Select Committee on Culture, Media and Sport Minutes of Evidence


Examination of Witnesses (Questions 231 - 239)

TUESDAY 13 JUNE 2006

MR ANDREW YEATES, MS ANGELA MILLS WADE, MS SANTHA RASAIAH AND MS CATHERINE COURTNEY

  Chairman: Good morning everybody and welcome to the fourth session of the Committee's inquiry into new media and the opportunities and challenges which it offers to creative industries. Can I welcome to the first part of our morning session Andrew Yeates, who is representing the Association of Online Publishers; Angela Mills Wade of the British Internet Publishers Alliance; and Santha Rasaiah and Catherine Courtney of the Newspaper Society. Can I ask Adrian Sanders to commence.

  Q231  Mr Sanders: A question about the BBC; what is the impact of the BBC's new media activities on your businesses? Are the BBC's new media activities undermining (or likely to undermine) the viability of commercial business models, or are they healthy competition?

  Ms Mills Wade: Good morning everybody. I think the BBC's Creative Futures paper and Mark Thompson's recent speech and articles are rather disturbing as they show just how far the BBC has already expanded since the last major review, the Graf Review, and will continue to do so. I think the impact on the commercial sector of these rather expansionist plans cannot be under-estimated and this affects every stage of our businesses, from the original concept, putting the ideas together, to development, to funding, to finding the investors, to promotion and marketing and eventual roll-out. There can be no doubt that the BBC now sees itself as a global multi-media player and indeed cites itself as a possible competitor to other global media players such as Google and AOL. I think this does raise serious questions and we wonder whether the new system of governance that is being put in place with a public value test—which, note, is "value" not "interest" which is harder to define—and only one single service licence to cover the whole of the BBC Online offer, is going to be robust and rigorous enough to measure the effects on the private sector. We are worried about that and we are also worried about other things that the BBC has talked about such as starting to fund part of their online service by advertising. Such a move, albeit to start with outside the UK, would have an impact on publishers, and online publishers in particular in the UK because many of the registered users of the major newspaper sites are outside the UK. If they did start to sell advertising on any part of their service this would depress advertising rates in the UK because they are such a huge player, and that would damage competition.

  Q232  Mr Sanders: BBC World when broadcast outside of the UK carries advertising so how would online advertising differ from that?

  Ms Mills Wade: I think it would be a really major enterprise to sell advertising on the online services and it would have a bigger impact than their advertising on BBC World. We think there is a danger that advertising would start creeping into the whole of the online offer and that they are setting up something for the future beyond the next licence fee.

  Q233  Mr Sanders: Can you put a figure on what you are thinking it would take out of your advertising take?

  Ms Mills Wade: We could try and measure that for you and let you have those statistics, yes. Obviously the online advertising revenue figures are being measured now so we could try and make that assessment for you, certainly.

  Ms Rasaiah: There is a particular concern from the regional newspaper industry about the BBC's aspirations for ultra local television services, which also of course fall upon their Where I Live web sites and other community activities As regional newspaper companies of all sizes—small independents as well as the groups—are investing and innovating and developing in this area, there is an issue about the impact of the entrance of the BBC, which is licence-fee funded so free from the commercial concerns that concern our members, could have upon the development of that area. Obviously the BBC at the moment is conducting a pilot project in the Midlands but our members have a real concern that the regulatory framework that is proposed is not actually going to address whether there is going to be a bad effect upon the commercial sector. It is set up in such a way that it is the BBC that decides whether it can launch those new services Although the public service value test does incorporate a market impact test, even if that shows that the BBC's proposed service is going to have an adverse market impact upon its competitors, the BBC can still decide to go ahead. That does not address the concerns that I think are covered in the Government's own regulatory impact assessment. Concerns were identified, for example, by the Graf Review as to whether the mere fact that the BBC is going to go into an area with licence fee funding could deter competitors from investing in that area and the negative impact that that could have. Or whether, as the House of Lords Select Committee recommended, that if there was a possibility that the BBC's launch of new services could stifle other services provided by commercial competitors, it should not be allowed to do so. If you read the regulatory impact assessment, the Government itself says that the public service value test might reduce the risk but it does not say that it would prevent it. That is a real concern at the moment, particularly while this is such a developing area.

  Q234  Mr Sanders: How do you prove that if the BBC was not engaging in a new activity that the commercial sector would have engaged in that commercial activity in the absence of the BBC? In a sense, until the BBC moves into that area, if there is not any commercial provision, then clearly they are not treading on anybody else's toes.

  Ms Mills Wade: There are two other areas that they have already said they are going to go into. For example, they are going to launch a broadband section aimed at young people, a teen brand. You know very well that there are lots and lots of commerical magazines, online sites, newspaper sections that already serve this teen market plentifully

  Q235  Mr Sanders: What are you more afraid of? Are you more afraid of the fact that the BBC is doing this on the back of licence fee money or are you in the first part of your answer more worried about the BBC competing with you for advertising? You cannot argue it both ways

  Ms Rasaiah: It is the same issue because a lot of this is about audience and audience fragmentation, whether the BBC is taking advertising or not,—

  Q236  Mr Sanders: If people want to watch it on the BBC, they are going to watch it on the BBC. Is it not their choice?

  Ms Rasaiah: It is a question of whether or not the people want those services and whether the BBC providing it will deter other people from providing it or deter the commercial sector from being able to develop those services.

  Q237  Mr Sanders: But if the commercial sector is not providing that service, why should the BBC not provide that service in their absence?

  Ms Mills Wade: Which areas are they?

  Ms Rasaiah: The commercial sector is in these areas and is developing these areas and there are plans from the BBC, for example, for ultra local television where they have been very clear about their aspirations, that they want to roll ahead with 60 ultra local television services. That is on the basis of one pilot project. There is not going to be a separate market impact assessment in any of those in other areas.

  Q238  Mr Sanders: That market clearly is not there because the commercial sector does not have 60 ultra local television services.

  Ms Rasaiah: The commercial sector is developing those services. You can see local television services which are being developed by the Manchester Evening News and other audiovisual/online services in other areas. It is at this particular time when people are innovating and trying to find the commercial model that, yes, then there is a threat that if you have a BBC which comes in, it is using licence fee funded money, so it is free from all the commercial pressures and all the commercial considerations that govern their competitors who do not have that public funding. As the Graf Review said, there is a real risk that others are deterred from even entering those markets and thereby affecting them, or else it could stifle those which have developed, or make it more difficult to establish such services. If you are having a revised regulatory framework, surely it must really address those issues carefully to make sure that that does not happen.

  Ms Mills Wade: The BBC has said that it is going to deliver content via mobile devices. Already that is an area which is extremely well served by the private sector, not just our members but generally, and this forms part of their wider cross-media strategy. It is almost as if they are setting themselves up for a post print digital newspaper. Is this what we want? Do we want the British Publishing Corporation to take over from the British Broadcasting Corporation? If so, that should be clearly defined according to a remit and funded accordingly, but at the moment they are just land-grabbing, as people have said in the press, and it is very, very disconcerting. Even the mere mention of ideas unsettles the private sector and who dares go where the BBC may dominate? That is the real dampener on innovation in the private sector. It is almost as if they are trying to roll over a monopoly status which may have been appropriate for a broadcasting market but not for a wider market, and it is almost a con trick. They have got this secure funding, unrivaled cross-promotion opportunities and can leverage their brands. It is very easy for them quickly to step into an area which may be under development and really dominate it. It really is a danger.

  Ms Rasaiah: It is not a question of there being a lacuna in that area. If you look at BBC ultra local services which are not just broadcast but also the online back up to them, the regional and local newspapers are already there providing local journalism. And they are providing it to an extent that is second to none. It is questionable whether the BBC will be putting in as many journalists and giving the kind of coverage that the local press already do in those areas and using what the local press are using to develop their own online provision of local journalism, and other local services, as well as their local commercial services.

  Q239  Chairman: I must allow Andrew Yeates, who has not said anything on behalf of the Association of Online Publishers, to come in.

  Mr Yeates: I have not on this subject. The BBC are members of the UK Association of Online Publishers. From the point of view of our Association obviously we are interested to see how the public service test operates for new services. We do hope that the checks and balances for application of the "public value" test will allow for a careful review of the extent of a new service, and particularly the system for reviewing when there are significant changes to a service, because it is a natural reaction to seek to be able to do as much as you can when you are launching a new service. If a service licence is too broadly drawn and there is not an opportunity to come back and review that when it is realised that the opportunities afforded under a licence cover you three or four new markets rather than just one concerns would arise. It is important that there are opportunities to review such concerns at a later date.

  Q240  Paul Farrelly: I will declare my interest now as a fully paid-up member of the National Union of Journalists. You will forgive me if I sound a note of scepticism when I see the Newspaper Society riding to the defence of commercial television companies with regard to ultra local television which you have mentioned; commercial companies which may charge and introduce advertising, which is more competition than the BBC. I have seen over many years how newspapers have been very, very adept locally at enhancing their own local monopolies, taking over free sheets and smaller newspapers, and now going into the Internet advertising sector. It strikes me sometimes when you look at the operation of local newspaper monopolies around the country, that many people will welcome ultra local television from sources such as the BBC because it provides a spur and competition against reporting that is often lazy, inaccurate and late. What would you say to that?

  Ms Rasaiah: I would hope to rebut it if not to refute it!. In terms of the local newspaper industry `coming to the aid' of commercial television, we are not just talking about broadcasting. The BBC's ultra local television activities cover not only broadcasting but the development of its online activities and other community involvement, which are in direct competition with local newspapers obviously. About a third of the workforce of the local newspaper industry is employed in an editorial capacity. I do not think there is any other commercial sector that covers the hard news and the community news and the community interests in the way that the local and regional newspaper industry does. I do not think it is lazy journalism. It is a fact that newspaper companies have invested in journalism, they have invested in the development of their printed newspapers, millions have been put into presses and production, as well as of course in a changing world adapting to the new technology, in developing their new services, as their readers, as their advertisers, as their consumers want in the way that they want. As far as being local monopolies, no they are not. There is fierce competition from all sectors for advertising, and indeed for other information services, and local and regional newspaper companies have no problems with engaging in fair competition against the other developing commercial sectors with the same conditions applying to all. The issue with the BBC and its proposals is that these are licence-fee funded proposals. It is not a level playing field.

  Q241  Mr Evans: Having said that, the BBC Online services are brilliant, are they not?

  Ms Mills Wade: You would expect it with that amount of money!

  Q242  Mr Evans: Yes but they are brilliant. I cannot think of any online services that provide news better than the BBC pages. The commercial online pages come nowhere near providing anything like the sort of information that you get off the BBC Online services. They are fantastic.

  Ms Mills Wade: I think the newspaper sites are fantastic too.

  Q243  Mr Evans: There is nothing to compare. Do you not think it is good that the BBC are there pitching a level of excellence to which then the commercial sector has to come in and compete?

  Ms Rasaiah: If you are talking about the BBC at a local level, I would argue that there is a greater depth in terms of regional and local newspapers, whether it is their print or their online journalism compared to what the BBC is doing. I would not necessarily accept that the BBC is setting the gold standard. The issue is whether the BBC in pursuing those activities is going to be deterring others in the commercial sector from doing that, who are investing as much in journalism and as much in developing the other sites.

  Q244  Mr Evans: The problem is trying to prove that, is it not, because the commercial sector has been very slow. I agree with Adrian and Paul. Why have they not already done something?

  Ms Rasaiah: They are doing things.

  Q245  Mr Evans: It is very slow. I cannot think of anything in my own region.

  Ms Rasaiah: There are online local and regional newspapers, 500 web sites, innovative services, they are video streaming, they are podcasting. There is tremendous development, whether it is within the editorial sectors, have a look at things that Liverpool Daily Post and Archant have been doing in their online business pages-, or the community sites and community journalism that newspapers are developing. They are into blogging—.

  Q246  Mr Evans: In which case you should not have any problem. If they are as good as you say then they are going to survive and flourish.

  Ms Rasaiah: Yes, but you are up against a rival which has licence fee-funded public money to support its efforts whereas newspapers are working in a commercial environment.

  Q247  Paul Farrelly: Just one follow up because I am interested. You are going to give this Committee on behalf of your society a guarantee that should commercial television providers set up ultra local television stations that your members will not try their utmost to drive that competitor out of business?

  Ms Rasaiah: That is fair competition. I have already said insofar as commercial competition is concerned, local and regional newspapers already face fierce competition. If commercial television companies are developing into that area that is a further competitor to local and regional press. But it is fair competition. Those commercial television companies are not being backed by licence-fee funding and public money that means that they are not subject to the same commercial constraints as newspapers are against television. What we are asking is that the regulatory framework under the BBC Charter means that there are proper and effective tests that assess adequately whether there is going to be adverse commercial impact upon the commercial sector already operating in their own areas, be it local regional newspapers, be it their other commercial competitors, and takes that into account. Because at the moment it really is a fact under the proposed charter that the BBC decides whether it will have to sit any test, what the boundaries are, and the BBC can decide to go ahead. That is even if the market impact test (which the White Paper proposes and it is a move forward that Ofcom is involved in that) has shown that there will be an adverse market impact. What we are asking for is that there is a proper and effective regulatory system to try and guard against that.

  Q248  Mr Sanders: You made a very good point about competition within the commercial sector but how many commercial newspaper circulation areas are there in this country, and can you name them, where there is a competitor newspaper within a circulation area owned separately? Can you name one area of the country where it is not the case that one newspaper dominates and therefore there is no competition?

  Ms Rasaiah: Local and regional newspapers are competing for advertising and for commercial revenue, not just against other local and regional newspapers, but against national newspapers, local radio, Internet services, direct mail, household delivery, all those competitors are actually in their areas already. Yes, the economics have changed perhaps from the times when there might have been three or four different newspapers fighting it out in every town. The economics do not allow that these days, but they do face fierce competition. There is another issue, once again to draw the distinction with the BBC. If you are a local regional newspaper and you want to transfer titles or acquire another newspaper, the regulatory system means that there could be an inquiry into whether that should go ahead and an assessment of even the most local of markets on both the commercial and competition aspects as well as the public interest/editorial aspect. In relation to what the BBC is doing that scrutiny does not exist. If you look at ultra local television services, the BBC would hope the decision on its pilot in the Midlands would allow it to roll out those 60 ultra local services throughout the United Kingdom without any separate assessment of the effect on the local markets.

  Q249  Chairman: Can I quickly ask the BIPA, you have used some fairly strong language such as "wilfully unsettling the private sector" and "no limit to the BBC's voracious ambition". Are you concerned simply that the regulatory structure is insufficiently strong to control the BBC in its ambitions in these areas or do you feel that the BBC should not be going into them at all?

  Ms Mills Wade: Obviously they have got to develop their service to fit the new media landscape and consumer demand and so on, that is fine, but the way that the new regulatory system is being set up, it is with one service licence—and they hold great store by the service licences1 for the whole of the BBC Online offer. So the things that I mentioned before, such as the teen brand and the mobile delivery areas, are specific areas in the commercial sector, and we would regard them as competitive areas between each other and between ourselves. If that is just all part and parcel of the BBC Online offer, I personally do not think that is rigorous enough, no.

  Q250  Janet Anderson: I wonder if we could turn to the question of copyright. We have had some evidence from the music industry about their concern about unauthorised copying. What is the scale of unauthorised copying or other use of your digital content? Is it as much of a problem as it is apparently for the music industry?

  Mr Yeates: As far as the publishers are concerned, piracy and unauthorised use is an issue. Certainly with the increasing trend to make e-books available, the issues that are of concern to the music industry are of equal concern to publishers. At the same time, the publishers are also looking at using digital rights management as a way of delivering effectively new services to their customers and therefore feel strongly that we need to be able to use the new technology in a positive way so that customers get increased choice over the ways that they can access material in the future. In terms of public perception in the traditional market, no, we do not have such a big concern although in many territories of the world there are really severe concerns over the copying of books and unauthorised publications, particularly in territories like India and China.

  Q251  Janet Anderson: Are you doing anything to educate the public about copyright and about infringement of copyright and so on? It has been suggested to us that this should perhaps be part of the National Curriculum and that government should do something. Would you agree with that?

  Mr Yeates: I think it is incredibly important that the DfES are involved in the debates going on. The Creative Industries Forum put forward some useful recommendations in terms of a broad educational approach and improving awareness about IP. There is also some good work going on at the moment in the Creative Economy programme to look at this issue and how the issues can be broadened out. Considerable efforts are being made to engage the CBI so that within companies people are able to explain to employees why IP is important to their livelihoods, because very often their jobs rely on the effective enforcement of IP but people do not realise this. Within the curriculum it is a difficult topic to make real to people but the Patent Office have already produced a Think Kit for secondary schools which has gone down extremely well. Further work is now being done to look at a similar project within primary schools, and certainly the publishing community is as keen as the music community to come up with examples that show young people how they can really become engaged and earn their living out of professional writing going forward.

  Q252  Janet Anderson: Is there evidence that all of these measures are having an effect?

  Mr Yeates: The research that has been done into piracy does show that people do now know more than they did four or five years ago about what is right and what is wrong in terms of intellectual property use. There are areas where further work is needed. I think the recommendations that have come out of the All-Party Internet Group concerning labelling for copyright protection measures are significant for the industry and we should take note of that, but I think on the whole there is a better awareness of the fact that copyright exists and that it should be observed; people are not quite sure of the parameters yet.

  Q253  Helen Southworth: One of the amazing things about new media is that it allows direct engagement between the individual and lots and lots and lots of other individuals. That is why lots of young people are so incredibly excited by it and want to use that medium rather than any other methodology. I wonder what you are actually doing to engage people in understanding copyright and understanding intellectual property but also understanding their direct connection with it. What about citizens' journalists, for example? What are you doing to be interactive? We have been looking at all the problems of other people and competition, but why should young people be excited? Why should not older people or why should not middle-aged people be excited in your parts of the industry?

  Mr Yeates: In order to encourage people to have trust in the system they do need it to be relevant to their everyday lives. It is incredibly important if you have got a musician in the family or you have got a writer in the family that they also help spread the message. There has perhaps in the past been a division between the industry side of the business and the creative side of the business and that has made it more difficult to get a coherent educational message out to people. When you do break it down and realise that copyright is really here as a method for rewarding people who have come up with something creative, most people are capable of that at one level or another. The work that has to be done is really to target that and make sure that everybody at whatever level appreciates that they can own intellectual property. Copyright does not need to be registered, but if you come up with something original and it is your own, you should be proud of it and you should be able to talk about it in that way as if it something that you really do own like a piece of furniture.

  Q254  Helen Southworth: Something the local newspaper industry has always done very well at is the school photograph where everybody buys it so they can send copies off to their nan or whatever. How do you engage people?

  Ms Rasaiah: For local and regional newspapers, as with national newspapers, inter-activity and engagement is the great bonus that is given by the new technology. If you look at the regional and local newspapers' web sites, there is a tremendous amount of reader interaction, whether it is reader comments following news items or whether it is the community forums. If you look at some of the local newspaper titles, they have an area where they are helping local societies and others set up their own web sites. From one local title I counted about 100 or so such web sites. There are blogs from readers, from people who have emerged as natural writers, and there is interaction whether it is in terms of reader competitions or reader/audience feedback. There is all that going on and it is a medium that obviously appeals to the young as well, so there is development encouraged by local and regional newspapers.

  Ms Mills Wade: Plus the campaigning type issues. Young people obviously are inspired and want to get involved with either local campaigns or national campaigns of one sort or another. I think the newspaper sites really lend themselves to that kind of area as well, building communities of interest.

  Ms Rasaiah: It is also the development of services based on areas that all are interested in, including the young, from sports, entertainment-, to what newspapers are doing in terms of SMS message services and all those kinds of engagements and services.

  Mr Yeates: There is one area where I think we have to work very hard at an educational message and that is, with that huge opportunity for everybody to become engaged and create material, there is a difference between the choices people make about how they want to assert their rights. Not everybody has to assert their rights and if you want to create something and give it away for free, then the system should allow you to do that, but at the same time there has to be a respect for those people who are employed or who work professionally to rely on those rights, so we must get the dual messages out there. The only way one can be successful in that is to build a genuine trust in the system and a respect for the law, and to enable people to appreciate that they do not have to enforce their rights, they have a choice to waive them, but that is a choice and it should not be a choice taken at the expense of those who wish to assert their rights.

  Q255  Helen Southworth: How are you actually investing in that? We are talking to each other but it is people outside who need to hear the message?

  Mr Yeates: Yes, and I think it is a gradual process. It has to be a gradual process but as new technology evolves and there are new choices of service, perhaps messages have to be honed to the particular type of service, so you would not necessarily have the same messages to people about not using films in an unauthorised way as you would about using pieces of text. It has to be targeted correctly so that people can relate to it.

  Ms Mills Wade: Andrew and I both sit on a group which is being brought together by DCMS to really focus on this area and to share knowledge but also to push certain projects forward together with the DfES and the support of the Patent Office.

  Ms Rasaiah: Local and regional newspapers are very involved in `Newspapers in Education' and that just becomes a natural part of whatever the particular project is that the local titles are working on with the local schools and colleges. Also, it is made clear in terms of acceptance of the contributions from readers and photographs and those sorts of things that are accepted on to web sites as well. It is a gradual process.

  Ms Mills Wade: At the European level there is a group looking at media literacy and how the European Union can add value to the national media literacy campaigns. One of the areas that they have focused on is intellectual property rights and how the messages can be part of media literacy generally.

  Q256  Mr Evans: For the novice, Andrew, what is digital rights management?

  Mr Yeates: It is one of the areas where we have to help with the educational messages because there are two separate sections of it really. There are systems you can put in place to manage your rights that you can apply to a piece of software so that you know exactly what you own and how you are licensing it out, and then there is the technical protection measures where you can use software to stop people doing things. The bad press that digital rights management has tended to have all concentrates on the stopping mechanisms rather than the enabling mechanisms, and it is very important that the industry reassures customers that certainly the management aspect of it really is improving the service and helping them in a positive way. When you come to the stopping mechanisms, then you need better labelling and clear advice to consumers over what they are buying. We should be encouraging them to realise that is not a bad thing. There are choices and the fact that you choose to acquire a piece of material for a limited period of time, as opposed to having it forever, may suit some people, and that is not a bad thing.

  Q257  Mr Evans: I heard what you said to Janet about informing the consumers even to the extent of putting it on the curriculum, but the fact is even if it is shoved onto the curriculum people know, if they are buying a CD or DVD and they are copying it for their mates or burning copies, what they are doing. The only way you are going to control it is not by educating them, surely; it is by actually stopping them from doing it?

  Mr Yeates: Not necessarily. I think there are a lot of areas of copyright, particularly when we look at the fair dealing aspects of copyright, where there are flexible areas. A great deal of debate has gone on over whether there might be a new broad "fair use" exception introduced under UK legislation for example. Certainly from my perspective it would be a very dangerous thing to change the law in that respect because people do push the envelope a bit. Wherever you draw the line, in the end the reason the law is there is to protect rights holders where people do things which cause them damage. If it is very much on the periphery then people will take a decision over whether it is worth pursuing the person for the damage that is being caused or not. If we start saying because there is a grey area somewhere, let us open it wide open and let everybody do whatever they like, I feel that would be very damaging to the industry.

  Q258  Mr Evans: So the way it is going to go is increasingly people will be prevented from copying?

  Ms Mills Wade: I do not think so. I think it will develop much more through licensing. Owners of the copyright works will want to have as wide a distribution as possible and they are not going to want to stop people doing things. They are going to find ways to allow them to do the sorts of things that they want to do in an authorised way. It will be all bound up in what we call as rights owners licensing, but it is just a contractual business solution. Also on the other side of digital rights management, a lot of it happens without you knowing, it is a machine-to-machine type solution, and that will happen more and more. It will not be an intrusion or a barrier to consumers; it will be, as Andrew said, an enabling technology. So I think that there is a move to come away from this "Stop, don't do this; don't go there" to finding ways to meet consumer demand.

  Q259  Mr Evans: Is it bigger in the States than it is here?

  Ms Mills Wade: I have no idea.

  Mr Yeates: I do not know.


 
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