
such as BBC 3 "will be the home of intelligent new British
entertainment and drama" (page 25), that it will "be
the UK's creative leader in showcasing new formats and talent
for a young multicultural audience" (page 27) and that it
"will stand out in the marketplace as the home of British
programming and talent" (page 38) deny the rich range of
creative achievement on existing channels.
A number of claims for originality and distinctiveness duplicate
work already being undertaken elsewhere, much of it on Channel
4. For example:
— BBC 3 entertainment is proposed to have "a
strong appeal to audiences with a young mindset, a modern multicultural
approach and a focus on new shows and new talent". These
are the characteristics of Channel 4, which in the last two years
alone has introduced such talents as Dom Joly, Ali G and Richard
Blackwood and pioneered shows such as Smack the Pony, Black Books
and Spaced.
— Six talent initiatives each year are proposed,
in such areas as new writing, film-making, comedy and animation.
Channel 4 already sponsors well-established and well-funded talent
events in such areas—for example, the Perrier Award for
comedy, the FilmFour Lab for new film-makers and three separate
schemes for animation organised respectively with the BFI, the
Arts Council and NESTA.
— The proposal claims a distinctive approach to
drama that "will reflect and challenge the often difficult
and complex issues faced by young adult audiences in a watchable
and entertaining way". Teachers, Swallow and Queer as Folk
are just some of the recent Channel 4 dramas that have achieved
those ambitions.
— The proposal says interactivity will offer "new
and innovative ways of connecting with younger audiences".
Through Big Brother, Banzai, Test Cricket and much else, Channel
4 and E4 are already providing sophisticated interactive services.
Channel 4 welcomes competition, but believes that as the
dominant public service broadcaster the BBC should strike a proper
balance between complementing and competing with Channel 4 and
E4. Close examination of the BBC 3 proposal suggests many of its
allegedly distinctive attributes are imitative of Channel 4—while
it lacks Channel 4's wide-ranging public service obligations.
THE IMPACT
ON CHANNEL
4 AND E4
Channel 4 believes the proposed BBC 3 would have a damaging
impact on other youth-targeted services in the market, both terrestrial
and pay-TV. The current economic climate and pressure on advertising
revenue exacerbate this. The combined impact of the decline in
commercial advertising revenue, the costs in the commercial sector
of new digital services, and the increased BBC license fee has
already shifted the balance of economic power from commercial
channels to license-fee funded channels by approximately £1
billion during the 2001 year.
The first quarter of 2002 has shown continued decline of
more than 10 per cent in ITV and Channel 4 revenues. Channel 4's
revenues in 2001 were 5 per cent less than a year earlier, and
may fall again in 2002, as a result of which this year's programme
budget has been reduced already. To launch BBC 3 with such light
public service benefits at this stage of the economic cycle could
be significantly detrimental to ITV, Channel 4 and Channel 5.
BBC 3 would have a significant impact on E4. Not only would
the BBC 3 programme budget (£97 million) be more than twice
the E4 budget, BBC 3 would be entering an already crowded marketplace.
Digital channels such as E4, Sky One, Paramount, and MTV already
provide entertainment, comedy, music and drama targeted at a youth
audience—but such genres represent 85 per cent of BBC 3's
output.
The BBC 3 proposal does not provide sufficient evidence that
it would grow the digital market any further and Channel 4 believes
its share of viewing is likely to come from current commercially-funded
services whose financial bases would be threatened as a result.
Indeed, the Oliver & Ohlbaum assessment of the impact of the
proposed BBC 3 estimates that Channel 4 would lose over 5 per
cent of its audience in multi-channel homes and that E4 will lose
around 15 per cent of its audience. If the BBC analysis is correct,
the effect on Channel 4 could be the loss of tens of millions
of pounds in advertising revenue, and corresponding further reductions
in its programme budgets.
The BBC has stated that BBC 3 represents "a major injection
of money into the British TV economy". Its impact is more
likely to be a reduction in revenues and programme budgets of
other commercially funded channels.
THE BBC 3 AUDIENCE
AND BUDGET
It is not clear why the BBC has narrowed the target audience
of the proposed BBC 3 from serving 16-34 year olds to one catering
primarily for 25-34 year olds. Channel 4 questions whether this
narrower demographic focus can justify a budget considerably greater
than those for all the BBC's other new television services put
together.
The proposal document itself argues (page 25) that, with
the already approved children's channels catering for the under
6s and 6 to 13 year olds and BBC 4 likely to attract an audience
which is mainly over 35, "the BBC is keen to ensure that
it. . .has a digital channel aimed at the audiences which lies
between those age groups". Yet by focusing BBC 3 on 25-34
year olds, it is self-evidently failing to provide directly for
14-24 year olds.
Channel 4 questions whether the BBC is justified in spending
£97 million each year on such a relatively small proportion
of the population containing a high proportion of digital adopters—especially
when it is proposing to spend less than a third of this amount
on BBC 4, which is designed to serve an audience of older viewers
not in the forefront of those adopting digital television. As
a major part of the justification for new digital services is
that they will help drive digital take-up, there should be equivalence
at the very least between the budgets of BBC 3 and BBC 4.
It is unclear how the BBC will allocate costs between its
various channels. For example if BBC 3 were to schedule same day
repeats of EastEnders four nights a week (as BBC Choice does now),
or even first showings, would its £97 million budget be charged
with the very substantial amount that the open market would pay
for such programmes?
APPROVALS AND
ASSESSMENTS
Channel 4 welcomes the government's commitment to ensuring
that the actual programming of new BBC services is consistent
with the approvals set out for them. But rather than the government
being wholly responsible for this process with OFCOM having an
advisory role, OFCOM should be made fully responsible for it.
OFCOM will have more knowledge of the impact of BBC services on
the wider market, and will have the objectivity and credibility
to make judgements balancing the interests of the BBC and its
commercial competitors. Channel 4 believes that the BBC should
report annually to OFCOM on how BBC 3 is fulfilling its remit,
in the same tried and tested way that Channel 4 and other ITC-licensed
channels are held to account currently by the ITC.
The BBC has failed so far to ensure that its digital channels
keep to the remits on the basis of which approval for them was
given. BBC Choice, for example, included sport and regional programming
as major planks of its programming proposal—but neither
feature in its current schedule. Channel 4 is concerned that,
whatever approvals may be given for BBC 3, its character cannot
be changed without a further process of review and consultation.
CONCLUSIONS
Channel 4 believes that viewers should have a broad range
of high quality programming from which to choose in the digital
age. Its own strategy of developing a portfolio of digital channels
is geared to that end. Channel 4 believes the BBC is right to
be developing a broader multi-channel strategy.
However, Channel 4 does not believe the current BBC 3 proposal
is sufficiently distinctive either to make a significant contribution
to digital take-up or to avoid causing commercial damage to other
channels that appeal to younger audiences. To launch BBC 3, as
presently defined, in current market conditions would cause significant
and disproportionate damage to existing commercially funded services.
Channel 4 therefore urges the Secretary of State not to approve
the proposed BBC 3 channel.
25 January 2002
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