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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 598-ii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE CULTURE, MEDIA AND SPORT COMMITTEE
Tuesday 8 June 2004 SIR CHRISTOPHER BLAND MR CHARLES ALLEN, CBE, MR CLIVE JONES and MR DONALD EMSLIE MS JANE LIGHTING and MS SUE ROBERTSON Evidence heard in Public Questions 98 - 189
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Culture, Media and Sport Committee on Tuesday 8 June 2004 Members present Mr Gerald Kaufman, in the Chair Chris Bryant Mr Frank Doran Michael Fabricant Mr Adrian Flook Alan Keen Rosemary McKenna John Thurso Derek Wyatt ________________ Witness: Sir Christopher Bland, Chairman, BT; former chairman BBC (1996-2001), examined. Q98 Chairman: Sir Christopher, I would very much like to welcome you back to the Committee. I remember our delightful exchange when you retired as Chairman of the BBC and I was asked to contribute to your farewell commemoration, and you wrote back thanking me and saying you hoped to do the same for me at some point. Sir Christopher Bland: I look forward to it. Any moment now? Chairman: You have got a vast experience on this issue of BBC Charter Renewal that we are involved in. We particularly appreciate your coming because, after all, you are under no obligation. Q99 Derek Wyatt: Good morning, Sir Christopher. In trying to understand where the entertainment platform might be in 2012 and then again in 2017, given that at the moment it is a ten-year licence renewal, what issues do you think there are for the BBC if, say, by 2012 its coverage, its audience participation, is less than 20 per cent? In other words, do you think we have a commitment to public sector broadcasting whatever the figure; or do you think there is something about the audience figure that dictates, as it were, a relationship with the licence fee? Sir Christopher Bland: Chairman, I think it is clear that there is a relationship but it is not one that is easy to define. I think we could all imagine a point at which the BBC's coverage, reach and share were such that a universal licence fee was not sustainable. It is a long way from that point today; and I suspect in five years' time (indeed in ten years' time) if the BBC continues to do well it will still be a long way from that point. There is plainly some relationship. You cannot expect the whole of the television-watching population of the United Kingdom, which is virtually all of it, to pay a substantial licence fee if a large number of those who pay it do not actually use some of the BBC services some of the time. To fix a figure I think is pretty tricky. It is a good deal lower than their present level of reach, which I think is still in the 1990s. Q100 Derek Wyatt: Reach as opposed to audience? Sir Christopher Bland: Share. Q101 Derek Wyatt: Given that the BBC set up NHK in Japan after the war, and given that NHK's licence fee is more than our current one in the UK but given the audience figures in Japan are less than ten per cent, it does not seem to have bothered the Japanese that there is this relationship. Surely the point is that we need a buffer, as it were, to the commercial world and it does not really matter what the reach is? You seem to think it does. Sir Christopher Bland: I certainly think it matters. I do not think it is an absolute. Your example from Japan demonstrates, at least there, that there is not a rule which clearly applies. There is a need for the BBC as a buffer, as something that on its good days is capable of raising the bar of the broadcasting. Of acting as both a national and international standard I think is as near an absolute proposition as you are likely to find in broadcasting. We do need the BBC for reasons and to provide a purpose that no other broadcasting institution in the UK is likely to provide in full. Q102 Chairman: That obviously is a very sustainable case, Sir Christopher. Following on from what Mr Wyatt has put to you, can I put to you two questions: first of all, this question of audience - audience reach as calculated means a very, very small attention span being given for those who have tuned-in to be counted as part of the audience reach. On the whole it is not realistic, is it? If people are going to watch television they are going to watch it more than for that very minute period, if they are serious about watching, rather than just zapping through with their remote control. That is the first question. The second question is a very different question. Assuming that the Committee decides (and we are a long way from any decisions whatsoever) that it is desirable in the national interest, as you put it, that we should continue to have a BBC, is it therefore in your view requisite that the BBC should continue to exist on a Charter; after all, Channel 4, which is a public sector broadcasting channel lives permanently without any need for renewal under the Communications Act? In a sense would it not be safer for the BBC not to have these periodic renewals, but just to be something that is there and remains there under the Communications Act? Sir Christopher Bland: You have to remember this is the first time I have appeared before this Committee without at least all of these chairs full, and several people behind me passing the answer and reminding me what the first question was if I had forgotten it! The first question was about reach and its imperfections. You are quite right, reach is a measure of quite a short use of the BBC's services; and share is of course quite different. I think you need to look at the two together. If share for example, on BBC1 in particular, declined far more than reach, you would have to pay attention to that. Would the BBC be better off without a Charter? I think arguably it might. I am not sure as a citizen and I am not sure that you as parliamentarians would be better off without a Charter. Charter Renewal does give you a chance to review, as you and the country is entitled to and should, the purpose and funding of the BBC at regular intervals. If there is a kind of rolling continuum then you do not get that ten-year opportunity to question what the BBC is for. The BBC, I think, is immensely privileged as an organisation, in a way that Channel 4 (although it has got a privilege of its own) does not have the unique privilege of a licensee; it does not have the access, the radio, television and Online frequencies, which the BBC has. I think the BBC is sui generis in that respect, and I think a Charter does, as it were, identify that very clearly. There is another value to the Charter too: it is via the Charter and its mechanism and the Queen and Privy Council that appoints the Chairman and the Governors at the BBC, and that puts them in a hugely strong and independent position both in relation to the Government once it is done, and also in relation to each other. The Chairman of the BBC, as you find very soon after joining it, cannot fire (although from time to time you may long to) any of his fellow governors, as they are there independent and for as long as the Queen is prepared to have them until the end of their three or five-year period. The Chairman and the Board of Governors are in a very strong position, and that derives from the Charter. Q103 Derek Wyatt: Is there a dilemma as the BBC moves forward - in that BBC3 and BBC4 cannot be seen by most of the population and much of the digital radio stations cannot be either - that if we were to say to you, hypothetically, by 2012 the entertainment platform was perhaps some sort of mobile communicator, and that is how our children and grandchildren will receive their information, should the BBC have a public sector remit for that entertainment platform; or should it just be basically radio and television currently? In other words, should it be a software producer, should it move with what is going to happen to the marketplace, or should it just stay in the radio and television business? Sir Christopher Bland: Of course it is not only in the radio and television business. In a sense it has invented its own Online role. I think actually of the great benefit of the expansion and quality of digital and Online services in this country at very considerable cost. It is difficult to see where else that kind of money would have come from and, as a result, Online in the United Kingdom has grown, I think, far more rapidly and its quality is far more interesting than would otherwise have been the case. I think it would be unwise prescriptively to say the BBC should not do X or Y. It involves a view of the future which is inevitably likely to be proved wrong. I do not think that kind of prescription would be wise - at least at this stage. Derek Wyatt: Chairman, could I ask about BT? Chairman: Provided it is relating to the BBC's Charter. Sir Christopher is good enough to come here but he has not come here to talk about his role as Chairman of BT. Q104 Derek Wyatt: Do you perceive at any time that BT will be a content provider, so that it will come to rival the BBC Online, or anything like that? Sir Christopher Bland: No, I do not. I do not think that BT's strengths lie in the area of content provision. One can see, although we are some distance from it at the moment, a broadband world in which increasingly video is a part of the services that people use. We are not there yet, but BT is doing some investigation and experimentation and that is going on in a lot of countries. It is all about the kind of band width you need to deliver high quality digital images, and that is a good deal more than 512K. You can argue whether it is 4Mb or two with compression techniques and these are improving all the time. To deliver sport, for example, you need a lot more band width than is available at the moment. To deliver action movies again you need a lot more band width. Chat shows, that is fine. The deliberations of this Committee, that is fine - we can do that at 512 you will be glad to hear. We are some distance away from that. I believe that broadband will become, at some stage in the next five to ten years, a very significant means of distributing television, film and moving pictures, and that is already starting. Q105 Alan Keen: I was as enthusiastic for a combination of Chair, Chief Executive and Director General when you were there as I was for the two who followed you. The problem the BBC had, and led to the resignations, I thought was extremely sad. The problem seemed to be that the Chair was perhaps too involved in the day-to-day running of the BBC and therefore was not the backstop that the Chairman could have been. That is not a criticism of the previous chairmen. I thought the relationship worked extremely well and I saw it on many, many occasions. You may not be able to comment on how it worked after you left, but did you think about that dilemma of whether you should be involved as an Executive Chairman, or should you have taken more of a backseat to have an overview of what was going on at the BBC? If somebody had been further back or had there been a separate Chairman of the Board of Governors from what looked like an Executive Chairman, would that have stopped the problem that arose at the BBC? Sir Christopher Bland: I do not think there is any form of organisation that stops mistakes, things that, with the benefit of hindsight, you would have done differently or you would conclude were an error of judgment. I do not think there is a structure that avoids that. It is clear that the BBC would recognise, and have recognised, they made mistakes. It is true of BT as well. I am a part-time Chairman (and I never allow myself to be called "non-executive" because that implies you are not very active or interested in what is going on) and have a very distinctive and different role from that of the Chief Executive of BT. The same is true at the BBC. The Chairman's job is not to run the organisation; it is to know what is going on and, from time to time, distance himself where he needs to from the Director General, from the Chief Executive. I think that is in-built, as it were. Knowing when that moment has arrived is pretty important, and sometimes you may not do it. It is a matter of balance. Again, I do not think you could be prescriptive about it. The most important moment, of course, in the Chairman's life is when he and his Board appoint the Director General and the Chief Executive; and the next most important, if and when that comes - and it is interesting to point out over the last four Director Generals of the BBC, three have been fired and one only missed it by a whisker - is when the Chairman and the Board of Directors decides that the time has come for a change. Q106 Alan Keen: There is a strong argument in any organisation - and wish my private sector experience had been as successful as yours because I worked in the private sector - and it is very handy, is it not, for a Chief Executive (the one driving the thing) to have a Chairman who is involved, not every day of the week but involved in a very constructive way and keeping his eye on things and helping things along? For the BBC, with an extra problem the private sector does not have, would it not be a good thing to have a Director General, a Chairman of the BBC, but then a separate Chairman of the Board of Governors as the backstop? Sir Christopher Bland: I do not think so. I understand the argument and the apparent appeal, but that raises the difficulties of: who is the Chairman of what; and what do the two chairmen do which is different? I think that would actually create more problems than it solves. With all its imperfections, with the relationship between a Chairman who is clearly not the Director General, is not responsible for running the organisation, and can and should stand back from time to time, along with the rest of the Board of Governors (again the BBC's structure is not like a FTSE100 company, none of the Executives, including the Director General, are members of the Board of Governors) there is the structural opportunity to stand back and say, "We are the Board of Governors. We are not the Executives of the BBC", and the BBC does need to do that from time to time. Q107 Alan Keen: Maybe it is because I am in favour of keeping Ofcom further away from the BBC than some would have that I am saying possibly there should be a separate Chairman of the regulators of the BBC. That is what I am thinking about, but you would not be for that? Sir Christopher Bland: I would not. I agree with Lord Currie when he says there is a difference between regulation and governance. At least I define "governance" as being responsible for what happens at the BBC; and "regulation" as being ensuring that the BBC obeys the general and particular rules that apply to that organisation. I think you can take regulation outside the BBC, but you cannot take governance. You cannot sub-divide or second guess the responsibility for making sure that the BBC achieves its remit and its Charter responsibilities. Once you divide that, that is the equivalent of saying to the Board of BT, "You're responsible but actually so is Ofcom". Now Ofcom is not responsible for BT. The Board is clearly responsible to its shareholders for what is in the end a fairly simple, in contra-distinction to the BBC, remit. Our job is to deliver shareholder value and you can measure that; the BBC's is much more difficult but it still cannot be sub-divided or shared. You have to decide who is in charge of that; making sure that the BBC delivers its responsibility. You cannot share that with Ofcom. You can on the other hand, and that has already happened, give Ofcom specific regulatory responsibilities in relation to the BBC, and that already exists. Q108 Alan Keen: What would be the main disadvantage if the BBC was not given a further Charter? It would go to the market, presumably? What would happen? Sir Christopher Bland: That would be to change the structure and nature of British broadcasting and, I would argue, for the worse. Broadcasting would survive. You have got a perfectly lively commercial model in the United States with PBS as a begging bowl stub that does, given its lack of funds, a remarkable but very, very small and minority job. It has very little influence and very little power and very little money. You could move to that model; you could make the BBC a commercial organisation overnight; it would fight its commercial weight; but you would destroy ITV in the process, or marginalise it, and you would have a far worse broadcasting ecology in the United Kingdom than we are lucky enough to enjoy at the moment. Q109 Chairman: Sir Christopher, if you have not seen it, I recommend you and my colleagues on the Committee to read the article on PBS by Ken Auletta in the June 7 issue of the New Yorker. It is a terrifying prospect, is it not? Sir Christopher Bland: I have read it and it is very, very good. Q110 Michael Fabricant: But not half as terrifying as actually watching PBS at times! Thank God the BBC provides much of its output. Sir Christopher Bland: Principally British shows. Q111 Michael Fabricant: Sir Christopher, I take the point you made to Alan Keen regarding the effect that a privatised BBC would have on other commercial broadcasters. Clearly, the pot is only one particular size for advertising subscription and it is not going to expand that much, if at all, if the BBC were privatised. With the benefit of three years' distance now from the chairmanship of the Corporation, do you see any room for any change at all in the governance of the BBC, the way it is funded, or any of its commercial operations? Or are you saying that it should remain forever static, or at least in the next ten years? Sir Christopher Bland: I see one significant change in the relationship between governance and regulation. I think that there should be an appeal against the BBC's decisions on matters of fairness, in the same way as there is on taste and decency. I took that view when I was Chairman. It was not a view shared by the majority of my fellow Governors at the time, who felt that was so important that the BBC needed to do it itself. I took a contrary view: that it was so important that there needed to be an entirely external body, and it could be Ofcom - they, after all, have those responsibilities in relation to taste and decency so you are not actually inventing a new principle - or it could be somebody else. That there should be an appeal against the decision of the BBC on matters of fairness I think would be a major safeguard - actually for the BBC, as well as for the public interest. That would be a change for the better. Q112 Michael Fabricant: I think what you have just said is hugely significant because a number of us have always argued that, even when the BBC Board of Governors came up with a correct decision, perhaps to the outsider it would seem not to be completely impartial because the BBC was being its own judge and jury. Could you just expand on that? What sort of areas of fairness are you talking about? Are you talking about balance in politics? Sir Christopher Bland: Yes. Q113 Michael Fabricant: Solely that? Sir Christopher Bland: In effect I think there is no decision of the BBC's that should not be appealable. That is the case for taste and decency. I forget what the exact definition is in the Charter and the Act of Parliament, but I think fairness is the overarching description: of fairness in coverage of politics; of the affairs of the Corporation; the affairs of an individual. An appeal against that - at the moment the opportunity for that does not exist. For the reason you have just given, I think it would be better for the BBC. Even when the BBC is right you may not be happy until you have gone to a third party. Q114 Michael Fabricant: On the subject of third parties, the BBC for a long time resisted any opportunity for the National Audit Office to look at its activities in respect of its operations - whether they were in the public interest financially. Do you welcome the fact now that the BBC is beginning to accept intervention by the NAO. Sir Christopher Bland: I think "welcome" would be overstating it. I accept it as a political need of our times. It would be very significant to see the way in which the NAO discharges that responsibility. If it does it properly and well that will be fine. If it tries, for example, to take over some of your job that will not be fine; because you will have two groups rather than one in Parliament doing that. If it tries to take over the job of either Ofcom or the Governors that will not be fine either. I think it needs to confine itself to what it properly does, which is an audit and that is a financial audit and a value for money audit. If it starts widening its remit - and that is the temptation and the thing which the BBC fears - then that will not turn out to be successful. Q115 Michael Fabricant: Alan Keen mentioned the recent turbulence within the Corporation, and I personally very much regret the departure of Greg Dyke whom I think was a very able Director General. You mentioned that part of the strength of the Board of Governors was the Director General not sitting on that Board of Governors. I put it to you: was that a strength? Might not the situation have been resolved more quickly, and perhaps for the better, had the DG been an integral part of the Board of Governors, just as you have a Managing Director on the main Board of BT? Sir Christopher Bland: It might, but I doubt it because the Director General is an integral part of the top structure of the BBC. He, as do the senior members of the Executive team, comes to every single meeting of the Board of Governors. The days are long gone when the Director General and others waited outside to be sent for. It is integral in that sense. Again, I do not think structure would have overcome the mistakes that were made. Chairman: Without being in any way critical of the line of questioning, I prefer us not to pursue the line about Hutton. I do not think that is really relevant to Charter Review. Q116 Chris Bryant: Good morning, Sir Christopher. Can I just press you on the issue of Charter Renewal, whether or not to have a Charter, or to have statutory powers for the BBC? If one were cynical one could point to the ten-yearly process whereby the BBC and policy people put together a grid of great television programmes that are going to appeal to politicians, that are going to be on in the six months or nine months before the Charter Renewal; lots of people taken out to lunch in Government and on select committees and things like that, and a great wooing of government over a certain period of time, and once the Charter has been renewed go back to normal. Would it not be better for the BBC, and for the steady progress of broadcasting, if the BBC instead of having a ten-yearly cycle was in statute? Sir Christopher Bland: I think you are right, that is a cynical view. As you went into politics plainly that would not be an attitude of mind you would hold. You and I are more optimistic about the human condition than that. As you quite rightly say, that is a cynical view of what happens and a bit of a caricature. Some of it of course happens but even if the worst comes to the worst and you said that was the only time the BBC behaved well, the rolling continuum, I would suggest they never did any of that. I think the truth is actually that the Charter Renewal does give you - Parliament and the public - a very, very significant opportunity to review the BBC in a way that on a rolling basis you would not do. The BBC is going to respond to that and plainly it should. The important thing if the Charter is renewed is for the Board of Governors to make sure - and for this Committee to play its part in making sure - that the Charter objectives continue to be fulfilled even when it is seven years away from the licence fee and from the next Charter. I think the processes by which that is done can be improved. I think, for example, this Committee can improve the ways in which it deals with the BBC. In my experience you do not grasp fully the opportunity that the Annual Report gives you for a really thorough-going review of the BBC's performance each year. I think Parliament as a whole - and the BBC did try and present its Report to the House of Lords and the House of Commons in Westminster Hall - also does not grasp that opportunity. That is something methodically and annually this Committee and Parliament as a whole should grasp. It should really hold the Board of Governors to account. That process should be an annual one rather than a Charter Renewal one. Q117 Chris Bryant: One of the innovations in the last few years is the review of individual services which the Secretary of State now does. We have had a review of BBC News 24; and there are reviews of the other news services, because there have been so many news services coming out at the same time. How important do you think that process is? Or do you think there is a danger of politicians getting their sticky fingers on broadcasting in a way that would be inappropriate? Sir Christopher Bland: There is always that danger, but I do not think in the case of the review of news services that is an inappropriate thing for the Secretary of State to do. Most organisations do not welcome annual reviews or having their processes scrutinised, but I think the BBC in particular has such a privileged position it really needs it. Actually the Board of Governors need it too. Q118 Chris Bryant: Gavyn Davies, when he was Chairman of the BBC, and Michael Grade already have made quite a lot of changes to the relationship between the Board of Management and the Board of Governors; a separate secretariat, and a suggestion that BBC Governors should be more independent from the Board of Management, a recommendation which was around from the 1940s in the Dearing Report. Do you think that is the right direction to go in, or is this overstated? Sir Christopher Bland: I think you have to analyse what "more independent" means and how that more independence is created. I see no reason why the Board of Governors should feel enthralled to the Board of Management; they are not appointed by them; they are not dependent on them for their rum and rations. They are dependent upon them for information, which is of course absolutely critical. Being more separate from them may actually paradoxically reduce rather than improve the information flow. We are all in favour of greater independence for the Board of Governors, but independence from what? From politicians? Plainly, but I think that is pretty strong. From the Executive? What does that really mean, and how is it to be delivered? Q119 Chris Bryant: Speaking from my own perspective, as somebody who represents a seat where access issues to a lot of BBC channels are very difficult, if you are going to go digital you have to pay a subscription to Sky, which effectively doubles the licence fee. You are paying another £16.50 a month because there is no free view. The kind of thing my constituents would like to say is that the BBC Board of Governors should be there to stand up for ordinary licence payers and say to the Board of Management, "Excuse me, you're rolling out all of these new services, but are you really fulfilling the public service remit of getting it to everybody?" Sir Christopher Bland: I think the Board of Governors have got to be able to answer that question. You have put it to them enough times to have given them every opportunity to ----- Q120 Chris Bryant: They have never answered it satisfactorily! Sir Christopher Bland: Satisfactory to you in London, no, but Ireland never was contented. You know the poem: "Ireland was contented when all could use the sword and pen". Q121 John Thurso: Before I ask my question, could I just say thank you to Sir Christopher for the interest he has taken in delivering broadband to Caithness and Sunderland which is very, very welcome. There are a lot of people grateful for that. Sir Christopher Bland: July 2005 in Kinlochbervie! Q122 John Thurso: It is wonderful! Recently there have been accusations that the BBC has been becoming more commercial, chasing ratings, if you will, rather than concentrating on some of its more public service role as it should have. Two questions based on that: firstly, do you think that is the case? Do you think the balance is broadly right or wrong? Following on from that: what is the core thing which the BBC should do that justifies the BBC having a Charter and getting a licence fee? Sir Christopher Bland: If I can start with the second question because, in a sense, it is the easier one to answer. In general terms at least, I think it is to provide a quality and range of programmes that will not always, or frequently, have been provided by commercial television and commercial radio. It is to provide a coverage of the affairs of the United Kingdom in the depth and of a quality that would not otherwise be provided. It is to have complete political independence and impartiality in providing that coverage. None of these things are things that ITV cannot and does not do. The BBC really only exists to do those things. In terms of its performance, as we were discussing earlier, it cannot ignore reach and ratings because that is as sure a recipe for disaster as if it were to allow those to dominate. The balancing act is a difficult one. I think the BBC, from time to time, may appear to lose the plot. It is not for me to say whether they have in the last three years. I have not watched enough television or radio, and I have not been responsible for making sure that that happened. While I spent five years at the BBC that was the job of the Board of Governors, to try and make sure that the BBC did do those things I set out in the second answer. From time to time it will not always succeed. It will do certain individual programmes that will not look as though they belong within a public service remit. We could all identify those; but it cannot live by those and those are not what the BBC is for. Q123 John Thurso: Do you think it would be helpful if the BBC were to produce less in-house and commission more externally? There is a theory because the BBC is responsible for so much product it almost has a controlling hand, and whether that is in fact a dampener on a wider commercial sector? Sir Christopher Bland: Yes, I do. I think that the amount of programming that goes to the independent sector ought to be increased. I think the primary reason for that is the independent programme-making sector is too small for really strong viable programme-making companies to exist in any quantity. If you increase the quota over time, and you should not do it overnight, that would strength both the range of programmes that are made in the private sector and the financial strength of those companies that make them. At the moment a lot of it is Soho pick-up television, with five people in the studio with an idea and they last for three years and have a great time and then they have gone. The other thing is that you do want to maintain a critical mass of programme-making within the BBC - because that is a real asset to the UK. I think it would be a mistake to go wholly to the Channel 4 model for that reason. The second thing is that the ridiculous rule by which independents suddenly cease to become independents, because they are taken over by somebody who has a broadcasting licence in, let us say, Luxembourg or Germany, is plainly nonsense. That is why the BBC did not meet its quota. It was not because the amount going outside the BBC was reduced; it was because the rules changed because there was an acquisition. That is a plain nonsense and should be eliminated. Q124 Mr Flook: Sir Christopher, in recent years the BBC in its Annual Report has crowed about how it has increased its market share. Yet, at the same time that commercial rivals have had a negative impact on advertising revenue, the BBC has had an increase in its RPI plus X formula. How did it look to you when you were given that RPI plus X formula? Did you think, "We know we have to put some of it into digital, but this will help us while our commercial competitors are on the back foot" as advertising revenues collapsed towards the very end of the 1990s? Sir Christopher Bland: It looked at the time like a really good and generous settlement, and it was. The reason the BBC were pleased about it was for good reasons. Nobody forecast both the extent and the length of the decline in ITV revenue, including ITV. I do not think that was the reason the BBC were pleased with the settlement. They were pleased because they could put more money into programming. You can trace where that money has gone. It is not the sole source. The BBC have saved a great deal of money. They have reduced their own overhead and operating costs. They generated more from commercial revenue, and that has gone into programming too. It has enabled the BBC to sustain one of the Government's and the country's legitimate ambitions for it, which is to help the roll-out of digital services both online and in broadcast. First of all, you can trace the money and I think it has been pretty well spent; but not with the aim of dishing the commercial competition. Q125 Mr Flook: As I understand it, the Governors are there to protect the interests of the viewers and licence payers. What role did you have in going to the Board of Management of the BBC and saying, "Hang on a moment, you've just been given a huge bung from the taxpayer, the licence payer; you've got to spend this money even more wisely"? When we went to a BBC facility a couple of weeks ago there were more flunkies following us round than we were. Everywhere we go there are huge numbers of BBC staff and middle managers. Could you not do a Barclays and put more money into the end product and less into the middle management? Sir Christopher Bland: Luckily I am flunky-less today; were I the Chairman of the BBC attending this I would not be, and you would be able to point to the serried ranks of supporters. Actually the BBC has reduced its overhead and its costs. You are always going to get, as you will when a Secretary of State or even a Minister of State appears before you, surrounding people hanging on their every word and helping them to frame them in the proper way. Q126 Mr Flook: They are the only ones who are! Sir Christopher Bland: If you look at what has happened to the overall BBC staffing, that has reduced. If you look at the costs of the BBC that go into programming, that has increased. I think the percentage has gone up year on year on year. As you rightly say, I think that was something the Board of Governors existed to ensure. Also, more difficult to assess, the right balance between expenditure on new digital services - which, by definition, are not going to be available to the whole country, and some of which the BBC got into well before its time. Digital radio, for example, they got into that far too early, believing that set manufacturers would have available sets at reasonable prices five years before they did. They should have been wiser. Q127 Mr Flook: How did that happen? How did the BBC start producing superb radio programmes on digital with no-one there to listen to them? When did the Governors get involved in sanctioning that, if they did? Sir Christopher Bland: You could not really sanction. We just made an error of judgement. We committed in the belief that digital radio would expand much more rapidly, and the manufacturers would deliver sets much more quickly than they did. It was actually a serious error of judgement. I remember helping to make it. I remember going to the big radio fair in Germany and seeing what were extremely elegant-looking prototypes (and that was fine) and believing (and this was not fine, but foolish) that these would be in production within a matter of months. Actually five years later they still were not made. We believed where we should have been more sceptical and we should have waited. Q128 Rosemary McKenna: Sir Christopher, can I move on to something quite different with your experience. Would you like to comment on the concerns that a lot of people have about taste and decency in television at the moment. It may have been a bit of kite flying by one of the Directors of Ofcom who suggested that perhaps television programmes ought to develop a rating system - rather than the current system of the watershed, where everybody accepts the nine o'clock thing - in view of the fact that recently there have been some dubious or concerning story lines in some soap operas, for example? Sir Christopher Bland: It remains a matter of concern. It is very much a generational thing. The younger you get - and I am talking generalisations now - the more standards and attitudes of what are acceptable in terms of language, tasted and decency change. Whether that is a good thing or another thing is a matter of opinion. You can also argue that some of that might be the responsibility of the media for, in effect, changing the attitude of, as it were, my 20 year-old son or five year-old son to my own or his grandfather's. It is not an absolute; it is relative. You see things now on television, read them in books and see them on the cinema which 40 years ago we would have thought astonishing, in whatever sense of that word you like to use. Standards do change. You cannot say today what is going to last forever. Whether a rating system would be better - I do not think it is a ridiculous idea - you would have to decide whether it would be really useful to the viewer, and whether the ratings would help people to make informed choices about when to let their children, in particular, watch a programme, or themselves to decide whether they wanted to see it. It is very important that viewers should not be surprised by what they see in particular in fiction and in a soap. They should be well warned in advanced. I remember we showed a Tarantino movie late at night and had considerable reservations. It was far tougher than I liked but it was a brilliant movie and it was sufficiently well flagged, "Here was what it was. Here was when it was coming", that nobody saw that who did not either want to see it or know what they were seeing when they switched it on. I think that is all right. The earlier you get in the evening, the more important it is to be clear what happens before nine o'clock. Q129 Rosemary McKenna: I agree with you. I do think ultimately it is the parents' responsibility to make sure; but there are, of course, many households where the parents are not there, the children have free access to television etc etc. All of the programmers at some time or another announce in advance there are concerns within the programme and parents should be aware. They all do that. I think it is something which is worthwhile considering. For example, parents often say to me, "Do I stop my child watching a particular programme when they're going to go to school the following day and it's going to be discussed? How can we control it?" Maybe some parents are looking for that kind of guidance? Sir Christopher Bland: I think it is a reasonable assumption that the major soap operas on either BBC or ITV should be watchable by children before the watershed. If there is pressure that they should sensationalise and move those story lines in more energetic directions then that really needs to be resisted if the result is something that actually should not be shown before nine o'clock. Chairman: Thank you, Sir Christopher. From what you have said about the role of this Committee we ought to place on record that it was you who instituted the Annual Report being brought before this Select Committee. Thank you very much indeed. Memorandum submitted by ITV Examination of Witnesses
Witnesses: Mr Charles Allen, CBE, Chief Executive, ITV plc, Mr Clive Jones, Chief Executive, ITV News Group and Mr Donald Emslie, Chairman, ITV Council & Chief Executive, SMG Television, examined. Chairman: Mr Allen, gentlemen, may I welcome you here today. It is always a great pleasure to see you. Q130 Michael Fabricant: In your written submission you said you would like to see the BBC's Board of Governors retained in their present role; but I think you were here just now when you heard Sir Christopher Bland speak when he said that he would welcome perhaps a little bit more influence from Ofcom particularly, say, with regard to fairness. What is your reaction to that? Mr Allen: We think the Board of Governors should take on the role more like non-executive directors of a plc board, more similar to Channel 4. I think it is impossible to ask the Board of Governors to be judge and jury. We think it is an impossible task. No matter how you structure the interface between management and the Board of Governors we do not think you can get that level of independence. We think that the Board of Governors should remain, but the task is much more that of a role of a non-executive director, and more towards the Channel 4 model. I also think they should be independently reviewed by Ofcom. Q131 Michael Fabricant: You would welcome that? Mr Allen: Absolutely. Q132 Michael Fabricant: The BBC is changing in some different ways, and you will know it has gone very successfully, as far as the number of hits is concerned, into its Online facility, very well championed by Ashley Highfield who is the Director for New Business. While I know you would not be happy at all with the idea of the BBC having commercials on its main television and radio services, just as the Radio Times carries advertising do you think BBC Online should carry advertising? Mr Allen: I think the problem is that it is the thin end of the wedge, of whether we want a commercial BBC or a public service broadcasting BBC. I think we need to be very clear on the role of the BBC. I personally believe that the BBC should be focussed on public service broadcasting. I believe that it should continue to be funded by the licence fee, because any involvement of that team in commercial activities will actually distract them from their core role of providing core public service broadcasting. I think that should happen. I equally believe that effectively their commercial activity should be privatised, with an even clearer divide between public service broadcasting, as a broadcaster, and their other commercial activities. Q133 Michael Fabricant: That is an interesting suggestion, because if the BBC's commercial activities were privatised - and that would include all BBC publications, all their productions, DVDs, VHSs and all the rest of it - then the profits from that activity would not be able to go back into programming, which actually helps subsidise and keep down the licence fee. Mr Allen: I think we should look at how it can be structured. I think they should retain the revenues which come in from those commercial activities; and those revenues should be put back into funding a strong BBC. We as ITV want to see a strongly funded BBC; not an over-funded BBC, but a strongly funded BBC. That is both in our commercial interests as well as in broadcasters' interests at large, and the public's interest. We want a strong BBC, and we would like to see the revenues and profits from those commercial activities fed back into the BBC, because we want a strong BBC. People sometimes find that a little bit strange and say why would we as a major competitor want to see a strong BBC; and the reason for that is basically we and the BBC obviously compete for ratings but we do not compete with the BBC for pound notes in the advertising market. We believe the public is well served by a strong BBC that is providing complementary public service broadcasting and commercial broadcasting service to the public. The ideal situation for ITV is ITV getting a 35 per cent peak-time share, the BBC getting a 30 per cent peak-time share, and all of the others chasing a 35 per cent share, so we want a strong BBC. Q134 Michael Fabricant: Do you think the BBC, through its commercial activities, competes unfairly in the commercial sector? Mr Allen: The difficulty we have is that it really lacks transparency. To be able to answer that question we would need to have far greater transparency between the costs that are transferred from the PSB side of the business to the non-PSB side. I think that is why a clean divide between the public service broadcasting BBC and their commercial activities owned separately would give that divide, but not deprive the BBC of those revenues and income. Q135 Michael Fabricant: Of course, the BBC would argue that they have a fairness structure in their trading activities. Would you then welcome National Audit Office intervention to examine and try and cut through that lack of clarity and expose whether or not the BBC is competing unfairly with the commercial sector? Mr Allen: We have supported that in submissions we have made to the Committee. We think that would be a good ideal. I do not think that takes it far enough. Inter-company trading, inter-corporation trading, is always a nightmare and it is very difficult to get to the true value unless you are in a real market. That would be a help but I do not think it solves the problem. Q136 Michael Fabricant: Earlier on you said that the BBC should really restrict itself to its core activities. You said that they should not be commercial. That followed on from a question about the BBC's Online services. By definition, it would seem that you would count that as being its core service. Do you think there are any activities at present which are undertaken by the Corporation funded by the licence fee - I do not know, maybe it might be BBC3, BBC4 or its Online service - that really is not its core service? Mr Allen: I think BBC3 and BBC4 are very much its core service. I think it provides a range of services. We welcome the fact that there is a very clear remit for BBC3 and a very clear remit for BBC4; we would like to see that clarity applied to BBC1 and BBC2. I think there is a fantastic opportunity (a) for this Committee and (b) in this debate to clarify exactly what the remit and role of the BBC is. So I think the areas you touched on are core services for the BBC. Q137 Michael Fabricant: Would you have any objection if the BBC were to expand its services and introduce new television and radio channels or indeed got into other areas of online provision? Mr Allen: Providing there is a debate, as there was on BBC3 and BBC4, we would have no objection to that, providing it really is providing new and additional services that the market is not already providing. There is a lot of debate in terms of the BBC's new service and a lot of debate on BBC's children's services. I think we need to have a very thorough process where, I think, this Committee can play a very key role in ensuring that we are actually providing true additional public services rather than just an expansion of BBC strategy. Q138 Derek Wyatt: Good morning, gentlemen. Can I ask a technical question? Is it possible, in the near future, for the Freeview box to be incorporated into a television set? Will that be on the market in three or four years? Mr Allen: It is technically possible now. Q139 Derek Wyatt: Thank you for that. Two weeks ago we had a session we called Blue Skies, where we were trying to sort of anticipate what the future might look like. Have you had a Blue Skies session with your own people and have you a view about where the entertainment platform might be in 2017? Mr Allen: That is a very good question. I think we have looked at a number of scenarios. There is a lot of scaremongering around that it will change dramatically. I think what we still believe is that there is a market for what we might call watercolour television (?). If you look at 20 years then 14 million people will still want to watch the rugby - Jonny Wilkinson's drop-kick - 14 million people may want to watch a programme like Get Me Out of Here! and 12 million people have continued to watch Coronation Street for many years. Our vision still has a lot of the things that we see now as part of people's lives going forward. I think what we bring is a cohesion to society with issues that people want to talk about because they share that experience. I think that shared experience will absolutely be part of the future. I think there will be a lot of fragmentation, there will be a lot of specialist services, but we inherently believe that mass-market television has a long-term future. Q140 Derek Wyatt: One of your purposes is the need to satisfy your shareholders. If I could prove to you that the revenue stream and the share value would be much better if you just actually had a DVD sent to every household and that on that monthly DVD was the complete Coronation Street or the complete ER and the only things missing were live news and live sport, and that it doubled your share value, you would have to look at that as an issue, would you not? Mr Allen: Absolutely. Q141 Derek Wyatt: That is some of the thinking in Hollywood; as DVDs go from ten hours to 100 hours to 1000 hours that is a scenario that could change, or you could just dial it down and just subscribe to a service. That changes almost all the rules, it seems to me, that currently we are talking about. I suppose my question really is: can you really bet ten years for another licence fee? Or would it be better to say five years or seven years? Mr Allen: Our view is that the BBC is appropriate to have another Royal Charter for ten years. However, what we would say is that we think it is appropriate for an independent review to take place upon switchover. So when we actually move to switchover and the date of switchover there should be a full review. So a ten-year charter that allows the BBC to plan, to think ahead about how it is going to manage that set of changes you have talked about, but we do think it would be appropriate to have a specific review at the point of switchover, because things will change quite dramatically and none of us can predict how that is going to pan-out ten years out. None of us could have predicted the growth of Freeview even two years ago. So I think the way forward would be to give sufficient comfort to the shape of the BBC for a ten-year period but to introduce a review, either by this Committee or a more general review, at the point of switchover. Q142 Derek Wyatt: However, if you are giving ten years you are committing the licence fee concept for ten years. Mr Allen: I accept that. For the BBC to enable itself to plan for that period of time I think that is a sensible time-frame within which to allow the BBC to plan its funding going forward. Q143 Derek Wyatt: If we were sitting here in 2012 - which is probably unlikely in both our cases - and, say, the actual viewing figures for the BBC were under 20 per cent, there would come a dislocation between people wanting to pay the licence fee. Can we be so confident now, in the next year, to give ten years? I think that is what scares me slightly. Mr Allen: I think it is a bit of a chicken and egg situation. I think if you do not have that level of confidence then the BBC would not be able to plan for its future. I think the BBC should be given a ten-year Royal Charter but we should implement a review. Whether that review also includes funding is the point you are making. Q144 Derek Wyatt: Would you feel happier if you had no public sector remit, as a group? Do you feel it should just be the BBC? Mr Allen: No, I think it would be wrong for the BBC only to be the provider of public service broadcasting. I believe pretty passionately that ITV has a role to play, Channel 4 has a role to play and Channel 5 has a role to play and I think it would be wrong to see the BBC as the sole provider of public service broadcasting. Frankly, a multiplicity of supply of public service broadcasting has to be the model going forward. Q145 Mr Doran: You made a powerful case for a strong BBC. How much does ITV depend on a strong BBC? Mr Allen: It is very important to us commercially that there is a strong BBC. I think a weak BBC means that they lose ratings and if they lose them to our competitors our competitors then make more money. So commercially it is very important to us. I personally believe that from the public service broadcasting perspective then a strong BBC, ITV, Channel 4 and Channel 5 gives viewers a range of public service broadcasting services that is unique in the world, and I think we should be mindful of that as we look to change and modernise the BBC and ITV going forward. Q146 Mr Doran: Do you think there is a case to say that the existence of a strong BBC actually improves ITV? Mr Allen: It is very important to ITV. I think without a strong BBC then ITV would be weakened. If you just look at the financial models, that is why I think in this country we have three funding models: pay generates between 3 and 3.5 billion; there is about 3 to 3.5 billion of advertising money and another 3 to 3.5 billion of licence fee. That tripod of funding enables us to have, I believe, the highest quality programming in the world. With any one of those not being there, or any one of those being disadvantaged, then I think that is a problem. One of the things I do think is important, though, and where there has been a change in the last few years is what I would call public service scheduling. One of the things that the Committee should look at is this whole issue of counter-scheduling. I do not think it can be in the public's interest when the main channels are targeting exactly the same demographic; whether you are a 16-34-year-old watching a pop programme or whether you are a 35+ or AB1 watching a key drama, that cannot be in the public interest. So one of the things I think we do need to look at is what I would call public service scheduling, because you are depriving the public of a type of programming they want. Q147 Mr Doran: Just moving on a little, in your evidence you have talked about the BBC's tanks on your lawn, and that has obviously become a feature particularly because of ITV's recent financial weakness. Your innovation has been, maybe, at a lower level than you would have liked it. Without that innovation from the BBC (what you call the tanks on the lawn), the excellence you have described and the strong BBC that you describe is not likely to be around. So why do you pick that as a target? Mr Allen: I think it is not about tanks on the lawn in that sense. The good news from an ITV perspective is that despite a significant fall in revenues we have been able to increase our investment in programming and we have been able to create more hit dramas, for example, than our competitors and the BBC. I think healthy competition is good news. But between ITV and the BBC spending $20 million on Daniel Deronda and Dr Zhivago and then thinking they should be scheduled head-to-head cannot be in anyone's interests. What I am talking about is healthy competition between the BBC and ITV. Equally, I do not see a BBC that would ghetto-ise the programming, only PSB (?). I think it is equally appropriate for the BBC to be providing Eastenders as it is Panorama. Actually the question is: how many Eastenders? The bulk of the money being put into longer runs of Holby City and more Eastenders - is that the right mix? I am talking about proportionality and healthy competition rather than scheduling which just undermines and deprives the public. Q148 Mr Doran: As a Scottish MP I could not resist this audience or this group of witnesses in front of me without raising the issue of regional broadcasting. I want to say something about Scotland in a second, but one of the disappointing aspects of the recent merger was that one of the first things that seemed to happen was the axe came out to some local studios. Is that something we are likely to see more of in the future? Mr Allen: I think maybe Donald could respond on that because all that has happened in some of the English regions is some of the work that has already started in Scotland, where there was a modernisation process. If you look at the work that Grampian did in modernising its studios, I think the focus for us is moving away from, if you like, an engineering structure to a talent and technology structure. I think Grampian did a good job. Mr Emslie: Frank has heard me talk about this on many occasions but in terms of modernisation, particularly as Grampian were about to do exactly the same for Scottish television in the Central Scotland region, we felt that our money is best invested, as Charles said, in programming, both network programming and regional programming, which is a significant investment for us, and the talent of the individuals to make it. So in Aberdeen we have moved into new studios which are very modern and highly technical, and that model I think will be replicated round the ITV network. We have now got more people making more programmes at Grampian than ever before, so I think the new model does work. I do not think anyone is suggesting that Grampian Television does not serve its region very well; it is an area the size of Switzerland and it makes seven hours a week, but it really focuses in on the local population, and it does a very good job. Q149 Mr Doran: I think we are all very grateful for the new studio, it is an excellent studio; the only thing you got wrong, I think, is that you moved it out of my constituency! Mr Allen: We tried to keep it in but we could not get a building. Q150 Mr Doran: There is a serious point behind that, because although I understand the situation in Grampian (we have discussed it many times and we have fought about it on a few occasions) it is the message that it sends. This new company is formed and, obviously, Grampian and SMG are not part of that new company. Offices closed down, and some of my colleagues round the table had real concerns about what was happening, and I know that fellow colleagues have. There is just a sense that the PSB part of the remit is not being abandoned but there is a move away from it, in the sense that it will all be left to the BBC and that is coupled with concerns about what we see as a very light touch from Ofcom. I think it is important to understand exactly how you see that and where you are in the process. Mr Allen: I think Clive can probably deal with that because he is managing the detailed changes throughout the whole of the English and Welsh regions. Mr Jones: I think the key thing is to actually judge what we are still putting on the screen and what we continue to intend to put on the screen. We provide 27 regional and sub-regional news services across ITV, and we are not proposing to diminish any of those. That is far more than the BBC does; the BBC in the English regions does around half-an-hour of non-news regional programming every fortnight and we do three hours a week - more in Scotland, more in Wales and more in Northern Ireland - to recognise the nations alongside the regions. This is a process of change to the process of investment - investment in new technology which is happening in Derek's area, in Meridian, which is happening in the Midlands which we are planning to do in Wales and which we are planning to do in the creation of a new news-gathering centre in the East Midlands in Nottingham. This is not a retreat in any way from regionalism or from public service broadcasting; this is a real investment in regionalism going forward and continuing to provide a range of regional news services and national news services and regional non-news programming which is unrivalled. No one else gets anywhere near us; Channel 4 cannot do it, Channel 5 does not do it (they are not required to do it) and the BBC does not do it. Regionalism is still alive and beating well in the heart of ITV. Q151 Rosemary McKenna: Can I go back to the point I raised with Sir Christopher? It was based on something I read recently, a suggestion by one of the directors of Ofcom that there ought to be a ratings system applied to television programmes, similar to the ratings system that is applied to cinema films, particularly, I think, in view of the concerns recently over certain storylines that have been appearing. I agree that times have changed and people are much more aware, and children are much more aware, but would it be helpful to the parents and how would you feel about being asked to produce a ratings system? Mr Allen: I think you make a very good point. As we move from analogue terrestrial television to digital then a lot of the rules and regulations we have accepted as the norm do not apply in the digital world. So I think you make a very good point about how we are going to deal with that. I think there is a big issue there. My only concern, or the issue I would raise, is that when Channel 4 attempted something similar, going back to the 1980s and 1990s, it actually had the opposite effect; when there was the identification of violence then it actually drew the people that you did not want to the programming. So I think it is something we should think through, but I think the more strategic issue is how we deal with something where we have got acceptable roles and structures in analogue television and the watershed, which is not something which would naturally apply in a digital world. I think it is an issue for the industry to debate and I think it is an issue where the Committee can play quite a key role in acting as a catalyst. I do not think there is one easy answer because there is always the law of unintended consequences. If you think you are doing something that will improve the situation, the findings of Channel 4 when it attempted to do something along similar lines, I believe, was it actually had the opposite consequence. I think we should look at that and bear some of those lessons in mind as we try to create a new structure in the digital world. Rosemary McKenna: I think that makes a lot of sense. There are many occasions when parents are concerned, but one of the problems I think is that families have so much access; it is not uncommon for four or five television sets in a family home, with each child having their own television set in their room, and how do parents control what they are actually viewing when they are viewing it? I think it is a huge issue but probably you are right there should be a proper public debate about it and about how we get the right answer without having a knee-jerk reaction. Thank you, Chairman. Q152 Chris Bryant: Part of the sort of concept behind public service broadcasting, as embodied not only in the BBC but in yourselves, is relatively authoritarian or paternalistic; it is trying to make people watch programmes that they might not otherwise choose to watch if they had freedom to do so. Of course, that is much easier in an old environment because you could "hammock" programmes, you could put something they have got to watch between two things that they want to watch and all that kind of stuff, but with Sky Plus now coming along and lots of people choosing not to watch the adverts, and choosing their own programmes rather than channels, there are some enormous challenges out there for public service broadcasting. Can it really survive? Can you survive that? Mr Allen: I think we can. I think there needs to be a clearer definition of public service broadcasting. A good example of that would be when we are trying to get political programmes. Sadly, for yourselves and for us, it is part of our PSB remit but we need to come up with more creative solutions that engage people in politics. Sadly, when we brand politics then we get quite a high turn-off rate. If we brand as issues, whether it is education, whether it is health, whether it is obesity, you can actually engage people in a debate. I think we need to change, and are changing, to try and get the debate, because people are interested in issues, they are not as interested in a red one, a blue one and a yellow one debating their point of view; they are interested in getting people to debate the issues more generally. I think there is a type of programming that will engage a number of people. It will not engage all the people but it will engage a number of people who want to be in the debate, and I think it is down to our creativity in getting the right people on the screen. Q153 Chris Bryant: So the kind of Shakespeare, Schiller and Shostakovich understanding of public service broadcasting is dead, really, because people will have so much choice that there is no way you are going to be able to force them to watch what is good for them? Mr Allen: I do not know if I accept that completely. Last year we did a modern adaptation of Othello and got very good ratings because, sadly, the BBC went head-to-head and undermined the ratings. There is a creative opportunity and challenge in actually having a range of programming that can attract people who would not naturally come to Othello. I think that is our challenge. I do not think prescriptive box-ticking and hours of PSB is the way forward. Q154 Chris Bryant: This issue about going head-to-head, counter-scheduling, that you have mentioned: one of my beliefs for a long time has been that you should not have politicians in any sense trying to tell people when things should be on television, getting their sticky fingers on scheduling. How do you get round this complication, especially at a time when, last week, I had a row with the BBC about a programme where they refused to tell me how many people watched the programme because they said it was commercially sensitive? How do we get round these problems? Mr Allen: I find that difficult to believe. The information is publicly available ---- Q155 Chairman: Chris, if you let me know about that, I will write to the Acting Director General. We have had that kind of nonsense from them before, and I will not put up with it. Mr Allen: The information is publicly available almost on a daily basis, if you read any of the trade magazines. I think the issue is there is not an easy answer. I think it is about setting it in the principles; of basically saying to the BBC and to other public service broadcasters "It is not in the public's interest for you to schedule head-to-head" and that being embodied in the Charter. It is not there. I do not suggest that politicians then become prescriptive if that was there but if you then had an independent body, such as Ofcom, reviewing how we are performing to our public service remit then that could be something that could be reviewed, because you could actually look at the number of instances when that is happening and say "Is that really falling within either the spirit or the letter of the law?" Q156 Chris Bryant: Freeview. A few years ago people said that the idea of a box that you buy, you plug in and which involved no subscription at all would not be an attractive proposition, but Ofcom's latest figures show, I think, an 18 per cent increase in the last year in Freeview. It is clearly going extremely well. However, it may not be a solution for every part of the country because geographically it just may not be possible. I am loath to return to the issue of my own constituency but there is no Freeview in the Rhondda. An important point: do you think that it is vital to have a free-to-air option, maybe on digital satellite, in the digital environment so that everybody has an opportunity to have not just the BBC channels free but, also, you and Channel 4 and Channel 5? If so how are we going to make that happen? Mr Jones: It is one of the issues that we have to deal with over the next year in terms of our deal coming to an end with Sky and we have had certain discussions with the BBC about the concept of freestat. We have to be concerned both about maintaining control of our transmission, both in terms of analogue and digital, and in terms of cost. We are facing an enormous potential bill from the Government in terms of bearing alongside 4 and 5 of the BBC, the complete load for converting all the digital transmitters - that is 1100 transmitters - at a time when we have already invested in partial infrastructure for the existing DTT transmission area, which as you said do not reach the Rhondda. Even if we did the complete conversion of 1100 I still do not think it is going to hit the Rhondda because of problems in relation to the topographic nature of Wales. So I think these are the issues we are going to have to grapple with. I think we also need to be aware that as Broadband rolls out this is another potential delivery mechanism for television channels, so it is not necessarily solely around a Freesat option. Q157 Alan Keen: David Elstein said the other week that 90-odd per cent of the BBC was just out-and-out entertainment anyway, so the public service broadcasting aspect of it was very, very small. In the case of ITV what difference would it make to you if you did not have to provide - what none of us really understand exactly - public service broadcasting? The regional aspect of it Frank has already been asking about. Mr Allen: If you look at the total ITV schedule, 33 per cent of the ITV schedule is public service broadcasting. ITC did a review for Ofcom and they estimated that there was approximately £250 million of opportunity costs in providing what is currently a range of public services ranging from news, regional news, international news, regional programmes, art, and religion - a whole range of programming. So a third of our schedule is currently constructed around what is currently defined as public service broadcasting. So that gives you a sense of scale. Q158 Alan Keen: I search around all the channels I have got available when I am sitting with nothing else to do and I am searching for stuff that is very difficult to find; I am looking maybe for arts programmes, and such like, and sometimes they are not easy to find. So I am a market. Why should we have to impose public service broadcasting on you when a lot of people are looking for interesting programmes which are not just entertainment? It is partly education, is it not, but it is still entertainment? Mr Allen: I think it is about us providing a range of services to different people. That is why it is not only across ITV1, it is across ITV2 and the new channel ITV3 - it is a range of services. I think the big challenge, looking forward, which addresses some of this point, is that in the past public service broadcasting, or the relationship with ITV, has been an "in kind" payment for a licence fee, but as we move to the digital world that you have talked about then the idea that we, as ITV, are paying £475 million in licence cast-offs (?) and in-kind public service broadcasting is not a sustainable structure. So I think what we have got to do is sit down and say, "How do we fund and structure ITV, if you accept you do not only want the BBC to be a PSB broadcaster?" Our view on that is that there should be a series of contracts: the BBC should be contracted to provide a series of services - PSB and others; ITV should be contracted to provide PSB; Channel 4 and Channel 5, so there is absolutely clarity on what we are being asked to provide and how that is going to be funded. If you look at a digital world that is how we would preserve PSB broadcasting moving forward. Q159 Alan Keen: If you had complete freedom what would you drop? If all your funding just came from advertising and that gave you a completely free market, what would you drop? Mr Allen: What happens is that basically we put on traditional PSB and our competitors schedule against that. So they will go against when we have got our news on and they will go hard with very commercial offerings - The Simpsons, or whatever. What you would do is have much more flexibility on when you played your public service broadcasting and how you structured it. At the moment there is a very rigid structure, and I think what I am saying is that in a broader sense we need to look at how public service broadcasting is funded beyond the BBC, because at the moment we see basically the licence fee as a BBC funding model and I think we have got to look at a different funding model and a different set of structures in a digital world. Q160 Chairman: Thank you. You must admit the Committee has been very co-operative without knowing the extent to which it is needed to be co-operative, Mr Allen. It has been delightful to see you and your associates. Thank you very much. Mr Allen: Thank you very much. Witnesses: Ms Jane Lighting, Chief Executive, and Ms Sue Robertson, Corporate Affairs Director, Five, examined. Chairman: Good morning and welcome. We are very grateful to you for coming here today, and we will start with Mr Fabricant. Q161 Michael Fabricant: The bad news was when I first saw Channel 5 I stopped watching but now I have become quite a fan; it seems to be changing its format. Do you see yourself now as a public service broadcaster? Ms Lighting: I have only been with Channel 5 for 12 months ---- Q162 Michael Fabricant: That explains it! Ms Lighting: No, no, no, I would not like to say that. I think Five has always seen itself as a public service broadcaster. What we clearly have been doing recently is, I think, improving the quality across the schedule and the diversity of the programmes we are offering. So I am delighted to see that you can see the difference. Q163 Michael Fabricant: The difference is noticeable. What is driving it? Is it to try and go - I was going to say "more upmarket" for certain types of programmes but I think that probably would call be the wrong assessment to make (and maybe rather a snobby assessment). What is driving it? Is it trying to get different audience profiles or is it because Ofcom are encouraging you to do it? Is it because of a sense of responsibility that you are doing it? Ms Lighting: There would be a number of reasons why we are changing, and I think one of the first things to remember is we are simply growing up as a company. We are the youngest, by a long way, of all of the terrestrial broadcasters. Five launched as the only terrestrial to launch into what was already a multi-channel environment and a very competitive one at that. In its early days I think Five was (and it was called the cross-channel five at that time) really having to push and work very hard to be noticed in what was already a very crowded market. We are now becoming more established; I think we are maturing and I think we have seen ourselves that it makes a great deal of sense, both commercially and in terms of the reputation of the channel, to put more emphasis on the diversity and the quality of the schedule. We, frankly, have better resources to be able to do that. Last year was the first year that Five made a profit, albeit a modest one but nonetheless a profit, after the start-up phase, which obviously took a lot of investment on the part of our shareholders, in terms of the re-tuning and the normal start-up costs of a channel. Q164 Michael Fabricant: One of the problems which you did not mention that Channel 5 (in those days) faced when it first started broadcasting - and still exists - is that you do not have universal analogue coverage, particularly in parts of the South coast which can interfere with French transmissions. Incidentally, the French interfere enough with British transmissions so I do not know why we are so reticent, but that is beside the point. There are whole areas of the country where you cannot pick up Channel 5 on analogue and we learn frequently that in the Rhondda you cannot pick up Channel 5 or anything else on Freeview. Is that not holding you back, or is now availability on satellite turning Channel 5's fortunes for the better? Ms Lighting: There is no question that digital is very good news for Five. We probably welcome digital technology and digital roll-out in a way that no other terrestrial broadcaster would. We have, in fact, made some improvements in our - as we would like to call it these days - "old, analogue system" but the focus, clearly, is the future and it is what digital technology will bring to us in terms of our coverage. Q165 Michael Fabricant: One of the suggestions you have made in relation to the BBC is that the licence fee should be top-sliced, and that a part of the funding should be available to Five for public service - no? Ms Lighting: Absolutely not. Q166 Michael Fabricant: I have been told the wrong thing altogether. Ms Lighting: We would actually take quite the opposite view. We do not believe that top-slicing is something to be recommended. We think that the BBC's current form of funding is the right one for the BBC and that, actually, top-slicing could be very difficult in any event to manage and to create a sort of Arts Council of the Air, if you like. So, no, it is not something that we would welcome or something that we are trying to bring about for Five. Q167 Michael Fabricant: I am very pleased to hear that because those are the sorts of arguments I was about to make. Ms Lighting: I think we are in violent agreement. Michael Fabricant: That is very good. In fact, it is such a love-in, Chairman, I think I will give up on that high note. Q168 Rosemary McKenna: Can I continue with the theme I asked the other witnesses, on the issue of whether there ought to be a ratings system for television programmes, or whether it is something that ought to be discussed in view of the concerns that are expressed by many parents with very young children, and older children, about the fact that everyone understands the watershed is nine o'clock but we have all the access to television and to computers, etc. Would you think that is worth discussing? Ms Lighting: I think this is a big issue and a difficult one, actually. I think the suggestion that this should be open to a wider debate is a very good one. What we actually do at Five is we have introduced some form of ratings system already in addition to the watershed. We have for our movies a rating that tells the viewers what they can expect to watch, and it is something that we have, particularly at Five, found our own audience actually welcomes. But we have done that specifically around our movie output and not around our general programming. I think more generally it may be more difficult to ensure that it is absolutely consistent, and I would slightly worry about the level of bureaucracy and administration across an entire schedule. Q169 Rosemary McKenna: To achieve that kind of consistency. I do not think anyone wants to go down the road of censorship but I do think people are genuinely looking for more information and more advice about content. Obviously, Ofcom are the people to look at that. Would you agree with that? Ms Lighting: I think Ofcom would be a very good place to start that debate. Q170 Rosemary McKenna: I think the concern is that Ofcom are involved after the event, when parents and people make complaints about certain things, and that they should be more proactive. Ms Lighting: I did think it was rather interesting to hear about Channel 4's experience of when they introduced ratings and actually it had a rather negative effect, which is why I am rather loath to jump to too many conclusions about this without suggesting that actually we do a really in-depth research and review of it. Q171 Chris Bryant: Can I return to the issue of Freesat? Part of the accepted world view for the last few years has been that there is a free-to-air offer which everybody is entitled to, and Channel 5 has been part of that although it has not been physically possible for people in many parts of the country to get Channel 5. Of course that is now possible in some parts of the country, but only if you pay money to Sky; you have to take out a package and the basic package is £17.50 and the next package up £19.50 and so on. Do you believe that Channel 5 would always want to be part of any guaranteed free package? Ms Lighting: We do see ourselves as a PSB who we hope and believe, in the digital environment, should be available universally, which is why we have welcomed the introduction of Freeview. I think it is an extraordinary platform to have seen just what has happened in the short time it has been around; it has grown to about 3.5 million homes - about the same size as cable which has taken considerably longer to establish itself. I think the introduction of a free satellite offering would be a very positive step, both for viewers and for the speed at which people would be able to take up digital rather than waiting for a full roll-out, but also I think there is enormous economic benefit in covering part of the country through satellite. Q172 Chris Bryant: Were you a bit depressed by the way the BBC went it alone, by going on to Astra 2D and therefore circumventing the need. Ms Lighting: In terms of going it alone, in terms ---- Q173 Chris Bryant: They have created a Freesat BBC, have they not, because you can go and buy a Sky box and use it and you can get the BBC, but you cannot get ITV, Channel 4 and Five. Ms Lighting: That is true, with the exception of Solus cards, which are available through Sky. Q174 Chris Bryant: You cannot get a new one. Ms Robertson: We were rather depressed by the unilateral action which immediately meant that the Solus card system, which the BBC had funded to start with, was stopped and so there was a problem for people, particularly in constituencies like your own, who had been receiving us through that means. That is why, together with Channel 4 and ITV, we for a period of time funded a scheme whereby people could, for a very cheap price, buy a Solus card to last the next three years, so that they could continue to receive our services on the satellite. Actually it is interesting it had quite a small take-up - much smaller than we had thought it would - but people did have that opportunity. We e-mailed everybody ---- Chris Bryant: There was enormous confusion about it, I think, and that was one of the issues I had more letters about - certainly more letters about it than I did about the Iraq war - from my constituents. I am just intrigued because, of course, that Solus offer is for three years; one of those years has now gone and there is only two more years of that, and you cannot go out and do it from scratch now. Chairman: I do not want to interfere with your line of questioning but this is an inquiry into BBC Charter Review. We are always delighted to see our friends from Five and we are very interested in Five but this is not an inquiry into communications in general. Chris Bryant: Chairman, I think that is unfair because the question is specifically about the BBC and the BBC's relationship with the other broadcasters, so that they produce the Freesat option, which then enables people to see the BBC. Chairman: I said I was not being critical of you, Chris. If I am critical of you, you will know it. Please go on. Chris Bryant: I do not think there is any need, Chairman. I have finished. Q175 Derek Wyatt: Good morning. Can you just tell me what your budgets are for production currently? Ms Lighting: Our programme budget is currently £170 million a year. Q176 Derek Wyatt: As I understand it, BBC3's is £100 million and they get less than 2,000 viewers per hour most of the time and 10,000-15,000 sometimes, and if we are lucky they get 100,000 which gets to .1, which is very good. So I am interested that you are not for top-slicing because we did not ask for BBC3 or 4; there was no negotiation with the people who pay their licence fee. I would like to see a UK film channel and I would like to see the BBC pay for that. If they do not want to do a PSB channel that we might like I would like to see a sports channel for the BBC. If the BBC does not want to do it why should there not be a fund made available for people to bid to say, "If they don't want to do it we would like to do it and we would like it to be paid for by the licence fee"? Ms Lighting: I think that when we have looked at the concept of top-slicing the view that we have taken so far is that most people have been talking about it in terms almost of an annual amount of money that perhaps would come from the BBC and would be invested directly into programmes that would then go into the various terrestrial broadcaster schedules. Our view, at the moment, is that the BBC is funded in the right way. By taking money from the BBC I do not think that will enhance in any way the offering we already have. I think the PSB requirements upon the other broadcasters are acceptable to all of us. What we would ask for, from Five's point of view, is actually just a little more flexibility in the way that we are asked to provide our PSB. By that, what I mean is more flexibility to choose the areas that we feel it is right for us to do. I will give you an example. Our arts programming, which is something that we have become fairly well-known for recently, and our science programme that we have just launched in January, were not actually a requirement per se by us but something that we were able to do, and we put into our peak-time schedule. We would rather move to an environment where we actually have more flexibility to work within our schedule and to look for opportunities to provide programmes that other broadcasters are not necessarily, and actually to be scheduling in a complementary way. Simply putting additional money into Five, with restrictions that may come with that, is not seen as particularly beneficial to us. Q177 Derek Wyatt: You heard Sir Christopher Bland say that on digital radio (I am going to find out how much they spent) they now admit that it was a mistake. We never asked them to do that. By the way, we could not even hear it. So what is public sector about that? For instance, my community radio stations - I have three with one-month trial dates - will never survive and never work in any other way unless there is a trust fund for them to work. I would say that that is a BBC duty; that they ought to have done community radio. They think it is rather down there, and they do not want it to affect their own radio programmes, but if we cannot get a community radio fund and we cannot top-slice the licence fund, how will community radio and community television develop in the UK? Ms Lighting: I am less familiar with radio, I must admit, than I am with television, but I would point to the BBC's investment in BBC3 and 4. We were just talking a moment ago about the success of Freeview as a platform, and I am under no illusion that actually those new channels have been part of the driving force of that digital roll-out. So I think the BBC are actually playing a very important role across the whole of PSB and driving digital take-up. Q178 Chairman: Following on what Derek has been saying, if you make a bloop you pay for it - you suffer, one way or another. Ms Lighting: Yes, we do. Q179 Chairman: If the BBC makes a bloop we pay for it. Basically, hardly anybody watches the BBC's digital channels. I personally find BBC 4 an attractive channel, but I must be practically the only person in Manchester who watches it. They spend all of this money on this, as Mr Bryant has pointed out and as others have pointed out. When I turn on Radio 3, all of the frequent interruptions on Radio 3 tell us "This is BBC Radio 3 on so-and-so FM plus digital radio", to which nobody is listening. You, like ITV, although not so much Channel 4 (that is in a different area) are susceptible to the market; the market decides how you do. Is it really acceptable that you have to compete against a broadcasting organisation who, provided in the case of new channels the Secretary of State allows them to go ahead, can do whatever they want, spend whatever money they want and obscure their accounting as they do (that is very well-known) and yet the only people who pay for it in the end are the licence-payers? Ms Lighting: I have a few points I would like to make around that. One is that I think the new channels BBC3 and 4, as I say, are important additions to the BBC. I think that it was the right decision for them to enter that market. What I think is important is that we find a way of ensuring that the BBC does keep to the remit as set out around those channels. The area that I have, from Five's perspective, more difficulty with is actually when we see the BBC investing licence money in acquiring foreign programmes. That, for me, is an area that gives me more cause for concern as we see the BBC either going out and acquiring blockbuster movies or buying commercial series from, usually, the States and doing so against what is already a healthy environment, a commercial market which would be just as prepared to acquire those programmes and to pay the price for those programmes. Effectively, what happens is often the BBC will drive up the price of those programmes beyond the commercial market rate. I had an example just last week of a series that the BBC acquired. We were in competition with them, we got to a certain level where, commercially, it was not viable to bid any further and yet the BBC continued with their bidding. So there are those more practical areas that I would like to call upon that we should look at in terms of how the licence fee is used. Where it is used for original programming and where it is used to provide programmes via different platforms I have far less of an issue, particularly where those programmes are British products. Q180 Chairman: I do not want to be rude to you but you, Channel 4 and Channel 3 have all got a vested interest in the continuation of a licence because if the licence did not continue then somehow or other you could be undermined. Ms Lighting: Absolutely, yes. Q181 Chairman: But that is not the deal, is it? The deal is not that you are insulated from possibly formidable competition from the BBC because of the fact there is a licence and, therefore, they do not have commercials or, in the case of Sky, they do not have subscriptions or whatever. I can accept that that is the deal for you but what about the deal for the licence-fee payers? That is not their deal, is it? In the end, the licence fee payer does not care whether there is a 3, 4 or Five because the licence fee payer is paying for 1 and 2. Ms Lighting: I think the licence payer and the viewer at large does care if there is 3, 4 and Five, very much so. I think that when you look at the television economy as a whole, it is important to bear that big picture in mind. So, it is not as simple as saying that if we reduce the licence fee or we find a different way of that licence fee being covered, it would have no other impact on the viewer at home. Q182 Derek Wyatt: I have asked this question of a number of people. Do you think that ten years is a reasonable period of time? None of us can be confident where the technology market is going to finish up in 2017. Would it not be better to have a shot across the BBC bows and say, "We will give you five maybe or seven but we want to come back and review this" and not let it just drift? Would you be in favour of shortening that period? Ms Robertson: We think there is a considerable amount of sense in what you say in that, how we can know now what the market is going to be looking like in ten years' time? We have not seen through the whole digital switchover process. So, a shorter licence than, say, the ten years that is currently being mooted might be a wise track to take. On the other hand, I do understand the pleas of people who say, "We are constantly being reviewed; five years is not long enough." We think as a channel that one needs to look at that length and the implications. Maybe something along the lines of what Charles Allen was talking about, a sort of root and branch review at the point where what is going to happen with digital switchover becomes much clearer. That might be the way forward. Ms Lighting: I think one of the biggest questions around it is actually what will happen with platform delivery and I think that once we know how the various digital platforms are rolling out in the UK, then we will see the role of the BBC within that and I think it will be much easier. Q183 Derek Wyatt: Is it your view that the deciding bit of technology is actually free-to-air satellite and that will have to be out on the market and then we could see how that went before you could make a defining decision about the future of the BBC? Ms Lighting: Free-to-air satellite is important in terms of the timing of digital rollout as a whole. I find it hard to see that we will get to the dates we would all like to reach unless digital satellite is something that is addressed in the short term. Q184 Mr Doran: You made a point earlier about the competition you were in with the BBC over a particular programme which you lost. Is that not always a problem for you? They are a big beast with 30 per cent of the market; you are much smaller with about six per cent or thereabouts of the market. Ms Lighting: The BBC is certainly larger than we are by a long way! Actually, there should however always be what you could loosely call a commercial market rate for programmes and there is an acceptance that, over and above certain levels, one is certainly justifying the acquisition of a programme for other reasons than commercial market rate. It is not so much that the BBC clearly has bigger pockets than us and therefore could buy more programmes if they wanted to, but we do not have this problem in the same way with Channel 4 or ITV. Q185 Mr Doran: You do not have that problem with ITV? Surely the commercial considerations which ITV take into account --- Ms Lighting: We can still beat and win programmes from Channel 4 and ITV because we are bidding on the same basis that we are bidding on a commercial basis. So, what is commercially viable for us will be commercially viable for ITV and vice-versa. Q186 Mr Doran: I find that a little hard to understand because they have a much larger income from advertising. Ms Lighting: They do, so their overall budget will be larger than ours but, in terms of their justification for an individual product, our justification will be very close to theirs individually. Q187 Mr Doran: I do not think I understand that but we will move on to something else. The ecology of the broadcasting market is always changing and, for a long time, we have had one big beast in the market and that was the BBC. We now have the ITV company which is another big beast and the range which you are more familiar with than I am. What I am getting across quite strongly in the evidence we have heard today and in the written evidence is that, despite the changes and despite the movements in the marketplace, the BBC is still extremely important to every one of the other players in the market. It may be going a little too far to say that it provides a sort of umbrella but it certainly provides a touchstone set of standards etc for everyone to weigh themselves against. Can you comment a little on that. Ms Lighting: I think our view from Five's perspective - and Charles is not here at the moment - is that the BBC is a particularly good touchstone for ITV. We would not claim to be large enough to be trying to compete with the BBC ourselves. However, it is a standard setter across the whole industry. I think that, in terms of the quality of programming that the British public not only enjoys but expects, a lot of that has historically been driven by the BBC and it continues to do that. So, for all of us in terms of us keeping on our toes and delivering quality that will be really appreciated as quality, the BBC will continue to have a role for quite some period. Q188 Mr Doran: So, the whole of British broadcasting benefits from a strong and vibrant BBC? Ms Lighting: We do and our view at Five would be that we are generally very supportive of the BBC. I will have a few niggles that I will quote of things where we feel that they are using their position to influence the market negatively, particularly where it is unnecessary, where it is acquired for in programming that really, as long as that programme is going to be brought to the UK and aired in the UK, then my view would be that the BBC, as the public service broadcaster it is, should, frankly, withdraw from such head-to-head battles and should commit its investment to British original programming. Q189 Mr Doran: The big issues in this whole debate about the Charter are about the length of the Charter, about the role of the governors, the separation and regulation. Are these issues that matter to you in the day-to-day marketplace? Ms Lighting: Yes, they do. We, as I say, are less affected by the BBC than, for example, ITV would be, but the BBC nonetheless has an important effect on us. Even the BBC, for example, showing high levels of football on BBC 3 will have an impact on our own viewing share. So, yes, they do have an absolute effect on us. In terms of governance and so on, obviously that has less of a direct effect on us. It is their commercial activity and their scheduling activity that has more of a direct effect on us. Ms Robertson: We do believe that there should be more of a role for Ofcom in terms of regulating some of the areas of the BBC's activities, such as cross promotion, new channels and probably into tier three as well. Chairman: Thank you very much indeed. We are most grateful to you. |