Examination of Witnesses (Questions 200
- 219)
TUESDAY 29 JUNE 2004
BSKYB
Q200 Chris Bryant: Let's say it needs
roughly £2.5 billion a year. Should it be funded by subscription,
should it be funded by advertising or should it be funded by the
licence fee?
Mr Rhodes: I think, as Richard
said, it depends on what it is doing. If for that £2.5 billion
it is providing a service for, by and large, the whole population,
then probably the population should be contributing to the funding;
and it may well be that the most efficient way to do that is through
a licence fee. That is something you would have to look at once
you have identified the role it is going to perform. If the role
it is going to be performing is, for example, to provide very
much a niche service, like the one that Derek Wyatt mentioned
earlier, this Sports Psychology Channel, then it may be that there
is a very small part of the population which would wish to consume
that service, and it may be more appropriate that that part of
the population looks to funding it. I do not think you can say
in the abstract: is the licence fee right? Should it be subscription?
It really does very much depend upon the activity being undertaken.
Q201 Chris Bryant: But we know what
the BBC looks like. It has got BBC1, BBC2, all the radio, all
of that kind of stuff. We know what it does. I am a bit worried
if you are so shy of saying anything about the licence fee, because
in the past Sky has always been rather publicly opposed to it;
and we have had people on behalf Sky sit in that chair and say
the licence fee is nonsense.
Mr Rhodes: I am not sure we have
said that, but our position today is that it very much depends
upon the function that it is performing.
Q202 Chris Bryant: But you challenged
the licence fee as being State Aid, for instance, in Europe?
Mr Rhodes: That was a question
to do with News 24, whether it was appropriate that public money
should be given to the BBC to perform that task given the effect
it was having on commercial operators such as Sky News. So that
was a very specific issue: should that money be given to the BBC
for that task? It is not a general, "We challenge the licence
fee." That is not our position.
Q203 Chris Bryant: Do you still believe
that News 24, BBC News 24 should be stopped, that in the new Charter
it should not be allowed to do News 24?
Mr Rhodes: I do not believe we
have given that any consideration recently. Certainly there has
been an adverse effect on Sky News, and it is difficult to envisage
yet another entrant who is providing news, given the BBC's position.
ITV was able to grow a 24-hour news channel off the back of its
existing news provision, but it is difficult to see anyone else
doing that. So there is clearly a market effect which we have
some concerns over.
Q204 Chris Bryant: Hang on. We are
talking about a new Charter for another 10 years in which presumably
there will be laid out what channels the BBC can and cannot do;
and you are saying today that you have no view as to whether News
24 should be part of that package into the future. Is that right?
Mr Freudenstein: If it is, I think
it needs to perform some public service function which needs to
be distinctive from what commercial broadcasters are doing.
Q205 Chris Bryant: It is, because
it is not as good as yours!
Mr Freudenstein: I think my comment
echoes what the Lambert Report said as well. It is no good just
copying what we do or what ITV News does. It needs to be distinctive.
It needs to do something that justifies the public money.
Q206 Chris Bryant: I am still a bit
perplexed, because it seems to me that basically you are accepting
the BBC as it is and into the future, which has not being traditionally
your position; and I just wonder whether that is because the BBC,
with BBC3, BBC4, these new channels, has driven up take-up of
digital, which has put you into an awful lot of homes in the country?
Mr Freudenstein: I would not over-emphasise
the effect that BBC3 and BBC4 have had on driving take up. What
has driven take-up, to some extent, has been the BBC's cross-promotion,
which is a big issue in making sure that they are platform neutral
in their cross promotions. Every new channel or service the BBC
launches has an effect on commercial broadcasters, and people
have to be aware of what that effect is. We may make decisions
to approve and launch new channels, but we are not coming here
today with a definite view on what channels should or should not
exist. It depends a lot on what comes up.
Q207 Chris Bryant: It is interesting,
because last time we debated issues around broadcasting in advance
of the Communications Act, there was a much more ferocious debate
about the BBC and about ITV, everybody was rowing, and it feels
as if all the heat has gone out of that debate. It feels as if
basically the status quo is what you are quite happy with. You
support the licence fee now. You support the BBC's broad package
of channels?
Mr Freudenstein: No. I think what
we are saying is you need to go through the process of analysing
what you want the BBC to be. We are not saying one way or the
other emotively what it should or should not be. I think the people
who decide this need to go through the process of what you want
the BBC to be, then decide how much money you need and then decide
how you are going to spend it. It does not need to be emotive;
it needs to be: "what does society want from public service
broadcasting?"
Q208 Chris Bryant: What do you think
it wants? That is what I am trying to tease out of you.
Mr Freudenstein: I will go back
to what I said at the beginning, which is echoing what other people
have said to this Committee, which is that you want a quality
and range of programming that is not provided by commercial broadcasters,
and then you work out the best way to achieve that.
Q209 Chairman: Before I call on Rosemary,
could I follow up on something that Mr Rhodes said? Mr Rhodes
talked about "niche broadcasting". Sky is a large conglomeration
of niches. So is Channel 4. So is Channel 5. They are the niches.
Chris Bryant was asking you about how you felt about the BBC as
it is now. The BBC as it is now, whether that will be so in another
10 years who can tell, is based upon having audiences, certainly
for BBC1 and BBC2, which are far bigger than anything you aspire
to for any of your channels. They are looking to have for BBC1
something like 20% of the people in the country sitting down together
and watching some programme, whether it is EastEnders, Panorama,
or whatever it might be. Is that the scenario that you envisage
is still viable for the year 2016?
Mr Darcey: Can I have a go at
that one? I think this goes back to the point that Richard was
making earlier about the issues with share of viewing. We have
some sort of sympathy with the BBC on this point—maybe that
is going to be your headline—that share of viewing is sort
of used in both ways. If share of viewing for the BBC is too high
they are criticised for being too populist, and if it is too low
they are criticised for wasting public money. Share of viewing
is a very imperfect device, and I do wonder if we should try and
pay more attention to some sort of concept of audience appreciation,
because I think there is quite an important difference between
somebody sitting down in front of a BBC programme because it is
the best of a bad lot that is on and they sit there and they find
it a thoroughly unmemorable experience, and contrast that situation
with one in which they sit down in front of a BBC programme and
it is absolutely the highlight of their week, they find it very
entertaining, they are very exited about it and they come away
thinking, "I am really pleased I devoted an hour of my life
to that." Unfortunately, those sorts of distinctions do not
really get picked up in straight viewing share numbers, and I
think the important thing for the BBC going forward is to make
sure that it is doing more of the latter, to the extent, whatever
its overall viewing share is, it is comprised of people perceiving
that they are getting a few real gems from the BBC that they find
memorable and, when they look back, they think, "Yes, I am
really pleased with what the BBC has given me." Because that
is more important than lots of people just watching a lot of stuff
that they find fairly unmemorable.
Q210 Chairman: Last Thursday evening
many millions of people parked themselves in front of their television
sets to watch the England/Portugal match. It was on BBC1, but
they would have watched it on whatever channel it was, provided
they had access to it. They were not saying, "I must us watch
BBC1", they were saying, "I must watch the match"?
Mr Darcey: Yes.
Mr Freudenstein: That is correct,
yes.
Q211 Rosemary McKenna: I do not quite
know where the Chairman is going with that question, but can I
probe a bit further. I wanted to ask about audience share, the
question that you have given, because I believe, and I wonder
if you would agree, that the BBC should not be concerned about
audience share as its primary concern. What it should be doing
is producing high quality programmes, a bit of experimentation.
Would anyone else have produced "The Office", for example?
Should they get their audience share by that effort of producing
really high quality programmes and not be concerned about audience
share in terms of what time they put something on to channel whatever.
What would your view on that be?
Mr Darcey: We have seen a number
of comments by some of the other terrestrial broadcasters where
they had some concerns about counter-scheduling and things like
that, and I think we understand where they are coming from. I
think we tend to agree that the BBC should focus its efforts on
high quality programming. People sometimes then take that and
say, "So what you are saying is they should go down a sort
of Shakespearean ghetto", and I do not think that is what
is being implied, that high quality can also be highly popular,
and I think this issue of risk is very important. It is very easy
after the fact to say, "Oh, well, `The Office' was a very
popular programme, so perhaps the BBC should not have done that."
I think the real issue is that most of the terrestrial broadcasters
find comedy a very challenging genre to invest a lot of money
in because it is very risky; but when we ask the BBC to take on
risk because they are well placed to do so, we should accept that
sometimes risk will pay off and they will produce something very
popular and very successful; and we cannot then criticise them
for that; but we also have to accept that sometimes they will
bear a risk and it will not come off and they will produce something
which is not very popular, and that is part of the game.
Q212 Rosemary McKenna: Your idea
about just looking simply at audience share—it would be
difficult to analyse that deeper, would it not, rather than just—
Mr Darcey: Yes, I do not think
we would go as far as to say you should abandon all audience share,
because I think there is a certain inevitability that those pieces
of information are produced on a daily basis and people will look
at them and they will draw conclusions from them. I think all
I would say is there are other aspects that are just as important
and they should be—or the industry as a whole should try
and look at those as well. Audience appreciation is, I think,
an important concept, it just happens to be quite hard to get
a handle on.
Q213 Rosemary McKenna: One other
question, Chairman. There is a common thread running through evidence
that has come from either programme producers or the carriers
that provide the path for people. Everyone has said that the BBC
is important, that it should continue to be funded. Is that simply
because they set a standard but they also do most of the training
in the UK? Is it simply because of that that the other companies
recognise that would not be done, or the standards would not be
as high if the BBC was not there and not doing the job that it
is funded to do?
Mr Darcey: I think clearly part
of the BBC's role is to help set standards. I do not think they
are the only people who set standards either in programming or
in training, and you cannot look at training too narrowly because
Sky does a lot of training in areas that the BBC does not operate,
such as call centres and a whole range of installation, a role
range of areas, but, yes, the BBC plays an important role in that
area.
Q214 Rosemary McKenna: On a different
tack, Derek Wyatt, I think, earlier on said that young people
are not watching television as much as they used to, but that
was said about film 10 to 15 years go and now many, many more
young people are watching film because the film people have recognised
they have to provide it in a different way. Is that very much
on your horizon, the BBC's horizon, do you think, that they have
to find a different way of attracting younger audiences?
Mr Freudenstein: We do a pretty
good job in attracting younger audiences. I think 60% of children
in the UK live in homes that have Sky. There is a great deal of
programming on the Sky platform that appeals to children of all
ages, and it is very important for us. I think you are right:
children do consume media in many, many different ways and it
is worthwhile seeing how that is going to develop and will they
continue for ever or will they revert to more, dare I say, normal
habits as they get older.
Q215 Mr Doran: In the market in which
you operate, how do you see the BBC? Are they simply competitors,
or are they something else?
Mr Freudenstein: They certainly
are competitors, and we compete with them in a number of ways
for rights, programme rights, clearly audience share. We have
an interesting relationship with the BBC. We are partners in Freeview,
so we work with them on the promotion of the Freeview platform.
We are in discussions with them about working together on the
free to air satellite platform, and we will see where that one
leads, but clearly whatever they do has a big impact on us and
the other commercial broadcasters.
Q216 Mr Doran: You are competitors
and partners at the same time?
Mr Freudenstein: Yes.
Q217 Mr Doran: You gritted your teeth
when you said that?
Mr Freudenstein: No, not at all,
as are lots of different players in the television industry.
Q218 Mr Doran: In relation to Freeview,
on the one hand you have said you are partners and that is clear.
At the same time, it seems to have had an impact on your business?
Mr Freudenstein: Freeview—.
It is questionable whether Freeview has had an impact on our business.
Freeview is doing very well, and on the back of BBC promotion
Freeview is growing quickly. Sky is continuing to grow.
Q219 Mr Doran: But not as quickly
as it was before Freeview?
Mr Freudenstein: Perhaps not,
but we will see what happens in the future. Early indications
are that people who have taken Freeview have been very much people
that are often BBC watchers who, so far, have been disinclined
to take pay TV. So we see Freeview as very much an introduction
to digital television, an introduction to multi-channel television.
I think you will find over time that, as people get a taste for
more television, work out there are channels other than the big
five, many of these will then be attracted by the superior content
on pay television and move to either Sky or Cable. So I think
over time you will see Freeview continue to grow and then perhaps
over time the number of homes that have only Freeview will start
to decline as those people then move and take pay television services
over time.
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