Select Committee on Culture, Media and Sport First Report

2  CONTEXT

9. The British Broadcasting Company, as it was first known, was formed in 1922 and its membership consisted of manufacturers of wireless equipment, including the Marconi Company. On 14 July 1926, the Postmaster General announced that as from 31 December 1926 the service provided by the British Broadcasting Company would pass over to the British Broadcasting Corporation which would derive its authority from a Royal Charter. This is the position of the BBC today: its constitution is set out in a Royal Charter while the rules under which it operates are set out in an associated Agreement between the BBC and the Secretary of State for Culture, Media and Sport (which is subject to intra-Charter amendment; most recently to take account of the Communications Act 2003).

10. The current BBC Charter, granted in 1996, comes to an end on 31 December 2006. This followed a recommendation from the National Heritage Committee that the BBC should continue to operate under Charter, and that a ten year period was appropriate. That Committee also concluded that the flat rate licence system had "the fewest objections to it" as a funding mechanism.[8]

11. It was clear to the National Heritage Committee that, even on the figures available in 1993, viewing shares for BBC, and ITV, would come under increasing pressure as more homes gained access to extra channels via cable and satellite. Subsequent developments in digital broadcasting have provided for increased channel capacity, not to mention greater interactivity. Significantly, digital terrestrial television ("Freeview") has become available to large parts of the country, its further growth in coverage being contingent on switching off conventional (analogue) broadcasts with which it competes for radio spectrum.

12. By the end of 2003, half of all homes had access to digital television and take-up has been extremely rapid. In comparison, Ofcom reports that this has occurred at twice the rate of colour TV take-up in its first five years.[9] Some of the implications may be seen in changes to the viewing shares of the main (terrestrial) broadcasters, including the BBC.

Viewing and listening figures

13. Table 1 and Chart 1 show the annual shares of television viewing time across the UK's five terrestrial channels and cable, satellite and digital network between 1993 and 2003.

14. Over the period, the share of non-terrestrial channels has increased from 6.0% to 23.6%. This gain has largely been at the expense of BBC One and ITV1. The proportion of total viewing time accounted for by BBC One has fallen from 33.0% to 25.6%, while ITV1's share has fallen from 40.0% to 23.7%. Shares for BBC Two, Channel 4 and, following an initial growth after its launch, Channel 5 have remained relatively flat in recent years.

Table 1:  Annual share of viewing: UK individuals¹

Note:  ¹Universe of 55.47 million individuals aged 4+ living in TV household as at 31 October 2004.

Source:   BARB

Chart 1:  Annual share of viewing: UK individuals

15. Table 2 and Chart 2 repeat the analysis of viewing shares only among individuals with access to multi-channel television.

16. Again, the figures show a decline in BBC One and ITV1 shares between 1998 and 2003, and a corresponding increase among non-terrestrial channels. Whereas non-terrestrial channels accounted for less than one-quarter of total viewing time among all individuals in 2003, they made up over two-fifths of viewing time among multi-channel individuals. This does not augur well for the BBC's gross viewing figures as take-up of digital services proceeds, but it may be fair, as Lord Burns "suspects", to say that those who have actively sought more choice in their viewing of television—early adopters—are likely to exercise that choice more assiduously, and to have been less interested in BBC services anyway, than those who go digital later.[10]

Table 2:  Annual share of viewing: UK multi-channel individuals only¹

Note:  ¹Universe of 34.77 million individuals aged 4+ living in multi-channel TV household as at 31 October 2004

Source:   BARB

Chart 2:  Annual share of viewing: UK multi-channel individuals

17. Table 3 provides more detail regarding viewing shares in multi-channel households. In October 2004, the combined BBC One and BBC Two share was 25.1%, compared with 31.3% for the three commercial terrestrial stations. Sky channels accounted for 10.3% of the total viewing time, with BBC digital channels totalling 6.2%. ITV digital channels made up 2.2% of total viewing time.

Table 3:  Monthly viewing share in multi-channel homes: UK¹

Notes:  ¹Universe of 13.51 million multi-channel homes as at 31 October 2004.

  Figures for BBC Parliament are greater than zero but less than 0.1.

Source:  BARB

18. Table 4 and Chart 3 detail third quarter radio listening shares among UK adults between 2000 and 2004. The weekly reach measures the total number of people listening to the station for at least five minutes during the course of an average week, while the audience share details the proportion of total listening time accounted for by each station.

19. The total BBC share has increased slightly over the period, from 51.4% to 54.4%. Within this total, however, the share of local and regional BBC stations has fallen slightly, from 11.1% to 10.9%. This trend is repeated among commercial stations, with national commercial stations increasing their combined share from 8.0% in 2000 to 9.6% in 2004, while local commercial stations accounted for 38.7% in 2000 and 34.1% in 2004.

20. The growth in BBC Network share has been caused chiefly by increased audiences for BBC Radio 2 and BBC Radio Five Live. Over the same period, the audience share for BBC Radio 1 has fallen quite significantly.

Table 4:  Quarterly share of listening: UK adults

Note:  Weekly reach measures the number of people listening to station for at least five minutes during course of average week.

Source: RAJAR

Chart 3:  Quarterly share of listening: UK adults

21. Table 5 below shows recent trends in BBC audience reach.[11] In radio "reach" is defined as the average number of people who listened to a station for a specified period (usually five minutes) throughout a day or week.[12] This can be expressed in numbers of listeners or as a percentage of the population. In television the formula is the same except that reach is calibrated as consecutive viewing for a fixed period, usually three or 15 minutes on an average day or week. The trend in BBC TV reach has undoubtedly been downwards. The experience in radio varies between stations, but in general audience reach has increased.

22. Figures for reach are higher than those for share, since the former is merely a measure of viewing (or listening) for a period - here 15 minutes - during the course of a week.

Table 5:

23. The figures for audience share and reach underline one of the potential dilemmas facing the BBC. As the BBC Chairman told us, "Governors in their stewardship of the public's money are not in the business of endlessly granting money to the management to spend on services that clearly nobody wants to watch or to listen to or to use online."[13] At the same time, the BBC has often been accused of chasing audience ratings at the expense of its wider public service obligations. In attempting to reconcile these conflicting factors, the Director-General referred to the BBC's current "manifesto", Building public value, which suggests a metric which is not just looking at audience size but also "reach, quality, impact and value for money with a large number of parameters for a more balanced assessment about whether or not we are driving public value."[14]

BBC programming expenditure

24. Table 6 details transmitted programme spend for BBC channels and stations in 2003 and 2004. Charts 4 and 5 compare the expenditure on different BBC outputs with the audience share figures already discussed.

25. In terms of television, there appears to be a general correlation between expenditure and viewers.

26. With respect to radio, however, the correlation is not so obvious. Audience shares for BBC Radio 1 and BBC Radio 2 are higher than programming expenditure would suggest, while BBC Radio Five Live has a much smaller audience share than would be predicted in relation to expenditure.

Table 6:  UK Public Service Broadcasting Group expenditure

Source:  BBC, Annual Report and Accounts 2003/04

Chart 4:  BBC TV audience share and programming expenditure

Chart 5:  BBC radio audience share and programming expenditure

BBC resources

27. Table 7 shows BBC staff and payroll costs by division for the period April 2004 to October 2004. It provides an indication of the BBC's scale and the distribution of the Corporation's resources at a time when the Director-General is planning efficiency improvements brought about, in part, by cuts in staffing. We take the view that the detailed allocation of resources is an operational matter for the BBC, but substantial changes should be conducted in a transparent manner and in such a way that maintains the Corporation's core mission as a public service broadcaster.

Table 7:  Equivalent Full Time (EFT) Headcount and Total Payroll Costs for the financial periods April 2004 to October 2004

Source:  Correspondence from BBC

28. Finally, as Lord Burns's Independent Advisory Panel has noted, the expansion of channel choice has resulted in a declining audience share for the main free-to-air channels and this trend is likely to continue even if the estimated rate of change is open to debate. This will put pressure on commercial channels to include more commercially dependable programming as a decline in spectrum scarcity reduces the value of a public licence to broadcast.

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8   Second Report, 1993-94, HC 77 Back

9   Is television special?, Ofcom, April 2004 p 62 Back

10   Ev 109, Q 136 Back

11   Note that: a) the Broadcasters' Audience Research Board (BARB) introduced methodological changes in January 2002 which could have had some downward impact on subsequent figures, and b) the data are shown as last, rather than first published - original figures are often revised in the next Annual Report.The total TV, total radio and total TV/radio figures were not published prior to the 2000/01 Annual Report. Back

12   In more detail, the radio reach relates to 5 minutes of cumulative listening in a 15-minute slot.Note that the combined radio and TV reach in table 5 is not a simple sum, but is based on a formula designed to express the total reach of BBC services (radio and TV). Back

13   Ev 218, Q 533 Back

14   ibid. Back

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Prepared 16 December 2004