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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 650-iii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE CULTURE, MEDIA AND SPORT COMMITTEE
Tuesday 6 December 2005 MR CLIVE JONES and MR CHRISTY SWORDS MR ANDY DUNCAN, MR DAVID SCOTT, MS IONA JONES and MR ARSHAD RASUL MS JANE LIGHTING, MR GRANT MURRAY and MS SUE ROBERTSON Evidence heard in Public Questions 192 - 277
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Culture, Media and Sport Committee on Tuesday 6 December 2005 Members present Mr John Whittingdale, in the Chair Alan Keen Rosemary McKenna Adam Price Mr Adrian Sanders Helen Southworth Mr Tim Yeo ________________ Witnesses: Mr Clive Jones, Chief Executive Officer, ITV Regions and News Group, and Mr Christy Swords, Director, Regulatory Affairs, ITV, gave evidence. Q192 Chairman: Good morning. This is the third of our public sessions looking at analogue switch-off and today we are taking evidence from the commercial broadcasters. We will be taking this in three sessions, the first of which we are discussing with ITV. Could I welcome particularly this morning, Clive Jones, the Director of News and Regions for ITV and Christy Swords, Director of Regulatory Affairs for ITV. Thank you for coming to talk to us today. Can I start by asking you to give a general overview of the attitude of ITV to switch-off and what you think it will mean for ITV beyond switch-off. Mr Jones: Obviously we are totally involved in switch-off and, more importantly, switchover, Chairman. We are active members of the Digital UK board, which we think has made a very good start to its work, and we recognise that digital is inevitable. It is the future of broadcasting and we are willing and happy to play our part in delivering that goal so that the whole population can enjoy the benefits and increased choice of digital television. We are currently involved in negotiations with the transmission providers over contracts to build out the post switch-off digital terrestrial network, and in many ways it has opened up new opportunities for us that were not available in the past, so we have now launched a family of channels: ITV 2, 3, more recently ITV 4, and of course ITV News. They sit alongside ITV 1. ITV 2 is one of the fastest growing multi-channel offerings in the UK. This new world of digital offers us a chance to explore new commercial opportunities which we hope will enhance the viewing experience of the people of the UK. New benefits like interactivity and advertising hopefully, over time, will open up new revenue opportunities for us as the biggest commercial broadcaster in the UK. Q193 Chairman: You have obviously had some experience of digital previously, with ITV Digital, which was not terribly successful. Would you tell us what lessons you have learned from that experience and how you see the costs to ITV of moving into the digital age and the benefits in financial terms? Mr Jones: It is obviously not directly comparable. ITV OnDigital was a venture by ITV to establish itself in pay television. Because of the nature of the technology and the nature of the content offering that we were making at the time and the economics of that particular business, sadly, it resulted in failure. I think this time around one is talking about a much more general generic process, about providing a range of digital channels to the whole population of the UK. It is not only about pay television; it is also about free-to-air television and the provision of a range of signals on a range of platforms: pay-to platforms like digital satellite and digital cable, and free platforms like DCT and, fairly soon, Freesat. We are cooperating with the BBC to deliver Freesat to the small number of people who will not get the full range of DDT coverage. About 98.5% of the population will get that and there is another 1.5% to go, and, hopefully, we can help provide the signals with the BBC through Freesat so that they have a continuing choice of free-to-air television. What is it going to cost? It is going to cost us a lot of money - millions and millions of pounds over the next five or six years in terms of switching all our analogue transmitters to digital transmitters. In the short term, we face the double-whammy of having to pay and support the analogue transmitters alongside the digital transmitters. That said, we suffer the pain now but we then enjoy the benefit later, because, once we are switched over and we are all digital, we think our costs of transmission will fall quite considerably. In one sense, we are investing now for real benefits in the future and, hopefully, benefits in terms of the viewing experience of the general population as well because they will have increased choice: more ITV channels, more BBC channels, more channels from Channel 4, Channel 5 and other providers of free broadcasting. Mr Swords: I think one of the fundamental problems that OnDigital and ITV Digital faced was the problem that the switchover process is specifically going to address and that is the problem of limited coverage. When OnDigital and ITV Digital were operational, coverage was as low as 50% for DTT. That has now risen to about three-quarters of the population. But we still have this chunk of the population which, until we switch over, will not be able to get digital terrestrial - which is of course for most people the cheapest and easiest way of converting to digital. Q194 Chairman: Have you made any assessment of exactly what it is costing you to have simulcast at the moment? Mr Jones: No. We are still in close commercial negotiations with the transmitter providers. There are still two providers. We are still in detailed negotiations and I think it will be some months before we actually get a process. Mr Swords: Currently, our simulcast costs, our DTT costs, are relatively contained. The big additional investment will come when we sign these new transmission contracts, which in effect will build a new network for DTT over and above the limited network that we run today. Q195 Mr Sanders: On that point, could you define what you mean by limited? Is that the entirety of the transmission network? Mr Swords: Today we have DTT broadcasts which cover about 73-75% of the country. We do not have a comprehensive DTT transmission system on the lines of the analogue service which is broadcast out of 1150 sites. We will be building essentially that and that should broadly replicate the near universal coverage that we get today from analogue terrestrial. That is the additional quantum leap, if you like, that will take us to high 90s, nearly 100% DTT coverage at switchover. Mr Jones: "Broadly replicate" has to be taken in context. The digital map will not completely follow the analogue map. There might be small regional variations. That 1.5% of the population which do not get analogue signals might be a different 1.5% which do not get digital signals. Q196 Mr Sanders: But it will be picked up. Mr Jones: Yes. But, hopefully, we can fill that in, as I said, through Freesat. I am sure, equally, with the rapid development of technology, that phone signals, possibly even DAB radio signals, could infill some of those areas that may be without a digital terrestrial signal. Q197 Mr Sanders: How do you see digital switchover impacting on ITV's public service remit? Mr Jones: I think this presents not only us but the other commercial public service broadcasters, 4 and 5, with a real dilemma. In the past, public service broadcasting in the UK has been supported by the fact that we have the BBC with the licence fee as a major public service broadcaster and we have had ITV 4 and latterly 5 being given free spectrum in exchange for public service broadcasting commitments. Our spectrum charges have fallen - they were many hundreds of millions of pounds - but they are still £80 million a year. We are still paying considerable sums. But our public service broadcasting commitments are costing us around £250 million a year - that is, national news, regional news, arts, religions, documentaries, current affairs. Let me make it absolutely clear, we wish to remain a public service broadcaster, but there is a dilemma going forward. At the point of analogue switch-off, at the point of DSO, the value of the free spectrum and, more crucially, the position of 101, 102, 103 for ITV in terms of the EPG and must-carry/must-offer obligations contained in the Communications Act, is estimated to have fallen to about £25 million. That is an estimate put on it, I think, by Ofcom. So in ITV's case - and this is equally applicable to Channel 4 and, indeed, to some extent Channel 5 with their news obligations - we have £250 million in one side of the scales and £25 million on the other side of the scales. I think we need an urgent debate, a very urgent debate - and I am sure it will happen in this Committee but also in the House and with government - about what we want to do in this country about public service broadcasting. Do we want a plurality of supply? I think we do. I think it would be a desperate shame if public service broadcasting became a monopoly activity for the BBC and they were the only main providers of television news or television current affairs. I would hope that we can come to a process which would ensure that ITV, Channel 4 and 5 can continue in this way, but it is going to be difficult, because £250 million for ITV against £25 million does not really equate and we are a commercial broadcaster and we have shareholders and we have a fiduciary duty to shareholders. I think we have to have an active process to try to work this through. Ofcom have suggested the PSP (Public Service Provider), funded possibly by top-slicing the BBC or an apportionment of the licence fee or possibly by a tax on broadcasters. There may be other devices. But I think it is very important that we start debating these issues very soon, because we run the risk that we will not know what we have lost until it is gone and digital switchover begins in the final quarter of 2008 in the Border region. That probably shows it in its greatest relief. The Border news service is unique. It is not replicated by any other channel. The regional news service in Border, on average, takes a 40% share every night of the week. We are obviously committed to carrying that through, all the way to the point of digital switchover, because we have signed licences, so it is applicable until 2012, but whoever is running ITV in 2012 will have to make a decision, if there is not a new process to support and buttress the plurality of PSP, whether it keeps that rather expensive news service going or whether it chooses to put in much cheaper programming in its place. Q198 Mr Sanders: Can you predict, then, if nothing happens, what public service content there is likely to be after switchover? Mr Jones: I could not predict what public service content would be next year. Q199 Mr Sanders: You say there is a need for a debate. Presumably you must be able to predict what the problem is. Mr Jones: I can predict what the problem is; I cannot necessarily predict the outcome. The problem would be for ITV, as currently a major public service broadcaster, that it would be faced with the equivalent of £250 million of cost and £25 million worth of benefit. That is the dilemma that ITV faces. I find it hard to believe that even a completely hard-nosed commercial ITV would not wish to maintain its national news service because that is one of the signature aspects of the terrestrial channel. Whether it would be able or would choose to maintain one of the most complex regional setups anywhere in the world - we provide 27 regional and sub-regional news services, which at six o'clock most nights are watched by between four and five million people - I do not know. What is the benefit coming back for that major cost? It is a cost of over £60 million a year. Q200 Mr Sanders: Has the idea not always been that the regional network would be funded by regional advertising, regional advertisers who could never afford to advertise on a national basis? Mr Jones: The amount of money that regional news attracts I suspect will not be able to meet the costs of a full regional news service. I may be wrong. I always compare broadcasting to Maoist China: it is permanent revolution. It is constantly changing. I could not confidently predict what revenues regional news would bring in in 2012 but it is a close equation. I doubt we could raise enough money in regional advertising to meet the full costs of the complex regional structure we have. Mr Swords: I think it is fair to say that we are not sitting on our hands waiting for this to happen. We are actively seeking forms of self-help, to develop new revenue streams beyond broadcast television. For example, we have launched the ITV local broadband service which builds on our regional content and our regional news and is delivered online to viewers on the South Coast. We are doing it as a pilot. We are targeting new forms of advertising which broadcast television has not been able to take advantage of traditionally, classified advertising, more local advertising, and we hope, if that is a success, that it will, in a sense, help us close that funding gap. But, I think, as Clive has starkly put it, fundamentally the problem is the quid pro quo: the costs and benefits of PSB in an analogue world really do not apply once you get to digital switchover and you have at least 30 channels in every home, and, in many millions of them, several hundred. I think there is a consensus that there is a problem there and that is shared by government and certainly by Ofcom and beyond. It is really a question of timing: When is the right time to address that problem? The Government proposed a review of commercial public service broadcasting towards the end of the switchover process in 2011. Ofcom are conducting a review of Channel 4 funding, I think, in 2006/2007. Our view is this all needs to be brought forward and we need to look at commercial public service broadcasting in the round, well in advance of even starting the digital switchover process, because, as Clive says, if you wait until 2011/2012 it may well be too late. Q201 Chairman: You will recall that the relatively modest proposal by Ofcom to reduce the public service obligation for 24-hour non-news regional programming generated quite a bit of controversy in this building. Do I take it therefore, if you wish to see ITV maintain in large part its public service broadcasting in the future, that, to meet the gap which you have identified, the implication of what you are saying is that you think you will need access to public funding, perhaps through top-slicing the licence fee? Mr Jones: We may; we may not. There are various forms of help, as Christy has alluded, Chairman. I think the first duty is upon ourselves: Can we diversify and access new revenue streams by creating supporting services like ITV Brighton and ITV Hastings which we are currently piloting? If those services work in terms of provision of local needs, local entertainment, local classified, local information, that could open up new revenue streams right across the country which could buttress our regional needs. It may be that over time we could look to Ofcom to change some of the minutage rules in terms of the advertising. I would not want to see a massive increase in minutage in peak time because I think about eight minutes an hour is as much as people want. But we currently optimise that minutage in peak time and we have very little air time available in the regional news between six and seven and the national news. That may be another form of self-help which does not mean a call on public funds. But it may be that at the end of the day there is a gap which is unbridgeable by ourselves, or, indeed, our colleague commercial broadcasters like Channel 4. They estimate that there will be a gap. I think our desire and our emphasis initially is on self-help, but there may be a point where some increased top-up funding could be provided from some kind of public service plan, which may be provided from the licence fee, or, as I say, through a different mechanism which we or Ofcom or this house have yet to think through. Q202 Chairman: You have also referred to the news as being one of the core activities of the public service obligation. If we are moving into an age of multi-channel television, would you not think therefore that in order to maintain ITV's standing as a mainstream news provider, the argument for continuing to have a 24-hour news channel becomes stronger not weaker. Mr Jones: I think this is a complex area. One of the realities of the move towards digital switchover is fragmentation of audiences. In the case of ITV, fragmentation of audiences inevitably means fragmentation of revenue streams as well. We will still be one of the major broadcasters in the UK post digital-switchover but our audience will be lower. Hopefully, we have made up for some of that loss with ITV 2, ITV 3 and ITV 4 and maybe other channels. But the main audience for ITV 1 will fall. It has done over time. We are already up to 62% digital penetration in the UK and there could be a further 10% of the population switching over to digital in the next year or 15 months. When you have fragmenting revenue streams, you have to work out your investment priorities. We have ambitious plans for ITV 1. We want to open up some new bureau around the world. We currently do not have a bureau in Beijing, for instance, where we think we should be not only because of the impending Olympics but because of the fact that this is the fastest growing economy in the world. We are going to have to balance our investment. We are currently investing very heavily in regional news - we are in the midst of a £45 million investment campaign - and we are going to have to work these issues through in terms of where we get the best return on our investment. The average audience for news channels, even the all powerful Sky News, is 75,000 an hour. More people watch Meridian News or Central News in a week than watch Sky News. If you look at that crucial news hour between six and seven, the audience across BBC One and ITV 1 is around 11 million people. Do we invest in rolling news services going forwards - this is applicable to the BBC and Sky, I guess - which deliver quite small audiences - or do we put our major investment into the big news programmes which still attract audiences in their millions? I think it is going to be a continuing debate about public service broadcasting and the nature of our commitment. Our national news and our regional news are major licence commitments: they are public service broadcasting commitments that we have made. Our news channel is not. Our news channel is a commercial venture. The cost of video streams on Freeview which only a year ago was £3-£5 million, this year is £12 million. That is what Channel 4 has paid for the latest video stream. That is a big cost before you even start paying for the journalists and for the infrastructure of the channel. It is going to be quite a daunting task for us going forward, but it is something that we are going to debate actively as we want to continue our investment in news Q203 Mr Yeo: I warmly welcome what you say about regional news, which I am sure has a very, very important function. But, from what you have just said, it sounds a bit as though you are writing the death sentence for the ITV rolling news channel, so we are going to be reducing from three to two. That is obviously a reduction of choice in the market but it did not sound to me as if there was any phrase in what was quite a long answer that can be regarded as reassuring for the future of ITV's 24-hour news. Mr Jones: I would like to keep the news channel going. I think it is a good channel. I think we have worked incredibly hard since we have owned the channel. (We did not begin it, ITN began it: it was a joint venture with one of the cable operators.) Since we have taken it over, we have invested quite heavily in it to try to make it a going concern, a going venture, and I would like to maintain the service. But I can only refer to my previous answer: we began as part of a duopoly and we had a monopoly of British television advertising; we are now one of 200 channels and we have to make our way in a highly competitive commercial world, and I am not about to become the beneficiary of a major increase in my licence fee. Q204 Mr Yeo: That is a fair point to make, certainly. Are you saying that you do not think the marketplace is really big enough for three rolling news channels? Mr Jones: I do not know. It may not be. You are talking about, as I said, very small sections of the population who watch news channels. They grow at times of crisis - when there is a 7/7 or when there is a Beslan - but when those terrible events happen, we switch, as we did on 7/7, as we did with Beslan, to rolling coverage on the main ITV 1 service, and that would always continue. Whether it is tsunami, whether it is any of these terrible events, the public expect to see major breaking news on the main channel, so we would continue to do that whatever might happen. Mr Swords: It is worth adding that the ITV News channel has had to fight its corner without any of the benefits clearly of licence fee funding but also of the PSB benefits that apply to the commercial public service broadcasters such as gifted analogue spectrum, gifted DTT spectrum, due prominence on electronic programme guides. If you go to the Sky programme guide, the first name you will see is Sky News. I think the ITV News channel is way down that list and that has had a big impact on it. As I say, it has had to fight its corner as a purely commercial venture without any of the benefits of public service status. Q205 Mr Yeo: I do not think ITV can complain about the EPG, given its early involvement in that. Sky clearly are making a determined effort to sustain their news channel. Surely they do not have the advantage of the licence fee money. They are also having to operate in a competitive commercial environment. Mr Jones: I suspect they will lose a great deal of money on Sky News as a pure channel. It is the only form of public service broadcasting they do. They do not carry any news services on Sky 1 or on any of the other range of channels. They are a platform operator, they are a channel operator. We do, as I said, £250 million worth of public service broadcasting on ITV 1 alone and we deliver a news channel. They obviously feel that it serves a role for them and has done over time, but it is the only form of public service broadcasting they do. Q206 Helen Southworth: You were mentioning local television programmes. What plans do you have to bring in a new world of local television? Mr Jones: We are currently running a pilot on both Brighton and Hastings which is a broadband delivered service to each of those homes. It provides local news. You can get the news for the whole of the South from Meridian but you can also get individual stories for Brighton. It provides what is on; it provides local information; it provides local documentaries that we have made about that region. It could provide, over time, a television form of classified advertisements, in terms of houses and cars. We are offering a facility called My Brighton wherein local residents can upload video reports. It might be their own take on living in the region or it might be their own account of local history or it might be their own account of the activities of a local school or a local group. We think it is an interesting area. We have never really done local television in that sense before, in terms of a micro area - we normally deal with millions of people in a region. We hope it can work and, more importantly, we hope we can monetise it. We do not know whether we can monetise it at the moment, but we see this as a potential way forward, as I was referring earlier, to open up new revenue supplies and create a strong alliance between local news delivery and regional news delivery and to be able to supplement our existing regional revenues with local revenues. If this experiment, this pilot, works on the South Coast, we would hope to roll out local television services across the UK quite rapidly. I think it might well have to be on the basis of different funding models. In major urban centres and major cities, it could probably work as a stand-alone commercial proposition, but I think in other areas, where there may not be the weight of population or the concentration of industry - and I am thinking possibly of the West Country or areas of Central Wales or possibly the Highlands of Scotland - it might be that we would do this in partnership with local firms or possibly councils or RDAs, to ensure that other people in parts of the country receive that, and that provides challenges in terms of editorial independence. But I am sure we can work these things through. As with the BBC, there seems to be a desire for local information, local news, and there seems to be a movement steadily, as we go into digital Britain, to take more and more information via the PC and, indeed, the convergence of PCs and televisions. So this is an area we want to explore. Q207 Helen Southworth: Do you see it as just an information-sharing vehicle, or are you looking at relationships with creative industries and opportunities for young people coming into the industry in production and all those sorts of things? Mr Jones: I think it could provide both of those things. We have already, with ITV Brighton and ITV Hastings, struck a showcase agreement with a local screen agency on the South Coast. Short films that are being made by young film-makers down there are already being showcased, so you can click onto the website - www.localtv.itv, if you want to go and see it - and see short films being which have been made by young film-makers going to colleges and universities down on the South Coast. In terms of training, potentially, yes, this could be an adjunct. We have about 20 young journalists a year - either through sponsoring them through postgraduate courses, or ten people a year we actually take straight into our news rooms. Local TV could provide an additional way of training and supporting an opening of employment to young journalists, young video-makers across the country. It has not worked yet, and I cannot guarantee that this pilot is going to be successful. Q208 Helen Southworth: That is really what I am asking you: rather than this being theoretically possible, is this something at which you are going to be looking and into which you are going to be putting some investment to make it happen? Because somebody has to do it. Mr Jones: We are putting many hundreds of thousands into our experiment now. If it can work, we will discuss it at some length with the main plc board. If it can be monetised, if it opens up a new revenue stream, we will be getting into this part of the business very, very quickly. Q209 Helen Southworth: What about high definition television. Mr Jones: HDTV! We are planning a pilot with the BBC next year, probably around the World Cup. HDTV is quite phenomenal, if you have been able to see the difference. Despite the quality of the panel pictures here in the UK, HDTV is a leap again. The pictures are absolutely stunning. However, it is spectrum hungry: it uses a lot of spectrum. The current spectrum available on DDT will not be enough to support. We only have half a multiplex and we would not be able to run our different channels and do HDTV at the same time. I think that is one of the things we would hope to achieve at the point of analogue switch-off. There will be more spectrum released, and I would hope that Ofcom and Government decide to release some of this additional spectrum to the traditional mainstream broadcasters so that we could deliver HDTV services. Mr Swords: I think it is worth nothing that DDT will be the UK default digital platform, in that a lot of even cable and satellite homes will have DDT on their second and third set. We are very focused and agree with the BBC that if DDT is perceived or becomes a sort of second-class service because of its inability to offer DTT, it will be a massive wasted opportunity. Ofcom are currently looking at the so-called digital dividend and what should be done with some of the released spectrum once we get switch-off. Using some of it and redeploying it for DDT and HDTV we think is something that should really be looked at seriously. Q210 Chairman: You have talked about the millions you are going to have to spend to convert the transmitter network for DDT. You have also obviously got the cost of being on the Sky platform. Why, therefore, are you also going to pay to go onto a Freesat service? Mr Jones: We are a free-to-air broadcaster and always have been. Our additional channels that we are currently providing are also free-to-air. We make our money and always have made our money out of advertising. Digital is inevitable. Yes, our market will fragment; yes, our share of the market will diminish; but digital switchover is now going to happen. We do better in DTT homes in terms of share than we do in either Sky homes or cable homes, therefore free-to-air platforms are better for ITV in terms of its advertising revenue. We think DTT will be the major deliverer to the 38% of the population and 18% of the population in Wales that have yet to become digital households. But there are going to be pockets of the country which cannot get DTT. In that context, our share will be higher, we believe, in a Freesat home than it will be in a 200-channel pay home, whether it be receiving those pay services via satellite or by cable, so it is an instinctive financial opportunity for us. Mr Swords: I think there is also - and we alluded to it earlier - the transitional issue of the limitation of DDT coverage in the run-up to switchover: the fact that a quarter of the population, even if they wanted to, could not get DTT. We believe that no-strings Freesat, which is not regarded as a sort of Trojan horse to a pay service, may have a role to play in that. That is what we are currently discussing with the BBC. Q211 Adam Price: In response to an earlier question, I think you said that the coverage map for DDT post-switchover would broadly replicate the current analogue coverage. I think Digital UK used the phrase "substantially replicate". Could you give a sense of where the existing gaps are in coverage and why the map will be different post-switchover? Mr Jones: I am not very good at the technical side of this, so please forgive me if I sort of fudge this answer a little bit. As I understand it, the digital signal operates in a slightly different way from the analogue signal. The Isle of Man takes its regional news service from Border and, because of the way that we would need to re-engineer the transmitters as a group, as a whole - meaning BBC, ITV, Channel 4, Channel 5 - it looked likely that we would have to switch the Isle of Man through to the main Granada transmitter, but, in fact, I think we have resolved this now. There are still problems in some of the other areas. The Berwick on Tweed transmitter, it is difficult to relate that to the new digital map of the Borders, and that might have to switch to the Tyne Tees service. Some of this, hopefully, we can tidy up and improve. There is a problem in Wales about Wrexham Maelor, for instance, which I think is the only major borough in Wales which does not take the ITV Wales service - which is odd, given that there is obviously a devolved assembly in Wales - and it largely takes signals from Granada and Central because of the nature of the analogue service. We may be able to resolve some of those issues. The London region, the traditional Carlton/LWT region, is likely to shrink a little bit and Meridian, Anglia, Central South will grow a little. These will be marginal changes, but it is the nature of what happens through the ether and happens through the airwaves. Q212 Adam Price: It has been suggested to us that there is some kind of trade-off between geographical coverage and higher channel capacity. Is that correct? The Committee responded to a fire alarm and suspended from 11.10 am to 11.28 am Chairman: May I apologise for that. Those who work in this building will know that it is a regular occurrence, but one day there might be a fire so one has to take it seriously. Adam, you were in mid flow. Q213 Adam Price: I was just asking about the potential trade off between channel capacity and coverage. Mr Swords: I think that is right. Broadly there are three variables at play here which input into coverage. There is the number of sites; the level of power; and the transmission mode. Various different combinations of those have been looked at by the regulator and the broadcasters and the transmission providers. In terms of rolling out to all of the 1150 sites currently covered by analogue, committing to higher power levels at the 64 QAM mode will get you to predictive coverage 98.5% in line with current analogue coverage. You can play with those three variables and arrive at different percentages, but we are meeting the requirement that we need to. Q214 Chairman: In your view is it sensible to spend the large amount of money necessary on that last 5%? You are talking about having to convert a lot of transmitters to extend the coverage by quite a small amount at the margin. It has been suggested it would be rather more sensible to give them all satellite dishes. Would you have any sympathy with that? Mr Jones: I think the debate is over, Chairman. There was a time when we were negotiating these issues through with Ofcom and Government but Government have decided and I think the debate has now become academic whether the last few transmitters should be switchover or not. I think the important thing now is to get it done as quickly as possible. Now the decision has been made, now the Secretary of State has announced the timetable from 2008 until 2012, I think it is in our interests and in the interests of all broadcasters and the general population to get this done now. I think going back and trying to reopen those arguments would not be particularly useful. I think it is much better in the interests of both the consumer and the citizen that we get this done now as quickly as we possibly can. Q215 Rosemary McKenna: A very appropriate point to come in with this question. In his written evidence, David Elstein said that you were very enthusiastic about it because you had had an unnecessary bribe to induce you to participate in digital television. How do you respond to that? Mr Jones: I think David missed the point somewhat. The reality is that in an analogue home which currently receives four or five channels, in peak time we take a 30% share of the audience - although last night, when a Thatcher was again winning the public vote, we took considerably more than that! I think it was about a 48% share! In a DTT home, the share of ITV 1 in peak times falls to about 23%. In a Sky home, it can fall as low as 19%. Therefore, it was inevitable that we would need some help or some assistance in going through this process. So I do not think in any way it was a bribe, and, whatever the level of inducement, it is going to be quite small, given the ground-shifting nature of the change in our business that we are having to go through this. It is offset on one side. As I said ITV 1 will come down a little, but we have the opportunity to launch ITV 2, ITV 3, ITV 4 and ITV News, so we can offset it in other ways, but we, along with other broadcasters, are being ushered into a new digital age, therefore it was inevitable that some kind of process needed to be brought through here because we are moving from an era of gifted free spectrum to a world of multi-channel and probably us and others paying spectrum taxes. Q216 Rosemary McKenna: There is a problem in your funding model based on advertising, given not just digital switchover but how people are viewing television now. There are recording possibilities; they will fastforward through the adverts; or they will just not record the adverts. All of that technology is available to some and is going to be available. What does that do to your funding model based on advertising? Mr Jones: We do not know yet. The more recent research on PVRs - and I think a million homes now have Sky Plus and it obviously is going to grow over time as PVRs extend through cable and through DTT - shows that actually rumours of PVRs destroying the advertising business are somewhat overstated. Research done in America and research being done by BARB shows that the recall of advertising is still remarkably high - and because some advertising is made to incredibly high standards they even stop and go back to see their favourite ads. We are not necessarily convinced that the onset of PVR is going to kill free-to-air commercial channels. Mr Swords: But, in so far as there are challenges, I think there are also opportunities, and, in particular, with some regulatory relaxations regarding advertising, sponsorship - which becomes more important in a PVR universe because people use the sponsorship break as a sort of guide - but also other forms of potentially embedded advertising and looking at the whole area of product placement, on which Ofcom is shortly launching a consultation, this kind of opportunity for commercial funding beyond spot advertising. Q217 Rosemary McKenna: I think it is very important that there is a public service broadcaster which is in direct competition with the BBC, if you like. I think that is important in terms of equity and fairness. Will you be able to sustain that? Mr Swords: We talked about the challenges earlier, the broader challenges as we move towards switchover, and that really brings into focus a whole host of areas of analogue regulation which I think does need to be looked at again, not just in terms of the genre specific obligations but also advertising regulation and other forms of content regulation. I think it all needs to be looked at and we would be supportive of that being addressed as soon as possible. Mr Jones: There are key issues, as I alluded earlier in my evidence, about support for commercial public service broadcasting going forward. Our concern - and I think this will be shared by our colleagues in 4 and 5 - is: "Let's have the debate now. This Committee, the broader House for Government, the departments concerned, I think it is vital we start debating these issues and deciding the priorities for plurality before the first transmitter is switched off, because there are various trigger points. When the first transmitter is turned off, there are changes again to our PSB requirement and the number of non-news hours we make are due to fall. There are challenges that are going to come up as we move digital switchover for the general funding of ITV for 4 and 5 as they relate to public service broadcasting. So I think it is absolutely vital that as a nation we debate these issues now and decide. It is bizarre that the most powerful broadcaster in the land, the BBC, is going through a process now where its charter is being decided and its licence is being decided yet public service broadcasting on which it will directly impact, on ITV 4 and 5, are not being debated. I truly believe that this should be a debate conducted in the round, which does not mean that I want the BBC in any way diminished or I would wish to see an end to the licence fee - I do not: I think the BBC is one of our most important cultural institutions and should be maintained and supported - but I cannot and do not believe that you can discuss public service broadcasting on the BBC in isolation while not having a broader debate about the public services that we would wish to be provided by the commercial broadcasters. Q218 Alan Keen: ITV and NTL's sudden incursion or attempted incursion into the Premier League shocked the football world and there was some scepticism. We heard the news yesterday about NTL and Virgin getting together. Does that mean the end of ITV's effort with NTL? Mr Jones: Our concern always has been to ensure that there can be major football events available on terrestrial television as well as on pay television. The lobbying that we have done over the last few years with the European Commission and within the European Union generally has been around the liberalisation of the market, so that those viewers who want to see major sport, whether it be football or cricket, can have the opportunity to watch them on terrestrial television and they should not be subject to an overall purchase by one broadcaster. We are fortunate enough because of the Listed Events Legislation that we will be showing the World Cup next year with the BBC - and we will be absolutely delighted if England do particularly well - in the same way as we now share the Champions League with Sky. So our concern with the Premier League process was to ensure that there was an open and transparent market and there was a level playing field, so that we could bid in the same way that other broadcasters could bid. We never went into the process knowing that actually we could guarantee that we would get a number of Premier League games, either with NTL as a partner or with someone else. So we will have to see when the Premier League unveil their packages, and we will the consider whether we can afford the many billions of pounds that no doubt the Premier League are seeking for us to secure some games. But our concern was liberalisation of the market, not an inside track in getting a limited number of games. Chairman: Thank you very much indeed. Witnesses: Mr Andy Duncan, Chief Executive, Mr David Scott, Consultant, Channel 4, Ms Iona Jones, Chief Executive, and Mr Arshad Rasul, Director of Technology, S4C, gave evidence. Q219 Chairman: Good morning. Could I welcome Andy Duncan, Chief Executive of Channel 4 and David Scott who is now a consultant to Channel 4, plus the new Chief Executive of S4C Iona Jones and Mr Arshad Rasul. Perhaps we could start off by asking each of you to give a general overview of how you see the process of analogue switch-off and what it is likely to mean to each of your respective channels. Ms Jones: S4C regards the switchover to digital as a great opportunity to extend the public service provision in the Welsh language but also to address some of the historic difficulties that we have faced as broadcasters in Wales, namely the fact that Channel 4 and 5 have not been available on the terrestrial network and we think this is an important improvement in the choice available to viewers in Wales. We are also very supportive of digital switchover in terms of the improvement in quality of reception which it allows. We are also very positive about switchover because it addresses the out-of-area viewing to English-based transmitters and this is again an opportunity to address that particular historic difficulty. In addition, of course, the take-up in Wales is currently 73% of digital households and therefore it is an irreversible trend which we feel it is important for us to support. We do not of course underestimate the challenges which it presents to us. In technical terms, we are playing our part as a member of Digital UK and financially we are facing a gap in 2009 which is the current date for switchover in Wales. But maybe more of that later. Mr Duncan: I think, rather similarly, the broad process of trying to get to full switchover is something we support. Totally from a citizen's point of view, I actually think it is a good thing and we have a world-class broadcasting system in this country and I think actually getting the whole country to digital will help sustain that. I think from the individual's point of view, the consumer level, whether it is through increased choice or through picture quality and so on, there are significant benefits as well, and we are obviously part of Digital UK as well and I think that the clarity of the decision which has now been made by the Secretary of State and the way the whole project has been tackled over the last few years, I think, has been done properly and well. Whilst it is a big logistical challenge, I think there are good people in charge of what is going on and I think basically it is being well managed. I think our overriding issue or overriding concern is actually the impact it will have on Channel 4 and our ability to deliver our remit. It clearly puts a pressure on commercial broadcasters generally, but I think with our unique role, as a public corporation with a public purpose, we have to earn our money as a means to the end, but our end game is about the public remit. What is quite clear from all the debates of the last two or three years around the future of the BBC and the future of PSB is that everybody wants plurality, which I think is absolutely right, we want a strong BBC, but we want strong plurality as well, and Channel 4, I think, is going to be absolutely critical in that because inevitably ITV and Five, whilst they make a contribution, are pulling back somewhat from that and the commercial pressures and the need to carry on making profits for shareholders. We want to make sure we do not weaken our remit, but we have fairly fundamental issues around our business model and I think the outstanding issue for us, and I guess probably similar to S4C in a way, is that there is a clear government policy on switchover which has been announced, there are clear government intentions to finalise the Charter for the BBC next year, no doubt with some sort of proper level of funding, and there is at the moment the lack of a plan for Channel 4 and how we can be sustained for the longer term. We are doing everything we can ourselves, but it is quite a significant outstanding issue and our big plea really which we are talking to at the moment is that we need certainty now to plan. Both ITV and Five have got reduced licence fee payments and they have some ability to plan over the next few years, but we do not have that ability, so, for us, we are supportive of switchover, but we are quite worried about the specific future business model for Channel 4. Q220 Chairman: Thank you, and we might return to that in detail, but David Elstein, who plays the part of Banquo's ghost in this inquiry to some extent, he said that the reason terrestrial broadcasters were so much in favour of Freeview was because they were likely to have a higher market share than a multi-channel household with access to satellite, for instance. He said specifically that Channel 4 recently revealed that they captured a 14% share in five-channel homes, 11% in Freeview and 7% in homes with access to 400 channels and that for Channel 4, 11% is survivable whereas 7% is not. Would you accept that? Mr Duncan: I think he was quoting me when I went to go and talk to one of the groups that he chairs. I think specifically the analysis is correct, that we do have a 14% share in analogue homes. In fact, our share of analogue has never been higher. It is currently about 10% in terms of DTT and for Channel 4 it is slightly bigger for the portfolio and it drops sometimes to as low as 5% or 6% in pay homes. I think our point of view is that we are being very selfish about it and a four-channel or a five-channel world is a lot easier for us than the multi-channel world, so, going back to what I was saying earlier on, the best thing for us, frankly, is not to have switchover at all because we then sustain a much better share position and, frankly, more of a limited competition position. However, recognising that switchover is happening and is broadly a good thing, I think there is a slightly different driver for us which is that we want our channels to be available on all platforms and, in particular, certainly over the last couple of years, we have taken steps to make sure that what we are doing is available free. I think that when you look at the characteristics of public service broadcasting, and Ofcom did a rather good piece of work on this a year or so ago, one of the characteristics was the ability to offer things free to air, so, taking not just Channel 4, but E4 free to air earlier this year and launching More4 as a broadly free-to-air channel, we think that is very much part of our remit going forward, so, whether it is Freeview or the possibility of some sort of free satellite service as well as being available on pay, we think it is very important. Then I think our point of view is: let the audiences decide. Those that want to go for pay, go for pay and those that want to go for a Freeview-type route or a Freesat-type route, go that route. Our role is to make sure we are there on all those platforms. Q221 Chairman: And you think you can keep your market share up as long as you are producing high-quality, imaginative programming? Mr Duncan: I think we are doing actually a very good job at the moment of actually sort of beating the curve. Going back to my earlier comment, I do not think we can completely compensate for the whole of the switchover process and the fact that a third of the UK homes in which we have 14% share will switch. We also have a particular problem around second sets. Channel 4 has over 20% share of second-set viewing and obviously not that many homes at this stage have switched second or third sets, so there is a big hidden impact to switchover for us there. I think we can do a lot to try and protect our position, but, without some form of external help, I really fear that we will not be able to deliver our remit to the same level as we do today. Q222 Adam Price: I was wondering if I could touch on a few issues to do with coverage which may be specific to Wales. One of them, firstly, is in terms of the topography of Wales and, of the 1.5% that currently do not get the analogue signal, many of them are concentrated in west and in north Wales. Do you agree with Ofcom's position that 98.5% is sufficient in light of the fact that that will mean that even post-switchover many Welsh-speaking households will not be able to receive DTT? Ms Jones: Well, I will ask Arshud to give you some technical information. Mr Rasul: Yes, in actual fact the figure of 98.5% is a UK figure, so, because the topography in Wales is rather more difficult for transmitter coverage, we actually have a lower figure than that in Wales and we would welcome the possibility of improving on the deficit fundamentally during switchover. In terms of the roll-out and the other issues which are to do with coverage, I think perhaps we will come on to that later, but basically we do have issues of adequate coverage and the services that people will be receiving. When we move from analogue to the digital switchover, whereas people will tolerate what one would call average to poor pictures on analogue, in the digital world these become intolerable because you end up with break-up and it is not a service that you want to watch, so it is very important that during that switchover period we actually get the message across that, if you actually do want to get a robust, good-quality signal, you need to actually watch the transmitter that is intended to provide the service in your area, so that is part of the whole process. Q223 Adam Price: Is there another issue as well with DTT because most Welsh-speakers live in linguistically mixed households? Thinking of my own family, my Welsh-speaking father is banished to my former bedroom to watch S4C on the portable, whereas my mother watches Freeview in the living room, so the issue of second and third televisions, does that have a specific linguistic dimension in Wales as well? Ms Jones: We believe that the fact that we have a disproportionate amount of viewing on the second set can be accounted for by the fact that we have one third of households which are mixed-language homes in Wales and, very much as Andy was saying earlier, the second set issue is very important to us. We believe that is one of the advantages that DTT has over Dsat in that DTT can actually reach all the sets in the house without necessitating a separate contract which is what I believe Sky requires the consumer to do if you want to watch more than one channel at the same time within the same home, so that is one of the reasons why we are in favour of DTT, although we also have a multi-platform strategy. Q224 Chairman: But that is potentially bad news for you because the Government has concentrated all of its attention on the proportion of households which are digital and, by that, they have talked about the first set. Ms Jones: Indeed. Q225 Chairman: I am not aware of any figure as to the proportion of households where the second set is also digital, but it clearly is going to be a long way below 65%. Ms Jones: Indeed, and we would actually ask for some guidance on this particular issue, that it be addressed by Digital UK as part of their planning. Q226 Chairman: Yes, both to find out the information and to encourage people to convert not just one set in their household? Ms Jones: Absolutely. Q227 Chairman: Can I ask you about one other aspect. You referred a little bit earlier, and I think I would agree, that it is obviously a benefit to the people of Wales that they have access to English-language Channel 4 as well as Welsh-language S4C in terms of extension of choice, but that has implications for you because at the moment you get part of your funding from the sale of advertising time for when Channel 4 is being broadcast because, when you are off air, you will clearly lose that when we get to the point where Channel 4 is on a separate channel. What does that mean for you? Ms Jones: Well, the advantages of digital, I think, are great in terms of promoting creativity and allowing our creative sector to develop and take advantage of new platforms to deliver their services. However, you are quite right to say that, by promoting the switchover, I am also at the same time sacrificing millions of pounds worth of advertising revenue which we derive from Channel 4 which obviously goes to support our ability to invest in content, so it is a strange position to be in, but again we would be looking, as part of revisiting our financial model, to take account of the fact that that actually presents us with a funding gap. It is one of a number of items on our list of unknowns at the moment which include the cost of carriage on the BBC multiplex and the way in which the costs of roll-out will be apportioned. Coupled with the airtime loss as well, it presents us with an immediate problem in terms of our ability to plan, as Andy was saying is the case for Channel 4. Q228 Adam Price: Presumably the loss of Channel 4's output provides an opportunity for you to expand your Welsh language programming, but does it also provide an opportunity to produce English language programming in Wales, maybe as ITV for a variety of reasons reduces its output of public service programming for Wales? Ms Jones: The funding model at the moment is based on the provision of a Welsh-language service, so any additional aggregation on S4C, as you say, in the area of English-language programming would require a different funding model. I am also keen to allow the BBC, given their enormous resources relative to S4C's and their access to capacity, and ITV, to allow them the opportunity to state, in the BBC's case, during the Charter review process what their intentions are as far as their regional services are concerned and, until such time as that is made known, I will say no more on that matter. Q229 Mr Sanders: Channel 4's written evidence referred to concerns over the possible impact of switchover policy on your ability to fulfil your public service remit. How can these concerns best be allayed? Mr Duncan: I think there are three very specific issues here. There is currently a proposal to have the transmission build-out costs paid for by the licence fee for the BBC. That is something we strongly support and which we have been in discussions with both DCMS and the BBC about and we are hopeful that a formal notification will be sent to Brussels at some point in terms of the EU. It both makes sense for us from a pragmatic point of view, but also kind of as an in-principle issue of being a public service corporation, publicly owned as well, and the BBC initially put the idea forward in their Public Value paper of last year. I think, secondly, for us, there is historically the very important indirect subsidy of Channel 4. Essentially, Channel 4 has worked, I think, extremely well for the last 23 years because it has had free spectrum and, secondly, because any surplus we make we are able to reinvest back either in terms of programmes, whether that is news or despatches or whatever we might happen to do, or indeed more latterly with new services, like More4. I think it is a really important area to say what forms of indirect support could be found going forward that would continue to allow us to deliver the public remit that we deliver today and there is a range of things we are currently in discussions about again with DCMS and Ofcom, probably most notably capacity. We think the single, most important thing that could be done to help us is to find more capacity which we are currently short of and having to buy at very expensive rates on the open market, which again is an extension of the way we have been subsidised historically. I think, thirdly, it is absolutely not a preferred route for us, and I double-stress that. We would prefer not to go this route, but eventually if you could not find the appropriate forms of indirect support, and none of us quite knows how the next few years are going to unfold, so if it actually ends up being much tougher than we are even predicting, the possibility of direct public funding, and again possibly not for programmes, but perhaps for some of the infrastructure costs of running the business, I think the two most important things in the short term are the confirmation of the transmission build-out costs, which are clearly linked to the BBC licence settlement, and, secondly, other forms of indirect support, most notably capacity. Q230 Chairman: You have got five Freeview channels now. Are you going to supply some more as well? Mr Duncan: We have half a multiplex which we share with ITV on which we have four channels and recently we bought access to two further channels via National Grid Wireless, so we actually have a total of six, but they are fully utilised. Most recently we have obviously added More4 which we have positioned as a public service channel, we are voluntarily running a new service at 8 o'clock, a late-night discussion programme, £20-odd million of regional programming, and in fact, interestingly enough, More4 News, I think I am right in saying, is the most successful digital channel news service, in fact virtually the only one, that has managed to establish itself, apart from the big main players of Sky and BBC and, when it is on air at 8 o'clock, it has a bigger audience than Sky News, ITV News, BBC News, bigger than BBC4 News and has a very young profile. It is a very good example, I think, that if you have the proposition right, and we have with More4 really interesting public remit programming to work in the digital environment, but the truth is that all of those slots are taken, it acts either as a mechanism to allow us to do further things, and we have further channel ideas we have planned, or as a mechanism to avoid having to pay effectively very expensive open market rates, and the other attraction of the idea is an extension of the way we have been subsidised historically, albeit interpreted for a digital age. Q231 Chairman: And you may also face the prospect of having to pay some kind of spectrum tax in the future as well. Mr Duncan: Correct, and there are a couple of issues there. Clearly, one of the key drivers behind a spectrum tax is spectrum efficiency and use of the spectrum efficiently. We are using our spectrum very efficiently and we are squeezing all the channels on that we possibly can, but I think it is a very straightforward point, that if the spectrum tax was introduced for public service broadcasters, in the case of the BBC, they are assuming they get funding via the licence fee, so effectively it is a way for the public to pay a tax. In our case, you would either have to find the mechanism to give us the money to pay for it or we would simply have to take it out of the programming budget and diminish what we are delivering. Our own view is that it is a rather pointless exercise in our case because, frankly, we are using spectrum completely efficiently anyway. Mr Scott: I absolutely agree with that. Most of the decisions on spectrum allocation are technical decisions taken by government and the regulator and how the released spectrum is used at the point of switchover is a matter for Ofcom. By putting a tax on the broadcaster, it is not going to affect the decision about how the spectrum is used, so it does not achieve the objective. Q232 Chairman: Does S4C take much the same view? Ms Jones: Yes, indeed, as far as the spectrum tax is concerned, we would put that on our list of more costs, but it would be a circular route really, would it not? Q233 Chairman: And you may be going on to the BBC multiplex in future? Ms Jones: Yes, that is a proposal and we have responded to the BBC with our capacity requirements and we wait to see whether they can actually accommodate our requirements. Q234 Chairman: Do you have ambitions for greater capacity, like Channel 4 do? Ms Jones: Well, we currently have guaranteed capacity of half a multiplex which we consider to be sufficient for our needs. Q235 Adam Price: I have seen a figure of 100 million deficit which Channel 4 are predicting if further financial assistance is not forthcoming. Is there a similar figure for S4C as well? Have you worked out the broad cost? Ms Jones: We do not have a figure because we are waiting on others to provide us with information about the likely costs, as I mentioned earlier, of roll-out of coverage. We have some predictions of decline in airtime, but they are not confirmed because we are obviously looking at four years out. Q236 Adam Price: But you have said in The Guardian this morning that the jobs in the Welsh media sector will go if substantial assistance is not forthcoming. Ms Jones: The important thing to have, as far as promoting the creative industry sector in Wales is concerned, is that I retain the ability to invest in content at the level which I am currently able to do and with the ambitions that we have for digital and our multi-platform strategy, including broadband and mobile phone provision which we are already involved with, that that level of investment needs to be sustained in order to invest in the sector and allow the sector to grow in a way in which government policy and Assembly policy requires of us. Q237 Helen Southworth: What is your opinion on the desirability of the launch of Freesat? Mr Duncan: I think we are watching with great interest. My own view is that the free Sky offer is not necessarily what it seems on the surface of it, so in reality I think it comes with a significance of incentive to try and upgrade and, from Sky's point of view, you can see how it is an interesting sort of starter kit, but really what they want is homes to come in and end up with their pay model. I think actually the idea of a competitive service is broadly a good thing because generally competition is good and, secondly, I think the phrase was used earlier of "no strings attached", and I think a free satellite offer is absolutely that for those that want it. I think, rather like with Freeview, the majority of homes have gone on and decided just to take the Freeview, but, if you want to, you have got the top-up TV option and it is not forced down your throat. I think broadly it is an interesting development and we are obviously watching with interest to see when BBC and ITV get going with it, but I think we are broadly supportive because it is a very clear consumer proposition and it will just help add another option for viewers. Mr Scott: We saw a little example last year or a few months ago when Sky had a card swap-out that it does disadvantage homes who have previously been Sky subscribers or have got a Sky card and suddenly find it does not work, so I think for the BBC and ITV Freesat route, not using a card is a good way forward for some people, otherwise they are going to have to buy new cards from time to time, every five years or whatever. Q238 Chairman: So will you be on Freesat when it launches? Mr Duncan: Not at the moment, but we have contracts in place with Sky for the next few years. I think it is clearly something which we will look at very hard at the point when our contracts are coming up for renewal, but I think our broad prediction is that we aspire to be on all platforms, so if a new platform comes along, a new service comes along and makes a success, eventually we want to find a way to offer all of our channels on all platforms. Q239 Helen Southworth: Can you explain why More4 is unavailable in Sky's Freesat package? Mr Duncan: Yes, in a nutshell, it is a matter for Sky. We have positioned it as a free-to-air service and in our minds it is very much a little sister public service channel to Channel 4. We are not charging Sky any money for the channel. Because of an existing contract that we have with them, they have the right to decide either to put it on all their services, including their free Sky service, or the right to put it on their minimum subscription package. We would prefer them to put it on to all of their homes and, from their point of view, I think it is a hard-nosed business decision, which is that if they offer it as a free channel, it is one less reason to go for their minimum subscription service and one more reason to simply go for free Sky. It is an anomaly I would hope we would be able to tidy up the next time the contract renewal comes around which is at the end of 2007/early 2008, but certainly if Sky were prepared to offer it to all of their homes meanwhile, we would be delighted. Q240 Chairman: You suggest that you might go on to Freesat in time and after you had had a look at it, but actually will it not be a major disadvantage to Freesat if it does not offer Channel 4? Mr Duncan: If there was never any prospect of it ever being on there, yes, it would be. I think there are two issues in that there is the issue of Channel 4 itself, the core channel, and the issue of the digital channels. On the digital channels, both More4 and E4, it is simply an issue for when the contract comes up in 2007/08 and for core Channel 4 there is some question, which we are looking into at the moment, that legally we might be obliged to offer it anyway via a Freesat platform, so we are looking into that detail of our contract with Sky. I think probably the material issue is, if Freesat does get launched, whether we are ever able to get some sort of perspective of what will happen in due course, so clearly if you are a consumer and you know in due course that certain channels might be going to join, that is a different perspective from knowing it will never join, but it is something we are working through at the moment and we are, I think, shortly due to have a meeting with the BBC and ITV to understand what they have got to do with the project. Q241 Alan Keen: One of the reasons for our embarking on this inquiry was the problem of the actual date of switchover. You have mentioned already the people with a third set and I presume you agree with me, that the people with a third set, all they need is a firm, clear announcement that that third set is not going to work if they do not do something and then they will just spend the money and convert it. Would you like to describe the people who will still be left there reluctantly, hopefully not right on the day, but six months before the date of switchover? Could you describe those sorts of people and what we should do about those? I know you do not want to broadcast adverts to help them on Channel 4, for instance, but ---- Mr Duncan: Sorry, just to clarify that, are you saying what you think Channel 4 should do or are you saying ---- Q242 Alan Keen: No, it is just a very general question. What do we need to do about the people who, if we do not do something, will still be sitting there and their sets will not work on the switchover date? Mr Rasul: If I can perhaps come in there, the marketing plan, the information plan that Digital UK is working on at present works on two years out on a regional basis, so although there is an overall full UK market plan in place, as each region comes up two years out until switchover, it becomes concentrated at the regional level and I think that is the time at which the message needs to be got across, that when switchover arrives, all of the analogue devices will actually cease to work unless you have a converter, and that is the message that we need to build in. The other aspect is obviously the fact that the transmission service needs to be able actually to be received correctly on those portable sets and that is another issue which is now being addressed with the different ends for receivers and outlets for reception which I believe in the next year or two when switchover is approaching will be available for products, so those two factors, public awareness and the actual kits which will actually make the portable sets more able to receive a signal on a poorer signal, will, I think, be the mechanism actually to get that objective achieved. Ms Jones: But then there will undoubtedly be some point at which some public intervention may be required in order to facilitate that more for certain consumers or citizens. Mr Scott: One of the advantages, I think, of DTT is the ability to get the signal through a set-top aerial, so there will be no need actually to cable around the house to get it to a dish or to a rooftop aerial. I think you will find that for the second, third and fourth sets in homes, people will decide how much they value them and I am certain that a lot of existing sets can be moved out into secondary rooms and are hardly ever used and they are just sitting around, but people who do value them and are using them will be able to buy a box and get them to work. Q243 Alan Keen: What about older people? Mr Scott: Certainly I think that some of the work which the DCMS is doing at the moment in thinking through the targeted assistance which will be necessary, there is an interesting trial going on at the moment and in the next few months the Government is going to come forward with a scheme where I think something like six million homes maybe could be helped. Q244 Alan Keen: There is a very firm divide, is there not, between those people who will use, as a result of the commercial advertising, all the wonderful advantages of digital television, but there is a big difference, a big divide, between those who will be influenced by that and those who will not be influenced by it and will have to be helped? Should there be plans for aiming at these people, and nobody has mentioned old people and that is what I was getting at, so are there plans to advertise to younger people who are connected with older people? You must have seen the evidence we have got from the voluntary sector that there needs to be a tremendous amount of effort going into that. Do you feel that there are plans really to do this yet or is it still in the melting pot? Mr Scott: Certainly Digital UK, in its communications, is conscious of this and has been setting up helplines and call centres which will particularly target groups as well. Mr Duncan: I think the general planning is very good at this stage. I think the first test area is going to reveal a lot, to be honest with you, and I think there will be a lot of learning from that which will be able to be taken forward. I certainly think that our view is that the most important role we can play, and it will not completely address the issue you are raising, but the most important role we can play is to continue to come up with the imaginative and interesting services and programmes that are an incentive to people to go positively for digital. There will be that issue you mention, but I think Digital UK are planning sensibly for it. Q245 Chairman: Do you see it as your role also to carry some public services announcements to advise people to prepare for this great event? Mr Duncan: I think we have some responsibility to do that, to our licence. I think we are concerned that not too onerous a responsibility is placed on us. To be very specific I think the best thing we can do, to repeat the point, is to promote services like More4 or exciting new digital channels and programmes as a positive incentive to go. I think there are some logistical issues about being able to do things regionally for us, so putting trails out that are not particularly targeted is, practically, quite inefficient. I think the general plan that Digital UK have a big chunk of money, a couple of hundred million pounds, some of that clearly can be spent on television, commercial television as well as, potentially, posters and other forms of media seems sensible as well. So there will be a role, perhaps a limited role, but I think it is quite right that the brunt of the responsibility will be borne by the BBC where they have the space to do that without impinging on their commercial model. Mr Scott: Under our digital licences from Ofcom we do have some responsibilities for communication. Q246 Chairman: But you were implying, Andy, that Digital UK should take, pay for advertising spots on Channel 4? Mr Duncan: Yes, correct. Q247 Rosemary McKenna: You both have a different relationship with the government in terms of your requirement and therefore obviously you are in discussions with them as to how best to continue to provide the service that is required of you. Take it that this is your opportunity to say publicly what you would like the government to do between now and switch-off to enable you to continue not just to provide the service you are providing, but also to improve on the service. Mr Duncan: It is very similar to what I said earlier on. We would like the transmission build-up costs funded by the BBC licence fee, which is currently planned but we would like that to definitely happen; and we would like that to be agreed by the White Paper and the subsequent licence fee settlement so that we know for certain. I think one or two people have suggested that it could be kept as a possibility should it be needed a few years down the line, but frankly that would be a bit of a waste of time; I think we need the certainty to plan, which, as far as we can see, most other broadcasters now have. We would absolutely like indirect forms of help, most noticeably capacity to be put in place, and we would like the possibility of public funding to be kept open for later. I think the key issue for us is one of timing. We think it is imperative that these decisions are taken in the next six to 12 months, perhaps, so that you have the BBC Charter being agreed for ten years, a licence fee settlement being agreed for ten years, a switchover programme that will roll through, really kicking in in 2007, 2008 right through to 2012. We have to plan our business some years ahead, commissioning cycles and distribution deals and so on, and because we are currently enjoying a lot of short-term success I think people are making a very elementary mistake of thinking that the channel is doing fine in the short-term and what is the problem? The message we are trying to get to the outside world - albeit we are sometimes accused of crying wolf, but I firmly believe that is not the case - is that now is the time to underpin public service broadcasting as a system and now is the time to address the S4C issue, to address the Channel 4 issue, and there are remaining issues regarding the other public service broadcasters as well. To repeat my earlier point, clear government policy on the BBC, clear government policy on switchover, we would like to see decisions and clear things put in place in the next six to 12 months to underpin the whole system. Ms Jones: The costs of rollout need to be borne either directly or indirectly: that is to say, that either we are given funding in order to facilitate that, or that it is paid for from elsewhere, either directly from government or through the BBC. It is an invitation which I welcome to put a bid in, if you like, but because we have so many unknowns and we are pressing quite hard to get some firm figures from the BBC on costs, et cetera, it is actually quite difficult to see how big the gap is and therefore how much assistance we may need. Q248 Rosemary McKenna: But as soon as possible, in line with what Andy has just said? Ms Jones: Yes, absolutely. Q249 Rosemary McKenna: So that you can plan ahead to get the solution as quickly as possible. Ms Jones: Yes, because, as Arshad was mentioning earlier, subject to going in in 2009 the whole campaign will start in 2007 and therefore the way in which we are commissioning content, our interactive strategies will be in place. We are putting them in place as of now so the timescale is very tight and very pressing. Q250 Chairman: I understand that you do not know the details of, for instance, the transmission costs in future, but the issue we referred to earlier, the fact that you are going to lose a lot of money from no longer being able to benefit from the sale of Channel 4 advertising time, that is a known, and how do you think that gap should be filled? Ms Jones: We have some commercial freedoms which we have exploited in the past and plan to do so in the future. For example, we were part of the multiplex operation known as SDN and we have receipts from the sale, which we are planning to invest in order to part fund the gap. So that is at our disposal and that was part of the planning for the decline in airtime at least. We are also very keen to retain our guaranteed capacity, which we currently exploit for commercial purposes, over and above the two public services that we provide currently, S4C Digidol and S4C2. Q251 Adam Price: Presumably because you take a significant share of your programming from the BBC you may not be in as good a position to exploit any future flexibility with product placement or programme sponsorship as some of the other commercial broadcasters may be? Ms Jones: Yes, though we actually do take commercial breaks during BBC programming and some BBC programming on S4C is also sponsored, which is probably a unique position in UK broadcasting. Q252 Mr Yeo: Just going back to Channel 4, have you ever contemplated Pay Per View as a way of supplementing your income? Mr Duncan: Yes, we model various options all the time. Not specifically Pay Per View but clearly subscription channels is something that we have done both in terms of E4 and Film Four. The short answer to our experience so far is that we cannot make enough money. What tends to happen is that the majority of the money in Pay is made by the platform owners or the rights' holders, whether they might be Hollywood studios or sports rights' holders and so on, and for us, bluntly, they lost huge amounts of money. What we are finding is that despite the uncertainties about the advertising model in the medium to longer term, things like taking E4 free are substantially more attractive for us in terms of the advertising money we can make. So I think for linear pay channels Pay Per View is quite difficult for us, not being somebody that owns content. I think what we are looking at very hard, which is of more interest, is the possibility of getting new pay revenues on some of the new media platforms. So we are currently in discussions around on demand, for example, on broadband, the possibility of things on mobile channels. One can see that there might be interesting potential new revenue streams from consumers, but our big problem with that is that again we do not technically own rights, so the current rights review with Ofcom, for example, is a very profound review as far as Channel 4 is concerned, and what we are able to negotiate with the Hollywood studios is largely dependent on them believing that partnering with us and our brand and our marketing power would be a more attractive model than simply going direct to the phone company, or whoever it might be, or they might miss us out altogether. I think the short answer is that the typical pay linear channels are quite tough for us, new media platforms possibly very interesting depending heavily on the rights outcome from the Ofcom review. Q253 Mr Yeo: I see the point about the new media, but given that with digital more households will have the facility to pay a subscription channel, for example, you do not think that will alter the financial balance? Mr Duncan: Not massively, no, partly for the reasons I have said, and I think also because you have two other additional factors. One is the presence of the BBC, which I think is a very positive intervention but the truth is that it has a huge impact on the market, and they obviously as a starting point tend to offer their services for free. Secondly, I do think back to our core remit, that we are a public corporation, public remit happening to rely on money commercially to deliver that end, but ultimately we have a responsibility as well to make our services available to as many people as possible, and I would hate the day where you could only get Dispatches, current affairs, which we offer 30-odd episodes of a year, if you are prepared to pay for it. I think the fact we offer that to everyone is a really important part of what we are about. Q254 Helen Southworth: What evaluation have you made of the opportunities that digital is going to give to your relationship with development in the creative industries? Mr Duncan: Do you mean specifically things like the independent production sector? Q255 Helen Southworth: I suppose new talents. Mr Duncan: I think we are doing a lot of different activity in terms of new talent development. We do not talk widely about it, but both in our annual report - and we have just produced a year book - we have listed the sorts of schemes that Channel 4 is currently involved in and we do a phenomenal amount, and probably after the BBC by some distance we do the most in terms of talent development schemes, whether that is film related, theatre related, animation related, new director related and so on, and we have certain schemes around ethnic diversity - a whole range of things. We are trying very hard and doing a lot to take those on to new media platforms in terms of digital. Probably the best example this year was the launch of our 4 Documentaries service, which we think is a world first. Basically, it is a really good, new broadband based documentary site where any film maker can upload a four-minute documentary, they get advice on how to light and make their film, they get advice on commercial affairs issues, they get advice on legal issues. Some of the best of them may well get selected to go on and be shown on some of our channels, and we are hoping to find a great new documentary maker to actually commission to make films for us. Also there will be hopefully a library of some of the best documentaries ever made on there in time as well. So that is a very good example of taking that talent and training tradition that is deeply ingrained at Channel 4 but using new technology as a way to drive it through, and it is linked to a big investment to support the British Documentary Foundation, costing us over £1m, and the commitment to documentaries for More4 as well. So that is quite a good example, and going forward I would really like us to do more things like that. They tend to have a cost to them - they do not tend to bring back money - but I do think that Channel 4 going forward is very much central to the vision that we are delivering our remit through the core channel, through multichannel and through new platforms. Back to the earlier point, if we got a sustainable business model we could carry on doing that. One final point, given that the BBC operates across multichannel and multi platform, polarity means other people like us have to also be similarly diverse. Q256 Helen Southworth: Have you made any evaluation of the kind of economic impact that that is having on the creative industries? Mr Duncan: Yes, but it is somewhat superficial. We do pump literally well over £10 million a year into a combination of training and talent development schemes and £10 million a year into the British Film Industry as well. So in terms of pure money that is about £20 million. There is also, to be honest, the 100s of millions that we pump into programming, all of which is produced externally, all of which therefore goes into the independent sector, which I think is by some distance the biggest impact we have in terms of creating economy - 30% of that is spent outside London. So I think we are a very important part of contributing to a wider creative economy but, to be honest, we probably could do more analysis and more work on it. I do not know if there is anything David would want to add? Mr Scott: I think from time to time we have tried to look at the overall economic effect of that spending power, but I think there are a number of answers which come out of that and it is probably not Channel 4's job to do that analysis. Ms Jones: S4C has adopted the promotion of the creative industries in Wales as part of its corporate aims, and as part of our programme strategy leading towards digital we have placed emphasis on creating excellence and have invested £1 million in five companies to create a sustainable framework for talent development, including new entrants, because I think it is very important that when people enter our industry there is some sense of continuity after the initial period of training, and that they are able to have the benefit of being surrounded by more experienced people in a very productive environment. We also, like Channel 4, have major initiatives in training in Wales and also in England through the NFTS Skill Set. We have a UK, if not global reputation in the field of animation and we continue to make great investments in that particular genre as well. Chairman: Can I thank you all very much indeed. Memorandum submitted by Channel 5 Broadcasting (Five) Examination of Witnesses Witnesses: Ms Jane Lighting, Chief Executive, Mr Grant Murray, Director of Finance, and Ms Sue Robertson, Director of Corporate Affairs, Five, gave evidence. Q257 Chairman: Can I welcome Jane Lighting, Chief Executive of Channel Five, Grant Murray and Sue Robertson also of Five, and to apologise to you for having kept you waiting for some time. Perhaps you would like to begin, as the previous speakers have done, by giving us an overview of Five's perspective of analogue switch-off. Ms Lighting: Absolutely. I would be delighted to. One of the benefits perhaps of going last is that of course I have been able to hear a number of the opinions of my colleagues and it is interesting, of course, just how many issues we do share in common. But some are different and perhaps it would be useful for me to start with some of the slight differences around Five's position perhaps with some of the opinions that you heard earlier. I think the first one to start with, and possibly the most obvious, but just to remind you, is clearly the rollout of digital for Five certainly has a benefit which helps mitigate, if you like, against some of the challenges that also come from the rollout of digital and the fragmentation of our market. Clearly what we are looking forward to is the first time that Five will actually be received in all homes on a par with our competitors. Clearly, up until this point that has not been the case with Five, despite the fact that we have welcomed digital rollout to this point and the fact that that has helped our coverage enormously. I think it is also worth noting that Five has actually been seen as a real benefit for those people who have gone out and bought Freeview, that for many it has been the first time they have been able to receive Five and to benefit from Five's programmes. I think the other point that is certainly worth pointing out as a difference is that Five is very different also because we are much younger than our competitors, so a number of our competitors have already started to respond to the challenge of fragmentation by launching their multi-channel strategies, by starting to launch the diginets that they have. Five is only eight years old. We have grown very fast in that time and very well, but we have only just in the last two years become profitable as a company and therefore have had to focus very much on our core business and getting that right before we were able to start looking at our digital strategy. What I can say, and what I am delighted to say, is that a few weeks ago we announced that we have taken a strategic investment in Top-Up TV, and whilst unfortunately it is commercially sensitive so I am not going to be able to answer questions on that directly today, what I can say to you is that this is a part of and an important step in us moving into a multi-channel mode and for us actually to look forward to launching our own diginets in the near future. In terms of other points that I would briefly, if I may, comment upon, I think there is a significant challenge. Whilst, as I say, we look forward to digital rollout we also absolutely acknowledge the challenge that this is to our business. We would, however, probably take a slightly different view in terms of some of the things I have heard said today around PSB because our view is that we are extremely committed to PSB and that we see it as a really important differentiator for Five in a totally multi-channel environment. In a world of 400 channels how do you stand out from the crowd? Actually having a PSB brand attached to you, we think, brings a number of positive elements, not just in the case of diversity and the range of programmes but also in terms of certain quality thresholds, and I think that if looked at positively that has a real positive aspect to your brand as well. I think quite clearly one of the issues is how do we continue to invest in our PSB programming. I would take a slight issue with one comment that was made earlier, when I think ITV and Channel 5 were put in the same basket as reducing their commitment to PSB recently. Nothing could be further from the truth. Five over the last two, three years, has increased the amount of original programming that we make, quite considerably, and also has really increased the range and diversity of programmes that we have across the arts, philosophy, poetry, across history and science, and for next year one of our big pushes is actually into original drama and comedy programming. I think one of the other points I would like to make is that in terms of part of the solutions to these challenges, one thing that Five has been very upfront in terms of what it does not support is that we are not looking for some kind of top slicing formula here; that is not what we feel would be the right solution. Actually we feel, as Clive said earlier, one of the first places we absolutely need to look at is the self-help and how we are going to rise to the challenge to move our businesses into a new era and into a new digital environment. There are things that I think we should focus on in helping us to do that. One, which was also mentioned, is around advertising regulations, ways in which we can perhaps have some more flexibility to be able to be commercial in certain ways in the schedule. The other one, which is really very important, which Andy also touched on and which we see as being absolutely crucial to our ability to continue to fund PSB, is actually over the rights issue because we are clearly funding 100% of the cost of PSB programming. At the moment we have the right to broadcast that on Five; what we need to be able to do is develop other ways of benefiting from revenue streams that will come from broadband, from downloading, from all these other new media. If in fact there is a disintegration of these rights and those rights are being exploited even before we have had a chance to show a repeat of our original PSB programme we will really be undermined in terms of our ability to earn our revenue on those programmes. So I think that is one of the really key issues that are currently being debated. There is a consultation going on with Ofcom, and the outcome of that we think is really going to feed into the ability of PSBs to be self-supportive in the future. Chairman: Thank you. Rosemary McKenna. Q258 Rosemary McKenna: Good afternoon. You have already said that you appreciate your larger audience share because of digital, DTT, so how important then is Freeview to Five's funding streams, from advertising in particular? Ms Lighting: It has been really important to us. It is true to say that obviously the benefit that we have from all digital, even where Five is carried in pay-digital environments, whether that is Sky or analogue, have clearly added to our coverage. So for many people it has been the only way to receive Five. Clearly Freeview, certainly in my view, has the benefit that not only is it the access to Five but it is the access to Five on the basis that I would say it is intended as, which is free, with no strings attached and the ability to enjoy public service television as people have the other four analogue broadcasters. Q259 Rosemary McKenna: So are you concerned about the modern methods of recording, et cetera, that are going to make a difference to how people view television? They are going to create their own programmes, are they not? They are going to create their own timescale and timeframe in which they want to watch programmes, and the ability to skip the adverts? Ms Lighting: Absolutely. That issue, plus others which are clearly going to be raised as challenges for us in terms of what broadband will allow and the ability to have video on demand, even free downloads and so on, you sort of feel that we are sitting in perhaps a similar place to the music companies as they did a few years ago, and I think one of the really important things that we need to absolutely engage with is the fact that we cannot sit here and hold back the tide. Technology is happening; this is a choice of consumers; this is what consumers want, and I think what we need to do is look at how we can adapt our business models to be part of that process, and one of the key parts of that for us, through the investment in content, is then to be able to look at all of these different methods of distribution, all of these different methods of usage and see how we can actually try to build business models that will allow us to earn revenues wherever it is used. Q260 Rosemary McKenna: I am glad to hear you say, "Do not hold back the tide." Ms Lighting: You cannot. Q261 Rosemary McKenna: Because I think the music business did try to do that and very unsuccessfully, so you have learned from them. Thank you, Chairman. Ms Lighting: Absolutely. I am not sure we know all the solutions yet but I think we know that we need to understand them. Q262 Adam Price: There have been some very impressive recent additions to your arts and factual output. Ms Lighting: Thank you. Q263 Adam Price: I think you have already hinted that you would take issue with Channel 4. For instance, their written evidence has styled Five's contribution to public service broadcasting as "small scale" and "declining". Do you think you will be able to maintain the current levels of provision of public service broadcasting post switchover? Ms Lighting: I think this is really part of the debate I was just starting to raise, that if all the world stood still then I think I would be able to say to you, yes, if it were just digital rollout then I do believe there would be absolutely a way of managing through that process. I feel that some of the almost larger unknowns are around the areas of other digital usage - it is PVR, it is around the downloads, it is where those rights sit and actually therefore how we are able to build our business models around those new uses. I think that really is the crux of it for me. We all have to face fragmentation; it is where we learn to make our brand stronger; it is where the good product will shine through; it is, quite frankly, one of our biggest tests and if we sit here and do not react to it we will fail. We need to rise to this challenge. Q264 Chairman: This is very encouraging in a way. Ms Lighting: I am glad you think so, Chairman. It feels quite hot over here! Q265 Chairman: A week ago we took evidence from a variety of witnesses on cricket rights, where we had the BBC, ITV and Channel 4 all saying, "No, we did not put in a bid for the highlights", but you put in a bid for the highlights. Ms Lighting: We did. Q266 Chairman: And you are going to put them on prime time. Ms Lighting: We are. Q267 Chairman: You have also heard the previous witnesses talking about funding gaps and the dire financial consequences, but you seem to think that actually you have a good future financially in a multi-channel world and that you can maintain your public service broadcasting, and indeed increase it, and you do not feel you are going to have to need any recourse to public funding to do so. Ms Lighting: I think as long as we have the flexibility around some of the advertising; and, as I say, we really need to address this rights issue because I feel that really is important. If I can amplify that a little more to show you the way in which that could become so significant? There is a connection between rights and advertising. We currently have restrictions on how we can carry advertising in a broadcast environment. There is debate that possibly these new media rights could within a very short period of time be made available via broadband and so via a PC you could either have streaming or you could have download. That could be on a pay basis; it could also be on a free basis funded by advertising. So we face an environment where possibly we are putting up 100% of the cost of this content of this original programming to find that it actually goes into a new media environment not owned by us because we have lost the ownership of those rights, and that advertisers are being lured into that environment where there are no restrictions on advertising. So suddenly we look rather old and staid and it is limited and restricted around us as a broadcaster, and yet actually we are putting up 100% of the funding of this programming. So this new media is really a big debate that sounds as if it is a new world but actually it is a debate that fundamentally could undermine the structure and substance of the model that we are used to as being the main funder in the commercial environment for public service programming. Q268 Chairman: In actual fact that will relate very much to the next inquiry of the Committee, which is into new media and creative industries and I hope you will perhaps elaborate on that argument to us. Ms Lighting: You can be sure I will be very vocal. Q269 Chairman: I would have to say that the arguments we have had so far have mainly come from the creative industries that take a slightly different view, as you would anticipate. Ms Lighting: Absolutely, and also to be clear that when these debates have come up previously this has not been the position that Five has taken before because the rights that have been in discussion before have either been those of international rights and how they should be exploited and who should benefit from that revenue, or it may have been around book rights and very different new merchandising rights. Five has been very clear that that has not been something we felt we would argue over in terms of ownership and that indeed we see a real benefit of having a strong independent sector because they are our suppliers of our content - we are as good as our independent suppliers. But this is the first time that the debate has actually entered into an arena where it will fundamentally have a very detrimental effect on our own business model and therefore we cannot afford to be as generous as we have been in the past. Q270 Chairman: We will look at that in some detail; but putting that to one side and just going back to your overall approach, would you say that you think your competitors might be being a bit feeble in painting such a bleak picture? Ms Lighting: You are trying to put me on the spot, as if I would dare to say such things! Perhaps I can put it this way? Five is only eight years old; we launched into an environment which was already multi-channel, multi-channel had already launched therefore there was already a very competitive environment. Five has never had an easy environment in which to work. We are perhaps more used to competition than some of our competitors have been, might be a better way of putting it. We became profitable two years ago and we are very excited about our levels of profit because they are increasing and we are working hard to push that forward, but we are still envious of our competitors' levels of profit. Mr Murray: It is also worth saying, notwithstanding our profitability, we have also used those profits and that success to reinvest in our programme projects so that over the last few years we have substantially increased that and that is what has allowed some of the programmes that you talked about earlier and has helped to boost the brand of Five within that competitive environment. Q271 Alan Keen: May I say first of all that I am a great fan of Five so this first question is slightly facetious. When a letter comes through the post from Five it has a big "Five" on the top of it. If you went out in the street and said to somebody, "I am the Chief Executive of Five" they would say, "What is that, give us a clue?" And if you said, "Channel Five" they would begin to realise it was TV. When there are going to be 555 channels have you not thought about having a name that is more recognisable? BBC already has Five Live so you cannot have that one, on the wonderful sports programming. Ms Lighting: No. Certainly one of the debates we are having at the moment is around what we are going to call our new channels as we launch those, and we have obviously been looking at our competitors and seeing what sort of formulas they have been following, and we have had some interesting conversations internally. I think the move to the name "Five" was a very deliberate one at the time in that we were making a very positive statement that we were repositioning our channel from what it had been at the time of its launch and for the early part of its life to the new channel or, if you like, the evolving channel that Five is now becoming. We rather fondly look at the channel almost as a teenager that is growing up. When we came on to the scene, as I say, we came into a very, very competitive landscape; we did not have a soft landing as some of our other PSB broadcasters did. Therefore, Channel 5 then was quite a noisy, brash infant that needed to shout to be heard and after a period of time we recognised that we needed to evolve that brand, that the channel itself needed, if you like, to mature, to have a different variety and depth of programming, and that we needed really to make a statement that we had moved from where we were to where we intended to be. So it is a bit of a tricky one. When you say it to a taxi driver, yes, it does get confusing, but we are living with it and with the improved brand and brand association that I think the channel has. Q272 Alan Keen: Can I come on to the question you heard me ask the others before? The people with three sets, four sets, they only need to be given proper warning of the switch-off date in their area and they will pay the money, but how do we tackle the problem of the people who are going to be extremely reluctant or will know nothing about it, even if it is published time and again? What are your ideas on helping them to understand? Ms Lighting: I do think there are different stages to this and clearly we do see that we have - as I think has been voiced by others before me today - an important and serious job to do in terms of how we can, through our existing services, through our main channel services, meet the benefits of digital and the options and the number of choices. We need to educate on that process, and I think that we need to start and we will be able to start as soon as we are in a position to actually have some of our new services. We have also been doing in some areas - because, like Four, we do not have the regional flexibility to be able to target areas and say, "Did you know Freeview is now in your local area?" - some very targeted off-air marketing. So when, for example, we have launched some new initiatives, whether it has been in the entertainment area or in the arts area with the work we have done with the Arts Council, we have done things as basic as organising events around supermarkets, popping things through people's letter boxes to say, "Did you know there are new programmes coming on Five and actually it is available through Freeview in your area?" So we have been doing some of that over the last couple of years because, frankly, as people who are sitting there without Five go and get Freeview it is a net gain for us. So it is absolutely in our interests to do it. Mr Murray: It is also worth saying that we have been very big supporters of the plans that Digital UK have for targeting communication towards some of these groups that you are talking about, and they have been working with Help the Aged, with RNIB and also from a regional basis planning to set up Regional Advisory Councils and therefore getting the information out there and available, reaching out to the groups that I think you are talking about in terms of doing that, and in trying to make the process as easy and as pain free as possible. I think that DTT has taken that as part of the overall switchover process, the fact that it is essentially a plug-in-play type technology, again makes it easier for some of those people to do that as opposed to the complexities of some of the other platforms. Q273 Chairman: You are not part of the consortium that owns Freeview. Has that proved disadvantageous to you at all, or have you considered trying to go in there? Mr Murray: I understand that we are not eligible under the current rules of Freeview, given that to be a member of the Freeview group you must either be a multiplex operator, which we are not by virtue of our historic position, or you must have a number of channels. Once we have the requisite number of channels I think that is something that we would potentially look to review. Q274 Chairman: And are you going to be available on Freesat? Ms Lighting: I think Freesat is very interesting and it is something that we would like to look at. We have a different issue from Channel 4, who I think were talking about their contract with Sky. What we would need to look at is our rights' situation because of the programmes that we acquire, to ensure that we would not be in breach of rights that we had acquired. We also would have a transponder issue in that we do not have the capacity on the right transponder to be able to do that at the moment. So that would need to be sorted out. Q275 Chairman: But that is something about which you are having discussions? Ms Lighting: We have just started having those discussions, yes. Q276 Chairman: Is there anything else that you would like to tell us about the switchover process and any particular problems? Mr Murray: Our issues in terms of the process are slightly different from the other ones from a technical point of view, in that we are not, in the way of ITV and Channel 4, multiplex operators as well. Our position going forward is that we will be carried by the BBC and clearly there is a process to go through, I think as Iona referred to in the case of S4C, in coming to our commercial arrangements with the BBC in terms of costs and timing, but that is a process that we are working through and clearly we would like to get the benefits of that as quickly as possible. Q277 Chairman: Can I thank the three of you very much? Ms Lighting: Thank you very much. |