Select Committee on Culture, Media and Sport Written Evidence

Memorandum submitted by Impresario Media LLP

  Steve McCauley, Partner, Impresario Media LLP, prepared this submission. The firm provides strategic and operational advice, at board and senior management level, to multinational clients and investors in media, communications and entertainment. The firm has expertise in broadcasting, new media, music, film, publishing and software.

  The issue addressed herein:

Where the balance should lie between the rights of creators and the expectations of consumers in the context of the BBC's Creative Arcfhive and other developments

  1.  The divide between public service and commercial activities at the BBC used to be relatively simple: generally, after transmission, a programme passed into the BBC archive, which meant that it could be exploited commercially by BBC Worldwide or another third-party.

  2.  There has always been another divide, at the BBC: licence fee money is to be used exclusively for the benefit of UK licence fee payers; any activities outside the UK are supposed to be commercial, hence the existence of BBC Worldwide, whose duty it is to provide a commercial return to the BBC for rights in which the BBC has invested.

  3.  This is why BBC America is, for example, a commercial television channel and why BBC World (television) carries commercials.

  4.  The Foreign & Commonwealth Office pays for the BBC World Service and dictates its priorities: the BBC cannot use UK licence fee money to subsidise the BBC World Service.

  5.  In 1996, the BBC set up what has become, one of the leading Web sites in the UK. Its success has been achieved by relentless cross-promotion and very substantial expenditure by the BBC, and by the exploitation of the BBC brand and the BBC News operation.

  6.  The BBC's strategy since then has been to colonise the Web, as well as other digital platforms, and to position itself as relevant, in the digital age.

  7.  This has led to an erosion of the public service/commercial divide and the UK/ex-UK divide.

  8.  The BBC has not, to date, limited the use of its public service Web site to UK licence fee payers. This means that a substantial amount of UK public money is being used to subsidise that service for the benefit of people abroad, who contribute nothing to the running of the BBC and whose use of such BBC services is not paid for by commercial revenues.

  9.  The blurring of these divides has not been the subject of proper public scrutiny, as it has been happening by degree, often cloaked within "trials" of new services or dressed up as extensions of existing ones.

  10.  An example of such erosion occurred around 2000/1, when the BBC introduced the "BBC Radio Player". This service allowed listeners to "catch up" with radio programmes they might have missed. This was (and remains) a streaming service, not a downloading service. The listener does not end up with a copy of the programme to keep.

  11.  At the time, there was a bitter row between the BBC and BBC Worldwide, as to which party should exploit archive programmes in this way, and as to whether the offer should be "free" or commercial.

  12.  In the end, and after months of arguments, a fudge was reached: there would be a "seven day public service window", during which time listeners could hear the requested radio show again, at their PC. On day eight, the programmes would no longer be available, other than commercially, from BBC Worldwide, if it chose to market them.

  13.  It was certainly not agreed that the BBC would give away digital copies of programmes as downloads, under the Radio Player agreement, and yet this is now what is happening in the "audio-on-demand" tests, as unprotected MP3s.

  14.  In practice, the seven-day restriction is fictional. Many BBC radio programmes remain available in the "listen again" area of the BBC Web site, years after they were first transmitted.

  15.  Furthermore, the BBC has not restricted access to the Radio Player to UK licence fee payers, though such a limitation is technically feasible. The service is global, at the expense of UK licence fee payers.

  16.  Since 2003 and the launch of Apple's iTunes service (and the popularity of the iPod), there has been an explosion in the market for paid-for downloads, not only of recorded music, but video, audiobooks, radio programmes, so-called "podcasts" and other "digital goods".

  17.  The BBC has responded by seeking to introduce a raft of new public service (ie free) audio and video download services. These include the so-called Creative Archive, the UK-only "iMP" video downloading test and the global audio-on-demand/podcasting trials.

  18.  In the case of the audio downloading trials, the "tests" will have lasted for fourteen months, if they end in June 2006, as now planned by the BBC. The BBC might call it a "trial", but this has all the characteristics of a soft-launch of a new and heavily promoted public service, without prior approval.

  19.  Outside the BBC, commercial media and entertainment companies regard digital downloads as the next, great product format, the natural successor to DVD and CD. Downloads are "digital goods", to be sold or otherwise exploited commercially.

  20.  The most valuable commercial window is the one immediately after the original transmission of a programme. The new video service from Apple iTunes, for example, sells programmes immediately after broadcast. This is the very window the BBC now wishes to enclose for the public service.

  21.  The BBC is seeking to extend the doctrine of the "Seven Day Public Service Window" to digital downloading. What was originally a compromise, for a catch-up radio streaming service, argued over by BBC executives, has suddenly and conveniently become a matter of corporate policy.

  22.  If it is right for the BBC to give away free digital downloads, then why not allow the BBC to give away DVDs of, say, The Office and Spooks, to anyone who wants them, as part of the licence fee? Why bother with BBC Worldwide?

  23.  Normally, when people want to watch or hear a programme again, they record it, or rent or buy the DVD or CD. The BBC seems to want to move this commercial activity into the public sector and is achieving this, by degree and without public scrutiny.

  24.  At the time of writing, it has been announced that Ofcom will have a role in assessing the market impact of new services proposed by the BBC, but that the final decision will be left to the BBC Trust. The BBC Trust will have to weigh up the so-called "Public Value" versus the market impact. There is no agreed definition for what "Public Value" is supposed to mean.

  25.  This is a deeply unsatisfactory arrangement, which cannot possibly deal properly with new services proposed by the BBC. The job of the BBC Trust is to protect the interests of licence fee payers, not those of artists, writers, producers, rights owners, or other market participants. The BBC's idea of "Public Value" is different from the wider public interest. It is clearly in the public interest for there to be a vibrant market in new media products and services, for new investments to be made and for new companies to emerge, but this does not figure in the BBC's definition of its own interests and its view of the interests of licence fee payers.

  26.  Consideration should be given to the introduction of a "Public Interest Test", which should be applied independently of (and after) the Public Value Test administered by the BBC Trust, in the case of proposed BBC services. A Public Interest Test is especially important in new, digital services. As BBC News reported, the Graf Report showed that while "The theory that BBC's online services had an adverse impact on the UK Internet market could be neither proved nor disproved", nonetheless "There were indications that it [the BBC's online service] may have had an adverse impact on competition, however, particularly by deterring investment by commercial operators that would have led to new forms of competition."

  27.  It is striking that in the BBC's home market, no UK equivalent has emerged to compete successfully with Yahoo!, MSN, AOL, Google or iTunes. This is to the great detriment of the UK economy. It is a matter of fact that the leading American Internet players did not have to compete with a publicly funded, US equivalent on the scale of the BBC, as they developed.

  28.  Graf also stated that the BBC should introduce a deliberate, "precautionary approach" to investment in its online services. If there is a "close call" between the public service benefits of a proposed BBC online service and the costs of that service, the proposal should not be taken forward.

  29.  There is no evidence that the BBC is taking a precautionary approach in its current plans to develop new digital downloading services; indeed, it is deliberately doing the opposite.

  30.  There should be an independent inquiry into the principle of a BBC public service new media window and into the principle of a new public service role for the BBC, outside the UK.

28 February 2006

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