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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 598-v House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE CULTURE, MEDIA AND SPORT COMMITTEE City Chambers, 80 George Square, Glasgow
Tuesday 6 July 2004 SIR ROBERT SMITH, MR KEN MACQUARRIE and MR PAT LOUGHREY MR JOHN PEARSON, MR DERRICK THOMPSON, MS HELEN ARNOT and MS ELIZABETH PARTYKA
MR PAUL BROWN, MR DAVID GOODE, MS NATHALIE SCHWARZ and MR STEVE BUCKLEY Evidence heard in Public Questions 278 - 347
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Culture, Media and Sport Committee on Tuesday 6 July 2004 Members present Sir Gerald Kaufman, in the Chair Chris Bryant Mr Frank Doran Alan Keen Rosemary McKenna ________________ Memorandum submitted by BBC Nations and Regions
Examination of Witnesses
Witnesses: Sir Robert Smith, National Governor, Mr Ken MacQuarrie, Controller of BBC Scotland, and Mr Pat Loughrey, Director, Nations & Regions, BBC Scotland, examined.
Chairman: Gentlemen, I would like to welcome you to this hearing of the Culture, Media and Sport Committee. I would first of all very much like to thank Glasgow City Council for making this very handsome room in the beautiful City Chambers available to us for this sitting. As it happens this is the second time I have chaired a select committee hearing in this building because the National Heritage Committee which I chaired also held a hearing here, so this is becoming something of an intermittent tradition for our select committee to hold hearings here in Glasgow. This, as you know, is one of a number of hearings, most of the rest of which are being held at Westminster, in our inquiry into the BBC Charter Review. I will ask Rosemary McKenna to open the questioning. Q278 Rosemary McKenna: It is quite clear under the current Charter exactly what the BBC's responsibilities are to the nations and regions of the UK. However, what we would like to know is just how autonomous BBC Scotland is. Mr MacQuarrie: If we take, for example, scheduling of BBC 1 and BBC 2, we are in the scheduling of programming very much autonomous but we would obviously look to fixed points, for example, the Six O'Clock News and the Ten O'Clock News, in considering the needs of the audience and the need for the BBC to offer a shared experience across the UK so that when we schedule sport, for example, or when we are scheduling factual output, we are able to take into consideration the needs of the audience in Scotland at a particular time and schedule accordingly. In that sphere of activity we have absolute autonomy as far as the scheduling is concerned but it is a discretion that we use with consideration and also in co-ordination with colleagues in the network in terms of making sure that we all know what we are scheduling at a particular point in time and that we have the marketing and all the listings and relevant information for the audience. Sir Robert Smith: Perhaps I could amplify that by talking about the governance. We have the Broadcasting Council for Scotland which is essentially advisory. The governors are the ultimate decision-makers in London. I am a governor as well as Chair of the Advisory Committee of the Broadcasting Council for Scotland. This year, with the introduction of the Scottish Six, as it was called, the Six O'Clock News hour between six and seven, which changes from international and national to purely Scottish news, we looked at whether that should be edited from Glasgow. We had about 20 public meetings up and down Scotland which members of the Broadcasting Council attended. The Broadcasting Council laid down a remit for independent investigation. When we got all the evidence back the management in Glasgow came to us with the proposition that we should not change. It was a very well argued thing. We agreed with that and we had no recourse back to the governors in London. We felt that the governors, if you like, of the advisory people in Scotland were content with what the management in Scotland were saying about the Scottish Six and we decided to go ahead on that basis and we did not have to go for approval to London. Q279 Rosemary McKenna: This is your opportunity to see if you would like further autonomy or if under charter renewal there is anything that you would like written into the charter which would strengthen your autonomy? Sir Robert Smith: I would not want any more direct power like that because I think there is enough opportunity there. Under the changes that the governors are bringing into governance generally, where they are creating more blue water between management and themselves, we are setting up a system in London where we will be able to commission independent research and we will be able to use internal people to do that. We would like to see Broadcasting Councils have more of an opportunity to use independent research locally as we did with the news and current affairs review this year. Mr MacQuarrie: We are looking at diversity this year in its fullest sense in terms of what we are doing across our services from social inclusion through to geographic diversity in that the Broadcasting Council will lead a major project with independently commissioned research on diversity in much the same fashion that we did the news review last year as a sample of 1,160 plus the public meetings. Sir Robert Smith: Broadcasting House are going to be talking about this and if the Broadcasting Council feel frustrated we will go to the governors and say, "Look: we need more authority here". If we feel really strongly about something I believe that the governors have to listen. Q280 Rosemary McKenna: Pat, you are Nations and Regions now? Mr Loughrey: I am in the unaccustomed role of being the voice of London and, as you will know from my accent, that does not come naturally to me. I think the best form of autonomy is meaningful economic investment. What has happened in the past six or seven years is unprecedented investment outside of London from the BBC and the old days of "London calling, London calling", have changed beyond recognition. Because it has been a gradual process what you have in Scotland now on television, because it is their economy, is a Scottish voice, Scottish branding throughout the day every day. You have Scottish programmes in peak time without challenge from elsewhere and you have the kind of investment that allows Scottish support, Scottish entertainment and Scottish drama to compete with any other form of broadcasting from any other source. Then there is radio. All the nation's radio services are devolved from dependence on bits of Radio 4 and the old Home Service with local programmes slotted in. Now you have got a free-standing schedule for all the peak time hours. That is a massive change with, likewise, financial growth. I believe those are the measures of a significant shift in that part of the BBC away from its London roots. Q281 Mr Doran: We have obviously seen an improvement over the last few years in devolution to the regions. In plans recently announced by the BBC it seems as though there is going to be even more of that, and indeed you have mentioned that yourself, Mr Loughrey. We hope to tease that out a little and ask you to say a little more about how you see the future in Scotland. For example, there was talk of over a billion pounds being spent outside London over the next ten years. What is Scotland going to get out of that? Mr Loughrey: I have been charged by Mark Thompson, along with my colleague Peter Salmon, with drawing up those plans. In the past six or seven years, as I said, there has been unprecedented growth in the three nations. It is obvious that some of that growth has happened while there has been a degree of neglect of the large centres of population in England. As commercial television in particular seems determined to move towards London and away from their regional roots there is an obvious need and opportunity for the BBC to take advantage of the great deal of talent which would otherwise be dormant in the sense of fairness about collecting lessons from across the entire UK. I guess our first priority is to re-assert opportunities for Bristol, for Birmingham, for Manchester, the big population centres in England. Even if we fulfilled all of our plans that are envisaged for those three centres in England, there is real opportunity for the three nations to continue to grow. The figure you quoted, affecting half of the BBC staff who will be based outside of London within the next charter, is a remarkable commitment from the top of the BBC, from the new Chairman and the new Director-General. The growth of Scotland has been remarkable in the past four or five years. The momentum is there: for example, 20 per cent of all of the BBC's rapidly growing children's output is now produced in Scotland. I cannot see any future in which that growth will not continue. Q282 Mr Doran: You talk as though you see a commercial opportunity rather than fulfilling a public remit. You make the point about the commercial companies withdrawing a little. I think there are gentlemen behind you who might question that. How does this fit in with the public remit? It is not that the BBC has not had a commitment to the regions for most of its existence; there is no question about that, although clearly it is a lot stronger now. Also in the papers I noticed that there was some suggestion of more local opt-outs. How local are you going to get? My interest, for example, is in north central Scotland. We have got very good studios in Aberdeen which serve a very wide area of the north of Scotland but we still have to get the same programmes as Glasgow and Edinburgh have. Mr Loughrey: I do not see it as a commercial opportunity. I see it as an opportunity of audience need. There is a clearly demonstrated sense of audience requirement for local information, local news and local contact. We have a raft of evidence from very extensive piloting and research to demonstrate that need. I am afraid there is evidence of ITV being less committed to their regional roots than they were historically. I think that is an economic inevitability for them but the BBC has different realities. There is an obvious public service remit for us across an increasingly devolved, granular UK. In terms of local broadcasting I have spent most of my career criticising the metro-centricity of the BBC with regard to London. The truth is that that metro-centricity is every bit as true of Belfast (where I have spent a lot of my time) dominating the whole of broadcasting in Northern Ireland, of Cardiff the whole of Wales and of the central belt the whole of Scotland. Our vision is to provide a far richer service for the regions of Scotland. We have seven Where I Live sites at the moment. That will be the launch pad, we hope, for a local news service across the whole of Scotland. Q283 Mr Doran: That will be based on digital opt-outs? Mr Loughrey: On-line, broadband, and as technology unfolds we will seek other means of distributing that most effectively. Q284 Mr Doran: One of the key areas in our inquiry is the position of governors, Sir Robert. You are the National Governor for Scotland and in the announcements made last week by Michael Grade there was clearly a new local governance. I think most of us want to see tougher governance and more intervention and a more proactive Board of Governors. Can you say a little about how you see that from your perspective and how it will affect the position here in Scotland? Sir Robert Smith: What we have in mind, and incidentally this is not in particular a reaction to very recent events, is continuous improvement in the BBC. For example, when I was appointed Scottish Governor back in 1999 I was the first Scottish Governor to have to apply and go through an interview. Previous governors were just tapped on the shoulder and told they were a likely lad. Governance changes the whole time and improves in every walk of life. We have got to be seen to be relatively distant from management now. We are not regulators, or, rather, we are regulators in certain smaller areas and we carry out the regulation brief from Ofcom, but we do govern and in governing we are ensuring that the regulations are carried out. In order to be seen to be not captured by management what we are doing is creating some sort of blue water by having our own secretariat and our own research people who will be employed by us directly . They will not fit into the BBC management line. They will report directly to us. We are also going to be announcing in a few weeks' time a change to our complaints procedure which we have been trying to improve over the last couple of years. This is a major announcement for how complaints will be dealt with in the future. Using this quite separate secretariat of people who will be monitoring complaints and monitoring how the organisation is carrying out its remit, as you see in the document that we produced last week, we are going to grant licences to each of the networks and we are going to be measuring them against a whole list of criteria so that they create public value. I think it is going to be more interventionist than it has been in the past and I think it will be clear that the governors are much more separate from management rather than being supporters, if you like, as they might have been seen in the past. I do not think it was like that but the perception was that it was. Q285 Mr Doran: Next week we are going to have the new Chairman and the new Director-General in front of us to present the annual report and over the past two or three years one of the criticisms that the committee has made of the annual report has been that the governance seems to have been fairly anaemic, to quote one of the words that came up, because there is virtually no criticism. I think last year the only criticism of the BBC's performance was about the number of ethnic minority candidates who were recruited. Are we going to see anything like a separate governors' report in the future? Sir Robert Smith: I think you will see a big difference this year. The report this year will be in two parts. Because it is not published yet I cannot tell you too much about how it will look but it will be in two parts. One will be from the governors which will very clearly say what the governors feel about performance during the year. The other half will not be a company annual report brochure selling the organisation. The first half will deal with the governance and how it is carried out and I think you will see some criticisms. There is incidentally fully two pages on the whole Hutton issue. We feel that we are drawing a line under that and we want everyone to understand exactly what happened, what mistakes were made, what lessons have been learned and what we have done about it. Mr Doran: We will look forward to that. Thank you very much. Q286 Chairman: Before I call Alan Keen I would like to follow up the last question which Frank Doran put to you because, Sir Robert, we have here an advance opportunity of speaking to you and in a sense we are leapfrogging next week because later in our inquiry we will be dealing with both the documents that have recently been issued and the whole governance issue and therefore it is appropriate that I should ask you about that. The feeling last year was not simply that the BBC annual governors' report was abysmal but that it was based upon a predisposition to be in favour of everything that the BBC had done regardless of its quality or justification and, although I do not want to and indeed will rule out of order anybody else who tries to refer to the whole Hutton issue, nevertheless what emerged from that famous Sunday night meeting was apparently a predisposition by the governors to take for granted what they were told. One of the big concerns with regard to the future governance of the BBC and why this select committee, when it was reporting on the Communications Bill (and indeed when it recommended the setting up of what is now Ofcom), recommended that the BBC come entirely under Ofcom - and I make clear that that is not necessarily what the committee will recommend this time because we do not know what will come out - was that the BBC governors were there on the one hand to be part of the BBC but on the other hand to hold the BBC to account and that this was anomalous and very difficult to separate. Mr Grade, when he made his statement on the 29th, was moving towards trying to sort that out but we would be very interested in your comments. Sir Robert Smith: I think the line that he came out with was that there is nothing wrong with the governors being champions of the BBC but what they cannot be is champions of the management of the BBC. I think you will see in our statement on Hutton that some lessons have been learned over that, although if you wanted really to go into Hutton there are a lot of things that we could say about the Sunday night meeting and the inquiry we undertook, but mistakes were made. We do understand the difference and with regard to the line that Michael Grade took about being champions there is one area that we are particularly left with under regulation, which is bias. I cannot remember the exact words but it was about impartiality, that sort of area. I think it is right that there is a danger in concentrating all the power in a regulator. Particularly where you take the BBC and potential government intervention and so on, this line of balance and balanced reporting is one area where it is right that it is kept with the governors and away from Ofcom. I think Ofcom on taste and decency and all these sorts of things is fine, and underneath that the governors set guidelines which may go further than those which Ofcom have set. I think lessons have been learned and absolutely we are not here to champion management; we are here to question management on behalf of the licensee. Q287 Alan Keen: I saw at close quarters the working relationship between Gavin Davies and Greg Dyke and I thought it was excellent. With your background in business you will have seen that model repeated over and over again in the commercial world. Of course, when the problem arose Gavin maybe was too close to the operations of it and would tend to defend management. Gavin advocated straightaway that there should be an executive chairman, as Gavin seemed to act as, and a separate chairman of governance. Now we are going to get another person who will make an excellent chairman but he has been even closer to the operations of TV and radio, so there is a greater danger. It is not just a danger - it would be a shame if the new chairman could not be part of the management but it is impossible to do both jobs. How do you react to that? Sir Robert Smith: You are almost getting on to my specialist subject, which is not broadcasting, incidentally. I do not think you can have two chairmen but in a way we have got that because you have got the chairman of what is really a supervisory board and the chairman of the management group. That is how it works. You have to have a good relationship between a chairman and a chief executive. It would be totally dysfunctional if you had a very bad relationship there. People might say, "It is very clear that there is blue water between them" but it just would not function properly. The Board of Governors has to be a reasonable working relationship and the chairman/chief executive relationship is very important. I think we have actually got that because the board is the Board of Governors. The Director-General, the Deputy Director-General and the Chief Operating Officer under the new constitution are not members of that board. That board is chaired by Michael and that board supervises the management board, which is chaired by Mark Thompson. It does actually work almost with two chairmen, if you like. It is a tricky thing. The more distance you get the more remote they are and the less co-operation there is between the two and the more the organisation suffers. What you cannot always have is total catch-up if they get too close. I am not commenting on the relationship between Gavin and Greg. We will make our statement and that is it. There always is a danger of being too close and of being too far apart. Q288 Alan Keen: It is a tricky problem. Can I go on to Pat? You can tell by my accent, Pat, that I was brought up on Teesside and in those days we used to have jokes about people from Newcastle, which seemed very large to me. I thought London was England and that we were different, so I understand the Scottish situation as well. How do you balance that? I look through different eyes. I have been in West London for a long time now; I actually live in West London now. I look back at the north east and I know that it needs to speak as a region and not as Tyne versus Tees. How do you balance those things? It is not just making programmes; it is a voice for the region as well, is it not? Mr Loughrey: Yes. This is another complex issue. I look across at the diversity of the United Kingdom as a hugely healthy, energising thing, and we can provide an internal dialogue within local radio areas, within where I live and within local television and radio. That is increasingly possible. We play a huge part, I hope, in the political life of the United Kingdom with our politics output and our active political coverage in news. The bit that has perhaps been neglected is in ensuring that that voice is consistently heard across the UK, so inter-regional and across the whole United Kingdom. That is what we are pledging to change. At the moment we have vigorous production centres in the three nations. We have less vigorous production happening across the regions of England and we are determined to enhance that for the benefit of the regions but also to ensure that the network schedules are as rich as they can be. When we produce programmes like Auf Wiedersehen Pet they do not just make audience tastes in that specific region; they make audience tastes in the entire UK, which is a far more tolerant and far more broad-minded audience than the old suppositions might lead us to believe. It is about nurturing the talent and ensuring that the string of remarkable writers from all parts of the north of England have opportunities through to public service broadcasters from the craft skills, costume design and stage construction. These are important prerequisites of a vibrant industry. We are determined to invest in those areas and build on initiatives like the Regional Theatre Initiative(?) in Newcastle and ensure that happens. There is also a renaissance happening in the cities of England. You do not need to spend long in those to see that. I am privileged now in my job to see a sense of pride and opportunity for the future and an unwillingness to accept less generous services than are available elsewhere. That is as true within broadcasting as it is in the rest of the public service. Q289 Chris Bryant: Can I ask you a question from one of your own documents? It is Defining a Nation: Wales and the BBC. Aled Eirug says, "... how can the BBC adequately serve both one nation and a series of nations? How can it contribute to a sense of cohesion in the United Kingdom while exploring the diversity of its component parts?" Mr Loughrey: That is an interesting quote. I think the diversity of the UK is its greatest strength. It is all of us from all of our different backgrounds coming together to provide broadcasting in which we passionately believe. We believe that broadcasting is a force for understanding and for creative fulfilment and enrichment in society. It is the variety of languages which we speak, the places and cultures from which we come that enrich and enliven that debate. If we were monolithic, if all of our identities were the same, there would not be the need for the bit of the BBC that I provide and a central singular monolithic voice would be adequate. Happily, the UK is a much richer and more diverse entity than that, not just because of our historic heritage and indigenous cultures and languages, but also because of waves of settlement over many generations and centuries. Our areas offer the ideal opportunity to ventilate and nurture that. There are not easy solutions to it. It has been an organically changing and shifting pattern. In the last decade we have probably moved more in a pluralist direction than we did in the previous one. Q290 Chris Bryant: I wonder whether that is true because it feels from a Welsh context as if you have decided that one of the things that you are there to do is define Wales as Welsh and as being different from the rest of the UK and that creates a monolith of its own. It is a small monolith, I suppose; it is a Welsh monolith. You have spent a lot of money on BBC 2 W, which is different from BBC 2, and BBC 1 Wales is different from BBC 1. We get programmes at different times and some of the biggest television news and current affairs programmes that would be on earlier in the evening in England are on later in Wales because there are specifically Welsh programmes put on. The governors put a lot of money into reporting devolution. I just wonder whether there is a danger that you adopt a kind of nationalism. Mr Loughrey: You and I have discussed this before. I do not think that proper coverage of the devolved institutions of Parliament and the Assemblies is doing any more than fulfilling our public service. In the John Birt era of running the BBC there was very significant and very proper investment in that work. If the accusation is that we are somehow nurturing an insular and self-obsessed identity I do not recognise that. If you look at the remit of BBC Wales, as we speak there is the production of a series of excellent factual programmes on Kew Gardens, we are about to produce Dr Who for the network. I do not think that speaks of an insular, monolithic obsession with Welshness but it is absolutely right, of course, that BBC Wales provides programmes that are based on and celebrate the unique identity of the Welsh language. Q291 Chris Bryant: The Welsh language and heritage? Mr Loughrey: But not exclusively. Q292 Chris Bryant: The BBC in the past - BBC Wales, BBC Scotland - used to do better at getting programmes on to the national network than it does now. It did better in the 1950s and the 1960s, according to your own document. Mr Loughrey: What you say is our own document is a series of essays that we commissioned from people who did not accept a specific brief from us. It is to ensure that the charter to date happens across the whole UK. These are critical friends, if you like. Q293 Chris Bryant: Half of them work for the BBC. Mr Loughrey: Some of them work for the BBC but that does not mean in this instance that they carry a BBC remit. Statistically I would challenge the assertion that our network representation has fallen. The opposite is the case. The level of production in the nations for the networks has grown in Wales by a factor of three in the last five years. Q294 Chris Bryant: I have not seen many made-in-Wales programmes coming on the national network. I know Dr Who is coming on next year and I suppose you would say that one of the recent dramas, He Knew He Was Right, was a BBC Welsh production but I do not see how BBC Welsh it was. Mr Loughrey: If you look at Belonging, if you look at the splendid Alun Cafr(?) documentary, you have on BBC Wales one of the finest factual production departments that exists in the BBC. They had 11 series running on four television networks at one time this year, an unprecedented success. Q295 Chris Bryant: You said something which I wholeheartedly agree with about there being sometimes a tendency within both Scotland and Wales as well as England to get obsessed and it is very depressing when you see a BBC news story about education and they have got just about as far as Gospel Oak in north London. I wonder what your response is to community radio, which has been very dismissive - or has felt very dismissive. Quite a lot of other MPs have raised with me that they are feeling that the BBC is never very interested in anything genuinely local. Do you think that is fair? Mr Loughrey: I am sorry if that is the impression. My colleague, Jenny Abramsky, of Radio 5, will look after the new portfolio. This is access radio for the community generally. Q296 Chris Bryant: That is what used to be called in the Communications Act community radio. Mr Loughrey: Yes. We made three specific offers of support to access community radio. We are going through a relentless process of digitising kit and upgrading our equipment. We are offering to those radio stations free training for anyone engaged in that kind of work, non-profit driven, community based radio. We are offering free training in any one of our centres across the country and I know that is happening in three or four as we speak. Lastly, if they wish to accept it, given proper controls we will give them our news output for use on their airways, provided it is clearly branded as BBC news and not scattered in the service. I think those are pretty significant offers of help. Rather than just give you the rhetoric, we are determined to be better partners than we have been historically across the world of broadcasting and indeed in communities. You know our open centres and buses only happen in partnership with education authorities in communities. Historically the BBC was not good in partnerships. We have realised that that is how you achieve things in the community and we are determined to be supportive of groups like community radio. Q297 Chris Bryant: I think everybody would applaud the announcement last week about taking lots of production outside the M25 area. I just wonder how easy it is going to be because I know A Question of Sport has been made in Manchester for some time and you have tried a version of A Question of Pop, which you were going to do in Manchester and artists refused to come to Manchester to do it so you ended up doing it in London again. Are there going to be difficulties? Mr Loughrey: Yes, because the industry is tilted more and more towards London. It is right that the BBC takes those risks and pushes in a different direction because of the nature of our funding. It will not be achieved overnight. We have set this charter period to achieve the targets that I have quoted in the document. It will be a slow process. As we speak almost all of the network commissioning decisions are made within that sealed unit that is the M25. Everyone eats in the same restaurants, walks in the same streets, attends the same theatre. When the key commissioning decisions are made in that milieu the talent and the industry know that those are the places to be. When the decision-makers live in a different environment, when they breathe a different air, when they meet different people, I foresee and Mark Thompson foresees a change in that dynamic and the talent will spot where the decision-makers are and follow them, but not overnight. Q298 Chris Bryant: So should there be a quota which establishes that 50 per cent, or not? Mr Loughrey: The 50 per cent is a very stretching target. History tells us that quotas are not the most creative device in our industry but you have a Chairman and a Director-General who are passionately committed, as indeed is the Board of Governors in its entirety, to achieving this because it is culturally and creatively essential in the modern UK. I foresee it happening. Sir Robert Smith: We are talking about moving 1,700 people. It is not just a case of, say, A Question of Sport going there. We are talking about complete channels having to move, complete genres having to move. It has to be thought out very carefully. If it ends up being very expensive we will have to think about that very carefully. Q299 Chris Bryant: One quota that you do have to abide by is the independent production quota. How does that work for the regions and Scotland and Wales? Is it not really the case that you are not going to stand much chance of increasing this level of production outside the M25 unless you improve your relations with independent producers? Sir Robert Smith: Strangely enough, on the contrary: we are exceeding that. The BBC overall just failed to reach its quota of 25 per cent. In Scotland, which I can speak for, and Pat perhaps can speak for the Nations and Regions, we are something like 30 or 33 per cent, depending on the two measures that we take of the thing, so we are way ahead of the game on that. Mr Loughrey: It is a good partnership. Of all the network production we make in the three nations for the networks, 60 per cent is made by independent companies. In representing the United Kingdom on the networks, frankly I am not obsessed with whether it is made in-house or out of house. It is important that it is made by people who live in and care about their patch. Q300 Chris Bryant: But the BBC employs 7,000 more people than the European Commission and so it is quite a big organisation. Is there a danger about being a monolith unless you are able to increase that relationship with independent producers? Sir Robert Smith: I do not think we have been very clever about creating relationships with independent producers. One defence we have used in the past is that it is because they occasionally merge or move out of being independent by definition it has been difficult for us to reach the quota. I do not think the governors accept that as a reason and I think some relationships mean that the quality varies. Some of the independents feel a little bit bound by the relationship with the BBC. We are going to improve that. It is great that I can speak from a position of strength in Scotland because we do go round and buy in technically the 25 per cent that the government have given us. Incidentally, I cannot argue with you about the 1950s because I have not delved into that history, although I did go back to the golden age of BBC in the 1960s where there seemed to be an awful lot of buying in of programmes like Kojak to fill in evening schedules and I can tell you that the home produced stuff was an awful lot less percentage-wise in those days than it is now. Q301 Chris Bryant: I was not around in the 1950s at all so I am only taking it from your own document. Sir Robert Smith: I was kind of around. Seriously, in recent years the percentage from Nations and Regions has been increasing. We have had particular successes. This is how it should be. Rather than taking quotas in each genre there should be centres of excellence developing. In Scotland we have got children's television and I can give you a world exclusive today which will be of interest to the Scottish constituency Members who are here, that Still Game, which is our comedy show, is going to go on the network this year. There has been a bit of concern about a tartan ceiling or something because comedy is the most difficult genre of all. We have got drama and we have got children's television and various things which we are highly successful in selling to the network, but Scottish comedy being understood, or Irish comedy or Welsh comedy, or even Cockney comedy being understood outside the M25, is a very difficult genre to do. That is one success story now. We have had Rab C Nesbitt, we have had Still Game, and that is tremendous for the people who are working here because it is done on merit and not against quotas. Q302 Chris Bryant: Obviously, the more you can get from the Nations and the Regions on to the national network the more chance you have of showing a diverse Britain and an exciting Britain, and indeed Welsh or Scottish people would quite like to see their programmes doing well round the whole of the country, but it just seems that Scotland has done rather better at this over the last ten years than Wales has. Northern Ireland has done rather better too. Mr Loughrey: I think in the year ahead you will see a significant uplift in the Welsh representation on the network. Q303 Chris Bryant: One final question, which is about broadcasting councils. Are they not a complete waste of time? Sir Robert Smith: Absolutely not. If you had been here at the time of the news and current affairs exercise in 1999 where there were resignations, had you been here last year when we looked at news and current affairs and did a very extensive survey, you would have placed great value on it. It does not just stop with broadcasting councils. We have four (five with Children in Need) advisory groups on religion, rural affairs, Gaelic and education. These four are composed of ten or 12 people in each case who are looking at religious affairs in Scotland, and that is feeding up and we are feeding into it a lot of information about what the licence fee payers are saying, wanting and criticising. Q304 Chris Bryant: Who chooses them? Sir Robert Smith: Ultimately the governors control the people who are running the different controls. The DG in turn controls the people who are running the different channels. The commissioning comes from the people who are running the channels. Q305 Chris Bryant: No; I mean who appoints the people on the councils? Sir Robert Smith: I am sorry; I misunderstood the question. There is an independent group of people again who are drawn from Scottish society, if you like, who are nothing to do with the Broadcasting Council and they choose. We openly advertise. They go through interviews and they are chosen and they serve usually for three years initially and they can be re-appointed for another two. We try to get a balance of area geographically or interest group and so on. Q306 Rosemary McKenna: I am delighted, by the way, about Still Game because I think it will do extremely well. I am going to offer to translate for the Chairman. Yesterday, as part of another inquiry, we visited the Science Museum and, of course, your building site is right next door. Would you like to tell us something about the move to Atlantic Quay because I do think that people do not quite understand? First of all, is it all BBC - production, management, everything is going to be there, and people who regularly contribute to BBC Radio Scotland will be delighted if they do not have that trek to get to the studio? Could you give us an idea of the scale of the project and when you expect it to be completed? Sir Robert Smith: Apart from the orchestras it is everybody and it should happen in about 2007. You are the expert, Ken. Mr MacQuarrie: We will open in July 2007. The building itself will be a 100-week build and then 12 months to do the technical bit after that but we are starting this month on site. The building already has had the exploration works and we are delighted to have had planning permission for it. We believe it will be a world-wide broadcasting centre for Scotland. It is probable that we will take this building with fully digital technology and it will also have high definition within that centre as well. The idea is that there will be a caucus of a media village in that area and other broadcasters are already committed to moving onto the site. It will be a tremendously creative place to be. As you know, at our own site where we are at the moment we are locked in and bounded by both the river and also with very difficult access and no room for expansion. The range of creative possibilities on what will be the corporate headquarters, it is important to stress, with the ongoing scheduling in Aberdeen, will mean that Edinburgh will be able to come in and use the material and the content as available within the Quay and that will be available across the piste. We are changing completely the way that we work with the emphasis on value for money and efficiency. There will be work streams on changing that. The way we make programmes will be unrecognisable from the way we currently operate. That work is ongoing and that transition into the Quay is part of the major work that is going on at the moment. It is essential that it is a transformation in the way we operate as opposed to, in the Scottish word, a "flit". The partnerships are working very closely, for example, with the City Halls and the orchestra go there and we are working with the Glasgow City Council to make sure that they have good educational outreach as far as the partnership is concerned. We will be working with the local communities and a good example of the sorts of partnerships that we have at the moment is with the Crishni Caerg(?) radio station where Radio Scotland is working on training the staff there. These are the sorts of partnerships that it is absolutely essential we build on in addition to having strong links with the local community. Already we have been working with the schools in the area to make sure that they have a sense of the scale of the project and can reflect the history of the project as it develops over the three years. Chairman: We have run out of time, so I am going to reserve questions I might have put to you on the use of digital television for local and neighbourhood coverage, which is something that we were told, not necessarily by the BBC, would happen and has not yet happened. What I would like to do is to place on record my appreciation of the indispensable and immeasurable contribution in the cultural life of this country of the BBC Scottish Symphony Orchestra and the BBC Philharmonic Orchestra which are in a sense completely gratuitous these days. If there is any reason whatsoever for the continuation of the BBC charter and no doubt lots of other reasons will be advanced as this inquiry continues, those two magnificent orchestras are an endorsement of it. Thank you very much indeed, gentlemen. It has been much appreciated. Memorandum submitted by SMG plc Examination of Witnesses
Witnesses: Mr John Pearson, Chief Executive, Virgin Radio, Mr Derrick Thompson, Managing Director, Grampian TV, Ms Helen Arnot, Head of Legal, SMG Television and Ms Elizabeth Partyka, Managing Director, SMG TV Production, SMG plc, examined.
Chairman: Ladies and gentlemen, we welcome you to this inquiry and Frank Doran will start the questioning. Q307 Mr Doran: We heard it from the horse's mouth: the commercial companies are withdrawing from the local market and you will be replaced by the BBC. What is your reaction to that? Mr Thompson: Absolutely not, Frank, is the answer to that. We have done more than anybody in recent years to keep ourselves at the forefront of broadcasting. Grampian itself, as you well know, has just moved to a brand new station where our studio in Aberdeen invested five million pounds in putting us at the forefront of cutting edge technology and the BBC are behind us at the moment because we have done it first. Colleagues at Scottish Television will be doing the same thing at Pacific Quay in the not too distant future. Q308 Mr Doran: You must be a little bit worried because the whole reputation of commercial television, particularly in Scotland, was built on its local content. Ever since 1955 when STV was founded and 1961 when Grampian came on the scene it has been a key part of local culture. Over the years we have seen much more homogenisation and with the merger of the companies in England to form one mega company are we not going to see more of that? Mr Thompson: I can only talk for Scotland and the way that I see it we have, as I said, done a power of work to ensure that in a multi-channel world we are producing programmes that are watched by our community. Nobody understands better than we do what that community currently wants. What we do under our licence terms is create range and diversity, and indeed quality, because we have to. If we do not we will quite simply disappear off the Richter scale altogether. In Grampian terms we still have the most popular news programme on mainland Britain and a regional series which broadcasts once a week on a Friday 7.30 slot, again achieving enormous ratings in this multi-channel world. Q309 Mr Doran: One of the major criticisms that has been made this morning about the whole of British broadcasting is about its failure to pay any attention at all to British film production, not just in terms of investing in films but also showing British films. It had not struck me until I was listening to the BBC people, and it is not an issue to raise with the regional teams, that we have been fairly heavy with the BBC in terms of its failure to show British films. Usually it is because American third-rate films are cheaper. If you look at Scottish broadcasting we have got two major companies who invest heavily in Scottish television and in drama, but we never see any opt-out from the film production which is carried out by the major English company. You may show them at different times but it is the same films. We never see any attempt to show Scottish movie production. Over the last few years we have developed our own industry with a number of very significant people like Lynne Ramsay and Peter Mullen but getting no showing at all on Scottish television. Mr Thompson: I would disagree that we are not fully involved in some sort of film making, first and foremost in New Found Films, and our effort to introduce new talent into the film industry has been enormously successful and that is something that we intend to continue to do. Ms Partyka: New Found Films is an extension of a scheme called New Found Land which is a joint project between Scottish Television and MPA, exactly as you have identified, to allow young and new in Scotland to spread their wings and get their first attempt at a movie. That has been very successful in talent terms. Q310 Mr Doran: But they do not get shown on television in Scotland. Ms Partyka: Yes, they do, and some of them get theatrical releases. Q311 Mr Doran: Okay. I will move on because this is an inquiry about the BBC. Reading through the SMG submission, you are fairly critical of lots of aspects of the BBC but I must be honest: when I read them it seemed that you were ploughing your own furrow rather than taking a proper objective look at the BBC. For example, on funding you are quite happy to see subscription but not anything which attacks your own income base of advertising. It does not seem to me that you take a very realistic or responsible approach. Mr Thompson: On the contrary, we take a totally responsible approach to it. First and foremost we are a commercial public service broadcaster and we take our money from advertising revenue and possibly the sale of programmes. The BBC get three billion pounds per annum come rain, hail or shine. I think we are being absolutely responsible in our approach in asking them to be less abusive of their market dominance. It is a difficult position. It has been a difficult position for broadcasters in the commercial world over the last four or five years and the BBC has become an extremely commercial animal, scheduling programmes head to head with ITV that are exactly the same, and that is a disservice to the British public. Q312 Mr Doran: We heard last week from the new Chairman of the BBC that there is going to be a new approach which is going to be very different from what you might call the blatantly commercial approach which might have been adopted before. Mr Thompson: We have read the document which has been produced with interest. Time will tell, frankly, if they will be able to deliver that. I am not so sure at the moment. There is a lot in there to chew through. We have not got crystal balls. We welcome those changes if indeed those changes are going to take place. It is a very well written document but time will tell. Ms Partyka: I would like to make the point in terms of the commerciality of the BBC that sometimes it is viewed very favourably insofar as within the document I noticed that Michael Grade hailed CBBC as a wonderful channel because it lacking in any form of advertising. I would like to point that ten minutes of Bob the Builder six times a day is actually a ten-minute ad for Bob the Builder in terms of merchandising and licensing. The BBC took programmes like Bob the Builder. They then reduced the licence fees in a way to shop-window merchandising and licensing that is the backbone of those kinds of projects. To say that the BBC is not commercial in any way is a misnomer. Q313 Mr Doran: I do not think anyone would deny that the BBC is commercial. It has got to be. It has to pay its way but you seem to be criticising them for innovation and being entrepreneurial. Ms Partyka: I just think that we have to accept and uphold that the BBC are doing that and not pretend that they are providing purely a public service broadcasting remit within children's television. They are actually making quite a lot of money for the BBC worldwide. Q314 Mr Doran: We have criticised them in the past for not doing enough of that. We are talking about the charter which will be in place for the next ten years. I would be interested in your views on how in this region of Scotland the BBC and the commercial companies can live together, particularly bearing in mind some of the things you have said in your submission, which is a little bit different from what we have had from the ITV companies in England because theirs was much more accommodating of the BBC, recognising some of the benefits of the BBC to the commercial companies, the way in which it drives up quality and standards and, if you like, provides a cover for everyone else to operate under. There is a sense that the BBC is essential for the success of the ITV companies rather than a threat. Mr Thompson: Nobody would disagree with your comments about the BBC being innovative and delivering quality, but what is key to the BBC feature in Scotland is delivering in an arena where talent can grow in Scotland because that is what we all want at the end of the day. We want the talented positive Scotland in terms of television production. We in ITV currently are heavily regulated and we have quotas that we need to meet in this process. The BBC should be doing exactly the same thing. I heard from the gentlemen previous to us that there was not a lot to discuss about Scotland, although it is great to see that Still Game and all the rest are going to get a showing on the network. In Scotland, as I say, we fully support a strong BBC for commercial reasons at times because it takes audience away from our competitors. We can live together and we can certainly develop together but it has to be a level playing field. As you will see from our statement, essential to that is that they are governed under the same regulator as ourselves, which is Ofcom. Q315 Alan Keen: I have noticed, not today but since we have started the inquiry into the BBC charter, that there has been more acceptance from the commercial sector that the BBC should be allowed to exist in the way that it does, apart from maybe restricting some of its commercialism. Previously we have had people arguing that it should be restricted almost to weather forecasts and social security things. Why do you think there seems to be a move this time towards accepting and welcoming the continuation of the BBC's charter? Is it because the commercial sector thinks that if it gets the balance right it will be listened to more than if they were just unreasonable and said the BBC should be shut down? Mr Thompson: Nobody would suggest that the BBC should be shut down. There has to be that balance in British broadcasting. Nobody would deny that the BBC is a superb organisation and long may that continue but there has to be that balance, particularly at regional level. I would put on the table that, particularly in the north of Scotland, I am not sure the BBC is completely at the races. As far as what we do in the north of Scotland I keep on using this phrase that we are the Heineken of broadcasting because we reach the parts that others do not, and that is true of the BBC. The BBC should be applying a lot more resources to developing talent and skill in the north of Scotland from their base in the central belt, but improving on the quality and the level of service they give to the brewers in the far north. Q316 Chairman: The argument which has been put forward, that people are moving to accept the BBC and the BBC are in a charter in a way that they were not ten years ago, seems to me to be accurate. If I could put this to our guests, could it not be argued that that is because what we have got now is a known quantity and it is safe, that although there are certain areas in which the BBC has been moving over the ground between public service and commercial and has been perhaps using the licence fee in order to do so, nevertheless it is a known quantity, it is safe, it is better from your point of view, even if you argue for subscription, that it be funded by a licence, that if it were to take commercials, because it still has the largest analogue audience and because it is, whatever you think, much more innovative in its digital services than ITV is, that if the BBC were really to be let loose then it could be a huge danger to commercial television in particular, whereas in a sense, despite concerns expressed by you and others about it exceeding, or allegedly exceeding, the remit, it is penned in now, as was shown by the Secretary of State's instructions to them yesterday on on-line services, and if it stopped being penned in it might go marauding around greatly to your disadvantage. Mr Pearson: We are talking about television. From the radio point of view there is an issue to be made in that the BBC already has too dominant a position in radio. It has 70 per cent of the spectrum which it uses to deliver to 50 per cent of the audience. It has five national FM channels. It acts in a very commercial way. I do not think there is any acceptance from the commercial radio standpoint that the BBC is contained or would be comfortable with its actions at all. From the radio point of view I would seek to disagree with those statements. Q317 Alan Keen: As one who before politics worked in the private sector all my life, I was less pessimistic when I heard that it was to accept the market, but we have seen tremendous expansion and I accept that the private sector is the way to drive it. Why should we restrict the BBC too much? It is restricting its income because government cannot go out next week and say, "Let's charge people not £121 but £175". It is restricted in that way by how much money it can get in the market. Why do we not say, "Let it go out and compete"? I am annoyed sometimes if two clubs I want to watch do clash but that is competition, is it not? Why should we restrict that? Mr Thompson: I think it comes back to the fact that they are a public service broadcaster and they should champion the niche issues put forward for the public. The commercial sector is there, it exists, there is a good co-existence at the moment. I disagree. I think the BBC should be a public service broadcaster and be contained in that way. Q318 Alan Keen: So much of the stuff you produce is, you would say, a public service. You have introduced yourselves as a public service broadcaster. What is the difference between you and the BBC? Mr Thompson: At the end of the day we do other kinds of programming which are totally commercially orientated. The BBC exists to produce quality programmes that are for a wide range of the public which the commercial sector television would not produce. If I give you an example, Blue Planet, Walking with Dinosaurs, versus programmes that we produce like I'm a Celebrity, Get Me Out of Here - they are at different ends of the scale but that is effectively what is in place and we think it works. Given the fact that every member of the public has paid a licence fee that is what the BBC are there to do and I think that to let them become a commercial animal in any other way is daft. Ms Arnot: The markets cannot deliver where there is abuse of dominance and regulation has to exist to redress imbalance and produce a positive result. Building up a critical mass of production in Scotland is a form of regulation which we would welcome to address the market where that is not able to flourish. Ms Partyka: Colleagues earlier talked a lot about investment in regional programming within Scotland and I think that is all to the good but regional programming is only one aspect of the production sector within Scotland. What we need from the BBC and from other broadcasters is more network programming in Scotland. You have to understand people who work in television. You start with working in regional programming and you hone your skills and increase your talent but eventually you want to work in network programming because you have bigger audiences and bigger budgets. Historically when that has happened you have had to move to London and if that continues then all that that does is that Scotland trains talented people and eventually they disappear. What we need is more network commissioning and more network programming coming out of Scotland. At the moment three per cent of the network budgets across the four broadcasters comes out of Scotland. Proportionally that should be nine per cent and I think the BBC and the other broadcasters have a role in trying to get us from three per cent to nine per cent. That is encouraging more network commissions to come to Scotland and that eventually will be network commissioning power coming to Scotland. A colleague said that if 100 per cent of the network commissioning power is based in London inevitably that is where most of the commissions will originate. We need to move that network commissioning power to the nations in order to encourage that change in the programme scenario. Q319 Rosemary McKenna: Can I go back to something Mr Pearson said? You said that BBC Radio had 70 per cent of the spectrum and produced 50 per cent of the content. If commercial radio had more spectrum what kind of programmes would they produce? Mr Pearson: It is 50 per cent of the audience. We have seen a huge increase in commercial radio's success over the last ten years and it has come about by extra stations and extra licensing. The Radio Authority were before Ofcom and Ofcom are now carrying on licensing stations throughout the country. What those stations are doing is, while the chance is there, providing diversity. What we see now is that it is getting away from the old first wave heritage stations model of having two stations in every area owned by the same contractor. Now we are seeing up to ten stations, 20 stations being licensed in some metropolitan areas, including digital stations. What those have added incrementally is new audiences, new advertising opportunities, and over the last decade radio has grown from two per cent of expenditure up to nearly seven per cent of expenditure; commercial radio has grown itself very successfully by new licences, new audiences and providing diversity. Our issue with the BBC is that the BBC has vast resources in radio which are far more dominant than in any other medium, especially television, where there is a more balanced market against the BBC. It is the way that it is using those public services. For instance, radio in this country is dominated by Radios 1 and 2, two of the largest radio stations we have. During the peak time, which is breakfast, and most of the day they are duplicating and competing for ratings with people in the commercial sector. In last year's annual report its first statement on radio was a statement about market share. If the BBC is going to measure success in market share, therefore it measures its value in market share, I am not sure that is a very sensible use of public funding, and if all they are doing is chasing the same ratings it is the same as television licensing. I agree with Michael Grade's comment that once every ten years the BBC gets religion. Very famously Radio 1, when it came up to the 1996 renewal, had fired a lot of its old resident DJs and re-formatted itself quite young, and going into the new charter it promised all sorts of things. It promised far more documentaries, more interviews, more cutting-edge music, more live music, but all they seem to have been delivering is in off-peak segments where audience numbers are quite small. There is another radio saying, "Ratings during the day, reputation by night". What we would welcome on the national estate especially is to have far more format control. The commercial stations are very much formatted and we have promises on performance and formats that we have to agree with Ofcom. Those run into audience delivery, types of music, percentage of music and speech, different eras of music. We are very much formatted. What that means is that as commercial players we know our businesses are working within a certain landscape, and in analogue radio the spectrum is still quite scarce and therefore there has to be some sort of boundary. The BBC and Radio 1 and 2 do not have any of those format boundaries. What they are doing is taking away and using resources in the wrong way. We would call for those boundaries to be put on Radio 1 and 2. Q320 Rosemary McKenna: You cannot possibly compare the programmes that BBC Radios 1 and 2 produce with the kind of pop programmes that the average commercial radio station produces. Mr Pearson: Yes, I would. If you look at the audiences that they are chasing and the amount of volume to music that they play, yes, I think we can. Q321 Rosemary McKenna: You are suggesting that BBC Radios 1 and 2 are simply chasing audiences, not producing quality programmes that people want to listen to? Mr Pearson: We need to go one step back. We were talking about public service and I am not sure again where the public service lies in competing, whether it is television or radio, for the same audiences with the same product. Q322 Rosemary McKenna: Let us talk about Scotland and the west of Scotland in particular. There is not a commercial radio station that produces anything like the work that BBC Radio Scotland produces. Mr Pearson: Probably it is a question for my radio colleagues coming on later, especially the Scottish radio colleagues. Q323 Chairman: Is there not an argument for saying, as Max Hastings has said, that the BBC does not need to do everything? Just because it is there it does not need to do everything. In the case of Radio 1 and Radio 2 that Rosemary McKenna has been talking about, they were there first. It is one thing to say that the BBC should not add to services that it does not already provide and that the commercial sector is already providing them and providing them well. In that sense it might argued that it is gratuitous for the BBC to produce a BBC 3 digital channel. On the other hand, when they were there first is it not a bit much to ask them to close down services that they have been producing for audiences - and I do not listen to Radio 1 but Radio 2 is something that arouses great affection in audiences - just because other radio stations provide some form of counterpart? Mr Pearson: I do not think we are asking to close them down. What we are trying to do is contain the activities that are competitive with the free market forces that the rest of us are in. I will give you an example of Radio 2. There was a leaked document from Radio 2 some four or five years ago which said that Radio 2's intention was to reposition itself to a younger audience and get rid of all the old people listening. It has done so very successfully over the last four or five years by pricing out talent, by changing its music policy, quite rightly, by getting lots of younger DJs in. That is not serving a public service remit. That is just competing with services that are there. If Radio 1 decides it is going to move its market position tomorrow it can do so because it is unregulated, whereas the rest of us cannot do that. By doing that it is chasing commercial audiences. The fact that it was there first might be one issue. When it has the freedom to go and reposition itself I think that is not quite fair; it is not quite the same thing. Also, it is not just the freedom to act; it is the commercial activities as well. If you talk about Radio 2 and Radio 1, where we have things like sponsorship - the Barclays Premier League Football, the Renault Proms in the Park, the RBS Six Nations Championship - those are the commercial activities and the promotion they enjoy, whereas on current Ofcom rules the rest of us with ownership rules cannot get to that size to enjoy that sort of performance. Q324 Rosemary McKenna: During the discussions on the Communications Act, when Ofcom was set up, as a member of the All Party Music Group we campaigned quite heavily to have a requirement for everyone to provide local music, not just local news, which was on the Bill, but there was a reluctance on the part of the commercial companies to do that. Can you explain why because there does not seem to be a will to encourage young local bands, whether it be folk, pop or whatever type of music they play? Mr Pearson: As a national radio contractor I am not a part of that argument. Mr Thompson: If you want an answer from television rights, if it is specifically in Gaelic it has always been our policy to encourage young talent coming through, whatever musical background they come from. Certainly Northwick Cantlow(?), which covers Gaelic commissioned programmes, has done extremely well, producing several new bands who are now doing extremely well not just at home but abroad as well. In terms of contemporary Scottish music we tried a programme two years ago which we put on at peak and it quite clearly failed in ratings terms compared to more factual documentary type of material which the public currently seem to have an appetite for, and that is regional factual documentary material. There are issues with the audience but certainly if it is Scottish at Grampian we try our best to involve those groups where possible. Rosemary McKenna: I think you have just illustrated exactly what is the difference between the demands on commercial and the demands on BBC, in that they do not have to worry about audience share. They have the pleasure of being able to produce good quality programmes and you are market driven. I agree with Alan that that balance is right and should be maintained. Q325 Chris Bryant: Can I go back to the Radio 1/Radio 2 argument briefly because it seems to me that the BBC is sometimes in something of a double bind. If Chris Moyles on the breakfast show on Radio 1 loses half a million listeners every newspaper in the country screams that BBC is not serving its young audience properly. If he puts on audience you lot all scream that it is shocking because the BBC is competing where it should not compete. How can the BBC win in this argument? Mr Pearson: The way it is set up it cannot. I think you are quite right to point that out. What we need to do is find what is in the public's interest in Radio 1 and Radio 2. If you are going to judge it by ratings, which is exactly what the public are doing, if the BBC itself in its own statement starts off talking about audience share and ratings, then they will be judged that way. We need to go back and see what it is that the considerable sums of money going to these two networks are trying to achieve with the public's money, especially when you look at the dominance. Radio 1 is a good example where, if you look at the dominance of commercial radio for 15-34s, it merits a 65 per cent regional reach. I can verify those figures later. Q326 Chairman: There is no doubt in my mind that what you are saying took place under Greg Dyke, but Mr Grade says he is going to change all of that and that chasing ratings is not going to be the BBC that he is going to be Chairman of. If that were to turn out to be so, and I think all of us hope it will, then a bit of the rug will have been pulled out from the argument that you were putting to Chris Bryant. Mr Pearson: I would very much welcome that and we did welcome the introduction of service licences that they were talking about in Michael's speech last week. What we would call for within the service licence, apart from the things that are going into it, is some form of very specific format control so that we know what they are trying to achieve with the money. Q327 Chris Bryant: I am still perplexed about this because of course the BBC should not be chasing ratings; that should not be its primary aim in life, but it also should not be so careless about whether anybody is bothering to listen to or watch it that it ends up not producing anything that anybody wants, and that seems to me the complex double-bind they are in. On Radio 2 it is probably not in their interest to have so much talk in the Jeremy Vine Show if they really want to go as commercial as they can; it is probably not in their interest to have DJs who choose their own music rather than go to play lists. Ms Arnot: Ofcom introduced the Communications Act but Ofcom has developed a high-falluting definition of what is to be public service broadcasting, be it on radio or television. It is to be innovative, it is to have great reach, it is to capture all these audiences and so it is charged for the BBC to still capture those audiences with their type of programming which serves their public. Q328 Chris Bryant: I just have this picture of the government saying that the BBC must have format control pressed upon it and I cannot see that that is going to be an open government process. Let me just go on to one of your other proposals which is about subscription. You say that a future BBC model might be partly licence fee and partly subscription. How do you see that working? Do you mean that some channels would be sold off or would become subscription channels? Mr Thompson: Yes, is the answer to that. Q329 Chris Bryant: Which ones? Mr Thompson: The lesser viewed ones. Q330 Chris Bryant: Which ones? Mr Thompson: Three, four. Q331 Chris Bryant: Nowhere else? Mr Thompson: In terms of the BBC? Q332 Chris Bryant: Yes, I understand, but why those? What is your rationale for those? Because nobody is watching them they should become subscription? Ms Arnot: The rationale would be for the next tenure. We are not advocating subscription now. We are advocating that that should be a potential form of funding in the future. Q333 Chris Bryant: So at the moment you think that the funding of the BBC should be the licence fee, end of story? Mr Thompson: Absolutely. Chris Bryant: All the broadcasters have said that so far. Thanks. Chairman: When it comes to the question of the BBC's digital services and what they are providing, it is clear - and you are experts in radio - that the big breakthrough on digital radio has not happened, has it? We are now seeing advertisements in the press for digital radio sets which are really quite inexpensive and yet people are not taking that up. You cannot get them in cars. I bought a new car and wanted a digital radio in the car and I could not get one. It was a very expensive car. Chris Bryant: It would have been even more expensive with a digital radio! Q334 Chairman: A marginal addition, Chris! The first digital radio I heard was when I went to an experiment in a commercial station. Is this not where a public sector organisation and the commercial stations can supplement each other very usefully, assuming that people actually want digital radio? They are going to have to have digital television because at some time there will be an analogue switch-off. Mr Pearson: I think the public will want digital radio if digital radio gives them more choice and more diversity of output. The one thing that digital radio has brought is the unlocking of new spectrum and new services. For any new technology to survive it needs a clear consumer benefit. There is a clear consumer benefit in these services. The trouble is that digital radio amplifies the resources gap we have seen over the last few years, where the BBC have had a secure inflation-busting income and the commercial sector, both television and particularly radio, have suffered one of the worst downturns that we have seen in 25-30 years. We have been piling money into digital radio now for the last six years. My station, Virgin Radio, was one of the first to broadcast in a digital one multiplex and we own two other multiplexes in London. The commercial radio sector has now put nearly £40 million into that. When we talk to the City we still cannot give them a business plan that makes any viable sense for our shareholders, so this is becoming a very expensive thing. There are about half a million sets around. We do welcome the BBC's promotion of digital radio. It has gone some way to kick-starting the medium but I think it needs to go further. What we have got now again is this resources gap where Radio 6, I gather, has six million pounds going into it every year and that is £12 per radio, not even per household. In the digital world the radio stations have some format control, so we are very happy with that, as I suppose you know. Digital radio is still very worrying because of the commercial sector's inability to fund it and, of course, to keep piling money into resources for us in the commercial sector in current circumstances is very difficult. Chairman: Thank you very much indeed. It has been extremely helpful. Your perspectives have been very valuable to us. Memoranda submitted by Commercial Radio Companies Association and Capital Radio Examination of Witnesses
Witnesses: Mr Paul Brown, Chief Executive, Commercial Radio Companies Association, Mr David Goode, Managing Director, Scottish Radio Holdings, Ms Nathalie Schwarz, Strategy and Development Director, Capital Radio, and Mr Steve Buckley, Director, Community Media Association, examined.
Chairman: Can I welcome you very much indeed. Thank you for coming and I will call on Chris Bryant to start the questioning. Q335 Chris Bryant: Can I start by asking some questions about community radio? You have heard the comments earlier from the BBC. Who should be doing community radio and how should it be funded? Before that can I say that I think Red Dragon is fabulous. Ms Schwarz: Good; thank you. Mr Brown: The Community Media Association has led the running on the third tier of radio broadcasting. Mr Buckley: Thank you for inviting us as the Community Media Association to speak to this select committee hearing. You will obviously understand that we believe that community broadcasters, both radio and television, should be locally under control, not run for profit and separate organisations outside the BBC. Not only do we believe that; there is a substantial number of organisations across the country who already have demonstrated community broadcasting practice and are seeking the opportunity to put that on a permanent footing. We hope that will happen first of all particularly with radio but we would also like to see it happening with community television. Community radio should take off with the Order that is currently in Parliament and that is going to be debated next week. Community television requires a further Order to be taken within, we hope, the next six to 12 months but we need assistance to press for that to happen. We do not believe it is the role of the BBC to run community broadcasting services. Community broadcasting works most effectively when it empowers communities by giving them ownership and control as well as access to means of broadcasting. Q336 Chris Bryant: But you do think, as I understand it, that a chunk of the BBC licence fee should be top-sliced for it, so the BBC should lose some of its money but it should not be allowed to run it? Is that not unfair? Mr Buckley: It is our view that community broadcasting needs a significant amount of public funding and even more so given the current regulations within the Community Radio Order which restrict private funding and therefore leave community broadcasting significantly dependent on a certain amount of public funding. We would like to see a structural mechanism by which that is delivered. The current arrangements within the Communications Act are not sufficient of themselves and we are proposing that part of the licence fee should be utilised to support community broadcasting services. Q337 Chris Bryant: But the whole process of top-slicing would be quite bureaucratic, would it not? You would have to have some kind of commissar deciding how that element of money was funded out to tiny organisations like GX in Pontypridd or wherever. Is that really a rational use of money? Why can they not have advertising? Mr Buckley: There are two questions there. First of all, they can have advertising but only in certain areas. The current Community Radio Order ensures that nearly 15 per cent of the country will not be able to have community radio stations that carry advertising. In other areas they are limited to 50 per cent of their revenue from advertising and sponsorship. First of all, there is a need for public funding to this sector and more so given the terms of the current Community Radio Order in Parliament. Secondly, if there is going to be public funding for the sector then that public funding should be deployed through an appropriate independent mechanism with a panel of experts who can give that money where it is most needed. Such a thing should already be in the process of being set up by Ofcom because there is already provision in the Communications Act under section 359 for a community broadcasting fund. What we are saying is that some of the money that comes into that fund should come from the licence fee but the structure will be there. Q338 Chris Bryant: A general question for all of you. At the moment I do not know what your estimate is of the BBC's share of the radio market - 50-something per cent? Mr Brown: Fifty-two per cent. Q339 Chris Bryant: Do you think that that is too high and, if so, how should it be rolled back? Mr Brown: From commercial radio's point of view you have already heard some arguments about how we would like to see independent regulation of the BBC to make some of their services different form our own during the day and for this to benefit listener choice. As for the rest of it, it is all down to the competition. I was very interested to hear what the Chairman had to say about digital radio. Clearly there is a variety of views about digital radio, both in the BBC and in commercial radio, but actually we regard the progress of digital radio as being quite outstanding. We believe that we are probably in a million sets this year; we believe that we will be in two million sets by the end of the following year and building exponentially thereafter. The amount of listening to these new services and securing our digital satellite television and digital terrestrial television has been quite remarkable in its growth. The fact of the matter is that people do need and want new services. Commercial radio thinks that digital radio is able to provide the new services and that is the way in which at the end of the day we will start to bring the BBC back to below 50 per cent and maybe lower than that. Q340 Rosemary McKenna: Can I explore further the concerns that were discussed earlier on, that commercial radio does not really have a public service broadcast remit and does not reflect the kind of anything other than pop music industry, and without the BBC how would we do that? Mr Brown: Actually we do have something in the region of 270 public service remits; they are just not described that way. We have 270 formats which include all sorts of things, including popular music, news, current affairs and various other bits and pieces. I run a trade association. With me are two people who actually broadcast who may like to pick up that question. Ms Schwarz: By way of illustration Capital Radio has Xfm and Xfm is a champion of new music in the UK and has won numerous critical awards. I guess you could say that Xfm would be more akin to Radio 1 in terms of its aspirations. It is well recognised in the music industry as being the place to bring great new acts and if I want to listen to Xfm's output for material it has a large number of driver sessions, it has a very deep role in the music industry and it really champions all sorts of new forms of music. Similarly, we now own Choice and Choice is very much a champion of urban contemporary formats. Again, we do operate quite a diverse portfolio, not just around the pop music format. Coming back to the point our colleague John Pearson made, we are heavily regulated and we have formats which prescribe the sort of music we can play. When you hear commercial radio playing certain types of music, such as pop music, by and large it is because we are regulatorily obliged to play that sort of music. There are other formats, such as Xfm, such as Choice, such as Gold forecasts, and David will outline some formats that his group own. In digital radio that goes even further, so, for example, Capital Radio has something like Capital Disney(?), which is a format specifically dedicated to children, but to a certain extent we are victims of the licensing process because our regulatory format prescribes the sort of music we can play. Q341 Chairman: Could I just interrupt a moment? I do not know whether you were present at the end of the session with the BBC when I was commenting on the existence of the BBC Scottish Symphony Orchestra and the BBC Philharmonic Orchestra, and I could have said the BBC Symphony Orchestra as well but we were dealing with regional matters. I was on the Standing Committee of the Broadcasting Bill which set up commercial radio and I remember asking Capital Radio - it was not an interrogatory session and we did not know that Classic FM was going to exist then - whether it could justify its creation and the profits it was going to earn by creating an orchestra akin to some of the orchestras that the BBC has. Classic FM does not do that. Classic FM sponsors a concert here or there and that is the limit of its commitment to classical music. Do you not think that the commercial sector, which makes a lot of money - and I do not begrudge it that - would be taken more seriously if it put more into the communities that the BBC does? People like myself, who do not exactly issue continual panegyrics for the BBC do nevertheless contrast the lack of such contribution by the commercial sector with what the BBC does. Ms Schwarz: Capital over the course of its history has been and still is very proud of its community involvement. Going back 20 years Capital was involved with an orchestra. In today's manifestation - and next week is a very good example - we are doing a live concert in front of 100,000 people in Hyde Park purely for charity in conjunction with the Prince's Trust. Red Dragon in Wales has its own concert, as does Oxford, and we do that in every local community in which we operate. We are very proud, within the format of what that radio station stands for and the sort of music that we know will attract our audiences, to put on live concerts. These are charitable community activities and with them we have our own charities. In London it is called Help a London Child; in Birmingham it is Cash for Kids in Birmingham; in Wales it is called Help a South Wales Child and so on, which really get into the roots of the community and give something back. What we do is evolve over time as music tastes evolve over time and as our target audiences differ. Xfm's manifestation of that is that it goes round to a number of gigs in London and it will itself put on live music events, as will Choice for the urban ethnic community it targets. Capital Radio right from its inception 30 years ago to where it stands today raises millions of pounds a year for charity and we believe that we do provide a public service. Mr Goode: Could I just add, because I think it would be wrong for me to let go the comment you made about just playing popular music, that in Scotland, where we are the major commercial broadcaster with commercial stations in all of the major markets, I echo exactly what Nathalie was saying, that we are somewhat constricted by the fact that our licence says we have to play a certain kind of music, but we do take very seriously our public service remit. In addition I would like to say, again as Nathalie did, that in Scotland in a single year we put well over a million pounds into our Cash for Kids charity, which is not as high profile, I accept, as an orchestra but in a way it contributes equally to the communities to which we broadcast. We here in Scotland also take it seriously in that we work very closely with the Scottish Executive. We currently are running a series of lifestyle matters, which we do call Lifestyle, which are all about healthy eating, about exercise and so on, to the extent that we have recently won a number of awards against the BBC at Sony Awards, and indeed the NTL Awards, from the British Heart Foundation for healthy eating, and we take on other activities, such as lobbying the A77 campaign, by which one of our radio stations here is reflecting the concerns of the local population about the dangers of that particular road, with which you are probably familiar. Q342 Rosemary McKenna: I am much more familiar with the A80. Mr Goode: Maybe we will start a campaign for that. These are very important. We take this public service remit, if you like, very seriously and there are some very clear and good examples of what we as a group are doing. Ms Schwarz: On page 4 of Capital Radio's submission we set out an excerpt from Xfm's format. This is what the radio station must deliver in terms of our regulatory licence and it illustrates as one example why it has to play music outside the mainstream. Q343 Alan Keen: As you have got such a wealth of experience and knowledge of radio, and often it is TV that gets the most air time on these inquiries, could I ask each of you to say what changes you would like to see made if there were to be another BBC charter in 2006? Mr Brown: Can I just say that we are very pleased to have read what the BBC is proposing. We have said a number of things to this committee in writing, but nonetheless the BBC seems to us to be going along the right lines. You yourself, Chairman, have raised that on a couple of occasions already this morning. Those licence conditions that they are saying they wish to issue to their own radio services we would like to see; we think it is a great idea, and we would also like to see auditing of the BBC. We would also like to see the licence fee being judged, not necessarily by Parliament, which is another proposal that is being made by the BBC. All of those things popularise what we are thinking, that what you need is some form of independent regulation of the BBC. The Board of Governors are stewards of the BBC, champions of the BBC. When it comes to calling the BBC to account it seems to us quite clearly that that should be done outside the BBC. From what we have read so far we think the BBC is moving in the right direction. Mr Goode: There are a couple of areas where we would like some sort of clarification. It is interesting to talk about it here. Our colleagues from the BBC earlier were saying that broadcasting used to be dominated from London but equally someone was saying that in Northern Ireland it is dominated by Belfast and so on. BBC Radio Scotland, of course, has come from the central belt and we have a network of radio stations that are run by independent managing directors and sales teams and so on in each of the major markets. We cannot now, for example, bring football to each of our individual market places because the BBC have decided to tie up an exclusive deal with the SPL. We have no worries in that historically we have competed with the BBC in audience because the deal has been non-exclusive. We just wonder whether it is right for the BBC, using taxpayers' money, to tie up a commercial deal that specifically excludes the ability of independent broadcasters to come in at some stage and provide locally in Aberdeen, for example, a service to bring football to that particular market. I only use that as an example but it seems to us quite a valid case where the BBC is using commercial muscle to do exclusive deals to the detriment of the commercial sector and thus to the detriment of the licensee. Mr Buckley: Can I comment from the community media perspective? We would very much like to see the BBC come to grips with community media and understand how to relate to it. That means moving beyond the paternalistic attitude towards this sector or thinking that somehow it can do it itself. There are certain things that the BBC cannot do as well as people in communities themselves can do, taking their own control over access to the airwaves and broadcasting, but the BBC has potentially a role to play. First of all, it should allow access to frequencies within its sub-bands. It has said in a recent response to the Ofcom consultation on community broadcasting that it will do so. However, we have also heard from a reliable source that the BBC is proposing to use up some of those frequencies now for additional transmitters, re-broadcasting existing services within local coverage areas. Secondly, we do not think the BBC should be competing for public funds other than the licence fee with community broadcasters. There has been a number of occasions now where the BBC, in addition to receiving the licence fee, is making applications to organisations like the Learning and Skills Councils to purchase pieces of equipment for community purposes. If the BBC is going to engage in community work it should do so with the licence fee and not place itself in a situation where it is potentially competing for other sorts of public finance with the community sector. Finally, in terms of the role the BBC may have to play, as we heard from Pat Loughrey this morning, certainly it potentially does have a role in terms of providing access to equipment, providing training, possibly providing news, but this needs to be not a paternalistic relationship; it needs to be understood that the community sector also can potentially provide training to people in the BBC, indeed is doing so in some instances for free. It has skills in community development which are not present in many parts of the BBC. It could potentially provide a news-gathering function which could be of use to the BBC. We want to see much more of a partnership-based approach. We believe that within the framework of a partnership based approach it is not unreasonable for some of the BBC licence fee to be used for activities which are not appropriately under the control editorially or under the ownership of the BBC. Ms Schwarz: We believe that there is a role for the BBC in the commercial radio industry to contribute to a very flourishing radio industry. What we would like from the BBC is essentially three-fold. We would like the role and the purpose of the BBC in each of its services to be clearly defined, so essentially welcoming proposals in Michael Grade's document that was published last week about the licence and with that a formula for how will we measure the effectiveness of that service, so building public value, and then what does it contribute to society, to cultural and social development. We would like it to be more independently regulated. We believe that it is very difficult for a governing board, which is not a reflection of the quality of the individuals on that board, to act as judge and jury and, in certain cases, counsel for the defence at the same time. We believe as well that Ofcom's ex ante competition powers should be extended to the BBC, so the Competition Act will allow, for example, the OFT to investigate the BBC but for that that relies on looking at the market and abuse of an over-dominant position within a market. It has always been very difficult to define the market that the BBC is in. We therefore would like Ofcom to have the same powers as it does for the whole of the commercial industry which is essentially to look at the BBC and ensure that it acts fairly and effectively when carrying out its public service remit in the same way that we are all duty bound to act fairly and effectively. Q344 Alan Keen: You may have heard me ask the BBC a point about having an executive chairman who works closely with the Director-General and a separate Chairman of the Governors to act as backstop, and I gave an example of the problem we all know about which fairly recently brought about the changes. The answer the BBC gave was what we would have expected to get from them. In your experience do you think there is some relevance to what I was trying to get them to say or not? Mr Brown: We think that there is clearly a case for a board in the BBC and a chairman of the BBC and a chief executive of the BBC and they should have the same kind of relationship that any other chairman of a board in a commercial company and its chief executive should have. We do not think it is possible to have that relationship and at the same time expect that person and those persons - who are admirable people; it is not a criticism of the governors, as Nathalie has said - to monitor the BBC. We think it is an impossible remit for them to undertake. If you genuinely want to have the BBC regulated in the public interest, if you want it to be accountable, then independent regulation of many aspects of what the BBC does is the way to proceed. Can I quickly say adjacent to that point that we are in an interesting time. The BBC has not come out for the last eight years with the kinds of positive proposals and understanding of its place in the market that it has over the past two to three weeks. What that means, of course, is that charter renewal (and I have been through a few of them) is a wonderful process but it does take place every ten years. If you have an independent regulator who is able to take an overview, over whatever period of time, that means that the BBC can be stimulated into being more competitive, more understanding, understanding of their place in the broadcasting universe and we can have greater certainty without having to wait every ten years to establish it. Q345 Alan Keen: I was invited recently to my local hospital radio. They rebuilt the hospital studio completely and they have got wonderful facilities there. I was so impressed by the skill and commitment of some of their graduates who are now working in commercial radio and the BBC, and we went there to celebrate the new equipment. A hospital is such a small place. Is there not a way of that equipment being used over a slightly wider area than purely the hospital itself? It seems a waste of resources and experience to restrict it to the hospital patients. Mr Buckley: There are a number of hospital broadcasting groups that do aspire to wider coverage but there are others that we have spoken to that very strongly see their remit as serving the hospital and not aspiring to do something else and they need their equipment to broadcast to that very particular audience, which in itself is a particular sort of community. The cost of equipment is not very high in the radio sector and that is the least of our obstacles in this environment. I would certainly expect to see many people who gained their experience in hospital broadcasting contributing to other forms of community broadcasting covering geographical communities and communities of interest. Also, we are very much aware that as community broadcasters get established they are capable of mobilising large numbers of new entrants into the radio sector to pick up radio skills. Ms Schwarz: Certainly when we recruit new talent a number of our current presenters started off life in hospital radio, so it is a very good training ground as well. Q346 Mr Doran: I would just like to ask one question but before I do that I would like to make a facetious response to David Goode in his comment on the Scottish football contract. Aberdeen have been playing so badly recently that we are very grateful for that. You heard earlier the BBC statement about the way in which commercial broadcasting is withdrawing from the local content and the regions. Certainly it seems to me that in television and in radio commercial broadcasting your greatest strength is your local content. I suspect that you do not accept the BBC's analysis, but the comment was made in the context that the BBC is talking about spending a billion pounds moving facilities out of London, which suggests that there will be a much stronger contest in the future, much greater competition, on local content. I am interested to hear your response to that. Just one side point to that: would I be right in suggesting that you may be being squeezed from both ends because at the other end of the market you have got the potential rise of community radio? I know that they are not allowed to compete directly with commercial broadcasters but it is inevitable that there will be a shift in listeners away there, is it not? Mr Brown: Clearly clarity of remit is very important for the BBC, for community radio and for ourselves, and obviously there will be overlapping. For most of the radio stations that I represent, which are our local radio stations (there are only three national commercial analogue radio stations), their localness and their relevance, either to the community of interest or to the geographical community, are their stock-in-trade. The more players you have in the market the more you have to compete in order to be able to keep your local listeners and convert them to revenues for your shareholders. To do that you have to be part of a community; you have to interact. I was intrigued by a comment made earlier on which reminded me of something I heard Anne Begg say, talking about that part of Scotland, at a meeting I was at recently. I was very encouraged because she did say that commercial radio provides a far more relevant and deeply rooted local product than the BBC, as far as she is concerned in her Aberdeen constituency. I obviously would expect you to agree with that. I think that is right. Q347 Mr Doran: For the record I would probably agree with that because all we have got at the moment is a small BBC opt-out. Mr Brown: I also think it is vital. The answer to your question is, that is how we perform, that is how we get our listeners, that is how we make our revenue. Mr Goode: It is the suggestion that the BBC are going to put more substantial opt-out in Aberdeen. The question is, should they? The fact is that in Aberdeen you have two commercial services - North Sound 1 and North Sound 2 - with the potential of the community radio stations to be put in there. North Sound 1 and North Sound 2, as you know, reach 50 per cent of the population. Combined they are the biggest broadcaster in the area. As I have already indicated, they are working with the Scottish Executive on public service, they are lobbying on areas of road safety and so on. The question is, should the BBC now be moving in there? It is not as if they got there first, as, Chairman, I think you were saying about BBC Radio 1 and Radio 2 earlier. North Sound 1 and North Sound 2 are there. The history is that they are providing a good service for the local community and one wonders what the BBC could add in that situation. Ms Schwarz: I am again echoing most of my colleagues. The Capital Radio Group is a local commercial radio group. We own and operate on local community licences with the exception of one national digital licence. Our whole history of success is based very much on its localness. We understand and our listeners understand that the more rooted you are in your community the more effective your radio station will be. Chairman: Thank you very much indeed. What we have managed to do today while looking at the issues in Scotland is add to our inquiry by looking at the whole spectrum. You have been very valuable contributors to that and much appreciated. Could I take this opportunity once again of thanking Glasgow City Council for the use of this wonderful building, with better acoustics, as the Clerk points out, than in the House of Commons, and also for the facilities here. |