Examination of Witnesses (Questions 280
- 299)
TUESDAY 13 JUNE 2006
MR JOHN
HAMBLEY, MR
NICK BETTS
AND MR
FRED PERKINS
Q280 Mr Evans: Do you not see though,
with people being able to download broadcast quality programming
to their computers and then wi-fi to their LCD high-definition
televisions, that programming as we understand it is going to
disappear? TV channels are just not going to exist in the future.
Mr Hambley: Eventually that is
true but it is far too early to write off the existing technologies.
It was not very long ago that the satellite and cable broadcasters
used to appear in front of parliamentary committees as the representatives
of new media and now we seem to be classed with the traditional
media, and of course we, like others, are distributing our content
over as many platforms as we possibly can, increasingly so, through
as many media as we possibly can and as long as we can make an
economic model out of those different forms of distribution. Ultimately
I think, yes, the television channel is going to disappear but
I think not in the lifetime of this Committee's remit.
Mr Perkins: I think we should
also ask ourselves your own question: can we get better content?
What is "better"? The Sun has a very large circulation.
Is that because it has good journalism? "Better" is
something that I think Ofcom has also recognised is changing.
Television for the last 20 years has veered more and more towards
entertainment as being the primary function. It is now possible
in a multi-channel world to revert back to where, in a sense;
we started, to inform and to educate as well as to entertain.
That was economically not in the interests of television channels
a few years ago; now it is becoming possible. So I think that
"better" is a very subjective subject but we will see
and are seeing what is better for some people, but better does
not necessarily mean watched by the largest audience.
Q281 Chairman: In defence of your
sector against the completely unprovoked attack by my colleague
here, I was watching the television adaptation of Dune
last night which I think the Sci-Fi Channel made; and it was very
good.
Mr Betts: Thank you.
Mr Evans: That is better programming.
Q282 Paul Farrelly: Before I move
a vote of no confidence in you, Chairman, I will just touch on
programme rights! Before I do, I remember when I was privileged
to be on the joint House of Commons/House of Lords Committee looking
at setting up Ofcom, and the independent production companies
in the UK, as represented by PACT, did a very persuasive and effective
job in arguing their corner. Mr Hambley, I do not know your group.
Is your group seeking to do a similar thing for channels?
Mr Hambley: Yes, what the Satellite
and Cable Broadcasters Group does is to represent what I would
call the independent channel sector, ie those channels which are
independent not only of the BBC and the commercial terrestrial
broadcasters but also for the most part independent of Sky.
Q283 Paul Farrelly: Sky is not a
member?
Mr Hambley: Sky is not a member
nor are the other big platforms. We regard ourselves as the independents
in this sector analogous to the independent producers. We represent
businesses ranging from the very large pan-European businesses,
the Discoveries, the Disneys, to very small, almost one person
businesses, like the Chinese Channel, or the Community Channel,
all of them independent.
Q284 Paul Farrelly: I just wanted
to clarify that because it would seem odd if Sky were having a
foot in both camps as a platform and a broadcaster.
Mr Hambley: To be absolutely clear,
there are some of our members (not many) in whom Sky have some
kind of interest but we are not representing Sky and Sky are not
a member.
Q285 Paul Farrelly: I wanted to clarify
that because the issue of programme rights that I am going to
address now in terms of independents and terrestrial broadcasters
can equally be applied to Sky from your point of view. Clearly
with the lobbying that was done very effectively there have been
codes of practice between the public service broadcasters and
independent producers that are now the subject of further consultation
and on-going revision. Could you just explain what the effect
of those agreements has been on your particular sector and your
view of the current situation?
Mr Hambley: I know that Nick Betts
would like to comment on this as well because he is at the sharp
end as a practitioner here. The first thing to say about this
sector is that it is quite young. It has very largely been built
on the acquisition of secondary rights, particularly secondary
rights in UK independents. It has been very important to us that
there has been a fair and free market in secondary rights. There
has not been, but we have over time been able to acquire a reasonable
amount of secondary rights in order to build our businesses which
have then gradually begun to invest in UK production. I was talking
last week to National Geographic Channel, for example, who are
one of our members, and now 35% of their spend in the UK is spent
on UK production whereas when they began less than 10 years ago
it was almost nil. It is important that secondary rights help
to underpin our businesses. We were very keen that in the original
codes of practice on secondary rights, which were initiated by
Ofcom, that they should enhance this free market, that they should
try to reduce holdbacks or eliminate holdbacks. They should try
to ensure that the immense buying power of the terrestrial broadcasters—and
here I am not only talking of the BBC—was not used to create
a stranglehold on secondary rights owned by independent producers,
and equally those businesses which produced programmes themselves
would also give the opportunity for purchase and co-production
to the independent sector. What has happened is that particularly
with the development of new digital channels by the commercial
terrestrial broadcasters—ITV, Five and Channel Four—there
is a less free market and opportunities for acquisition and co-production
have reduced. Although the latest agreements between BBC and PACT
and Channel Four and PACT are not clear to us at the moment, since
we have not been party to those negotiations, it does not seem
to us that they will be improving the situation for our sector.
In fact, we think the opposite will be true.
Mr Betts: Yes, I agree with much
of that. Really I think the bottom line is that it seems to have
got more difficult rather than easier to acquire secondary rights
in programmes commissioned from the independent sector by the
terrestrial broadcasters. I think with the BBC, who previously
had an exclusive arrangement with UKTV, there is an opportunity
there at certain points in the life of the programme now to acquire
those programmes into the secondary market, but I think for Channel
Four, ITV and Five those opportunities have virtually disappeared,
with the vast majority of that programming going to their free-to-air
spin-offs, the ITV2s, ITV3s and E4s, et cetera. As John said,
the deals that have been negotiated are a bilateral negotiation
between PACT and the terrestrials. We have not been party to that.
We have made our views known to Ofcom about that. I do not think
we feel as a sector that we have been particularly listened to
and I do not think we can say the result of what has come out
of those negotiations (even though we do not have the full detail)
certainly the revised terms of the Channel Four and BBC arrangement
are an industry solution that we could sign up to or the telcos
could sign up to or the IPTV portals could sign up to. It is just
an arrangement between those two which on the surface seems to
make it harder for us to get access to those rights. In addition,
it seems to make it more difficult as well. It has brought in
now the new media rights which were not part of the original programme
supplier and viewer area. It was very much an afterthought it
seems. Now we are applying those holdbacks to new media rights
as well. As I touched on earlier, that is going to be important
for business like mine going forward as to how we generate new
media business. It has taken that content out of that arena as
well. In effect, for me the position seems to have got worse rather
than better as a result of those arrangements.
Q286 Chairman: Have you tried to
get some of the great BBC science fiction series? There is still
an audience for Blake's 7.
Mr Betts: Blake's 7 we
could get because it is so old, but even then it is an in-house
production and you have to make a distinction with the BBC between
in-house production and independent production. With in-house
production there is still a complete holdback against all of that
content. If I go to the BBC with a big cheque and say, "I
want to co-produce the next series of Dr Who," they
would say, "No way" because it is in-house. It is slightly
different if you look at a series like Life on Mars, which
is an independent production, but I could not co-produce it, I
could not give them money upfront, they would not accept that,
but once it has been released from its holdback, potentially I
could go and bid for it. Life on Mars did come up for bidding
recently and we did bid for it; we did not win it but a competitor
did, which is fair enough, all fair game. The difficulty now with
the new revised terms, although I have only seen the top line,
is they are now saying for Life on Mars you cannot get
access to series one until series three has been broadcast, which
is two or three years away depending on the production cycle.
That situation has got worse as well and that programme would
not be open to us.
Mr Hambley: We obviously need
to find out more about the terms of trade but the bottom line
for us is that we asked Ofcom to ensure that in these bilateral
negotiations the parties took account of the need to ensure a
strong competitive market in secondary rights; Ofcom did not do
that.
Mr Perkins: Can I just add in
this area for even smaller new media and particular companies
and organisations, the huge concern over the recent debate between
PACT and the terrestrials is that this is traditional broadcasters
agreeing with traditional production companies. The world is changing
very dramatically. Those models were valid when there was potential
market failure. There is anything but market failure now and going
forward and markets are changing. We are very concerned that some
of what appears to be emerging is almost casting in concrete a
model that will not work going forward and will stifle innovation
when it comes from other areas.
Mr Betts: I agree with that. There
is no sign yet of market failure in new media. It is only just
getting started so it cannot have failed yet, but these arrangements
seem to have swept up those rights on a separate issue, which
is market failure in a production environment for the terrestrial
broadcasters.
Q287 Paul Farrelly: I think "warehousing"
is the colloquial terms for sweeping up all these rights. We have
just had the Newspaper Society talking about rights and copyright
and fairness. Now I am no longer employed by a national newspaper,
if I were a freelance, to break out of the warehouse in terms
of asserting my rights in copyright, I would have to be a Seamus
Heaney, a Germaine Greer or a John Whittingdale to be able to
assert my rights, in fairness to them, at the sharp end as a producer.
Do you think with the new Ofcom consultation where they are specifying
the different windows and holdbacks, that the net effect of that
is going to legitimise warehousing?
Mr Hambley: Yes, I think so. Warehousing
is taking intellectual property and locking it away in your warehouse
so that others cannot have access to it, but also so that consumers
cannot have access to it. One of the problems that are going to
be increasingly created by warehousing is that it gives a window
for piracy. If there is no public access and there is a public
demand then piracy results, which is why we have argued that really
a complete end to holdbacks is what we need, a complete end to
warehousing. The major Hollywood studios are now beginning to
put an end to holdbacks and again piracy is one of the reasons,
but doing that has not affected their economic models. What we
must see is the public access need as well as the economic need,
particularly with those things which have been paid for by public
money or public subsidy. So we think that Ofcom, apart from being
unduly protectionist towards the incumbent terrestrial broadcasters,
is somewhat behind the times in its view of these matters.
Mr Betts: The reaction to piracy
really across the industry has been to collapse traditional windows
so whereas, for example, a programme would go on air and it then
would go into a DVD window and then a pay-per-view window and
then it would go into terrestrial, those windows are shortening
rapidly with the impact of trying to get as much value out of
the programme as you possibly can while all the marketing is happening
before people start pirating. This is taking it the other way
so the value of the programme, the economic curve of a television
programme is getting shorter and shorter rather than longer and
longer. What the new terms of trade basically do is say that 80%
of the value we are taking as applying to the terrestrial broadcaster,
whether it is for new media rights or for their traditional linear
channel rights. If the new media say in three years' time, "I
will try and make a business model out of that programme",
and it has been on video on demand, it has been on linear broadcasting,
it has been on their secondary channels, it has been out to the
market place, it has been pirated over the Internet and whatever,
there is no incentive for me to try and do that. It is very difficult.
Q288 Paul Farrelly: The world is
clearly moving on with the Ofcom consultation but before we know
the outcome of that there are the new terms and agreements that
are being signed by PACT with the BBC and with Channel Four most
recently. Do the terms of those agreements give you any cause
for optimism that things are going to get better, or do you still
have the same fundamental concerns?
Mr Hambley: I think we have the
same concerns. We have to remember that these agreements were
not designed for us. They were designed entirely for the parties
and particularly for the major terrestrial broadcasters and, in
effect, they are another aspect of those broadcasters' increasing
dominance of the scene. That obviously particularly applies in
the case of ITV and Channel Five, where the new agreements were
being designed to give them as many rights as possible for their
new, entirely commercial services, which they are building and
promoting on the back of their public service privileges, and
for that reason these new agreements do not give us cause for
optimism.
Q289 Helen Southworth: The lobbying
by PACT in the past focused particularly on the elephant in the
room, the BBC, and also with respect to the commercial terrestrial
broadcasters. Do you have the same fundamental issues with Sky?
Are the same concerns there?
Mr Hambley: Not really, partly
because we do not regard Sky as having this terrestrial incumbency
of public service privilege which gives those so-called public
service businesses extra leverage. Sky, to be fair to it, does
not have that leverage. We may have many issues with Sky but this
is not one of them.
Q290 Mr Sanders: Can I ask about
warehousing and holdback and the experience of the second series
of Lost which many people have already seen on pirated
DVDs before the series has completed its run on terrestrial television.
Is it not the case that holdback will just die a death because
of new technology?
Mr Betts: I think that is part
of the point that I was making really, that all the value of the
programme because of the way new technology is going, goes very,
very quickly after the first outing on the terrestrial broadcaster.
Is a three-year holdback irrelevant to us? Yes, it is in a way
because there is no business model to be had at the end of that.
Q291 Mr Sanders: So is there any
mechanism or body that could negotiate global release dates for
TV shows such as that or do you just have to leave that up to
the market?
Mr Perkins: The danger here is
that these agreements are market intervention, and market intervention
is very, very risky. You yourselves have looked at the music industry
and how it has learned lessons. Before that the publishing industry
had to learn the same lessons. If technology allows consumers
to get something, they will get it, one way or another. Industry
time after time has adopted the approach initially, "Oh my
God, the world is changing, let's stop that, let's appeal to government
to prevent our industry being killed." That fails. The sun
rises when that same industry recognises, "This is a new
opportunity if we just re-think our business models and turn it
around and see that these new channels of distribution are real
opportunities for us and how do we capture some of that and take
advantage of it. We may have to sacrifice a lot but it will work."
I think we are already, before these agreements are made public,
agreeing that they will not work, that they will be subverted.
Why are we applauding this kind of approach to what is a hugely
important industry which now straddles many sectors that traditionally
were nicely isolated but that are now coming together in ways
that even three years ago no-one could envisage. We have got to
step back and begin to recognise that fundamental concepts, even
like how we manage copyright and intellectual property, have got
to be re-examined. The old models will not work in isolated sectors
now brought together.
Q292 Helen Southworth: What are your
views on the BBC's plans for new media expansion?
Mr Perkins: Absolutely horrified.
I was at a presentation where the Secretary of State presented
the White Paper and I asked a question afterwards when did it
happen that the BBC's brief suddenly moved from being a broadcaster
to being a worldwide multiple media content provider? When was
that change mandated? The BBC has many strengths, it does great
things, it produces great content but it gets £3 billion
a year guaranteed income; it should be able to do all these things.
However, it seriously distorts innovation and development in what
is a huge but highly fragmented market place. What gives the BBC
the idea that it should be taking on Google and AOL? There are
many of us trying to do the same in different ways. Sometimes
we ally with these people, sometimes we work with them. That world
is changing but the BBC sits in a hugely privileged position.
I came on the Tube this morning and I saw a big poster "Coming
shortly exclusively on CBeebies Ernie the Underground
Man. It is a new series that is going to be built around the
Underground with a cartoon character. Already there is an example
of the BBC's ability to commercialise—and let us not pretend
the BBC is not commercial, it is hugely commercial. In the UK,
UKTV is the BBC's commercial arm. So we are making even broader,
in a world that is changing dramatically, the BBC's ambitions.
If we encourage it at this stage the licence fee demands will
grow and grow as it seeks to stand up against the might of multi-media
industry in the world.
Mr Hambley: I might just say since
UKTV are our members that we would not characterise them as the
commercial arm of the BBC, that is just BBC Worldwide. I do not
think we use the word "horror", I think we use the words
"some concerns" and that is partly because what we have
seen in a couple of BBC press releases about Creative Futures
do not tell the whole story. Some of the story seems completely
admirable, as half the BBC story is always admirable. Some of
the rest, for example as our colleagues earlier were saying in
terms of the new teen brand which the BBC is going to introduce,
you could characterise as a way for the BBC to spend money fighting
for an audience which is already extremely well served by other
media, including my members and by innumerable other new media
businesses. We do not know the detail and we do not know the expenditure
so we just have to cross our fingers that the new BBC system of
governance will be able to regulate and rein in some of this expenditure.
We have very, very deep scepticism about its ability to do that.
Q293 Helen Southworth: But if this
is what the public, the people who have invested in the BBC want,
should they not be able to get it?
Mr Perkins: The public did not
take a conscious decision. An organisation the size of the BBC
with the resources it has, can, of course, provide what the public
wants but that does not post hoc justify the continuation
of an arrangement that was originally set up to provide what in
public service broadcasting the public should want in some respects,
but which might not otherwise be provided. Nowadays many, many
more things are possible. Of course, the BBC can do a job on Wimbledon
or the World Cup second to none with enormous resources behind
it, but surely there has to be a limit beyond which you say to
the BBC, "Look, there is innovation already very healthily
happening in lots of areas." It is not necessary for you
to wade in and then distort as a result the direction of what
is an early but emerging market place."
Q294 Helen Southworth: But if the
BBC has content that the public want access to and want the quality,
then does the BBC not have a responsibility to be able to find
ways of making it available?
Mr Hambley: If I may say so, these
are different matters. There is absolutely no reason why BBC content
should not be made as widely available as possible, but the Green
Paper and the White Paper made it very, very clear, supported
by the public and supported by all the evidence which was given,
that the public interest is served by the BBC being distinctive
and providing distinctive content from what is available elsewhere
unfunded by the public purse. What we are suspicious of is that
there are going to be many things taking place under "Creative
Futures" which are not in any way distinctive from what the
commercial sector provides, but which are simply another competitive
action by the BBC in an already well-catered for market. That
is why we agree with our colleagues earlier that rigorous market
impact assessment, properly taken account of by the new BBC Trust
and with proper regulatory impact assessment, is what is needed
before we have another few years of enormous BBC expansion into
new areas that it does not currently occupy. We are not asking
it to roll back from areas that it does currently occupy or from
the many things it does which are absolutely splendid and in the
public interest.
Mr Perkins: Some years ago Parliament
passed Crown copyright legislation whereby it was decreed that
any publications created at the expense of the taxpayer should
be made available to third parties, including the private sector,
for commercial exploitation and that is now happening in many,
many areas. I remember at the time suggesting should this not
also apply to the BBC. The content is created at the taxpayers'
expense. Why is it not therefore made available to private sector
organisations to exploit in innovative and new ways? We could
consider that kind of approach to the BBC's content library. I
am sure we would see even faster growth in terms of innovative
and new services from the creative industries than we are seeing
at present. It would be a major change, but it is consistent with
the approach that it has already been paid for by the taxpayer.
Q295 Mr Sanders: The licence fee
is not a tax; it is not paid to the Chancellor, is it?
Mr Perkins: Technically not but—
Q296 Mr Sanders: Is a subscription
to Sky a tax?
Mr Perkins: It is a subscription
that is effectively applied to everybody.
Chairman: Before we go down that road—
Mr Sanders: Some people do have to do
in order to get television. There is no alternative.
Q297 Alan Keen: I remember John Hambley
when he was here last time—and can I say my parliamentary
career was the equivalent to yours in broadcasting, I used to
be driven around in a car by a chauffeur so I am not taking anything
away—I can remember asking this question and I can remember
the figures as well. I said, "Look, I would love to have
Arts World but at that time it was £6 a month, £72 a
year and I said at that time for another £72 plus £49,
I could have the whole of the BBC's production." How do we
get it right for the public? I watch Arts World a lot, I could
not afford it before, because it is free on Sky now and I add
it on for the money I pay for the football. How do we get it right?
How can you justify the public having to pay £72 for Arts
World whereas if the BBC were not allowed to produce anything
like Arts World I would have to pay for that?
Mr Hambley: I cannot remember
what I said to you, my memory is not as good as yours, but what
I would say to you now is the public does not have to pay. The
thing they have to pay for is the BBC and many of them are very,
very happy to do that but they do not have to pay for any of those
other services you describe. They choose voluntarily to pay for
them. That is why I have to respond to Nigel Evans' remark about
the quality of programming by saying people choose to watch; they
are not forced to watch. They are not forced to watch the BBC,
and of course they are watching the BBC in declining numbers,
but they are forced to pay for it. The answer to how you get the
system right is to ensure that you continue the current mixed
economy of broadcasting, the publicly funded BBC which does things
of supreme excellence but which must not return towards a monopolistic
dominance of the system so that it prevents all those other independent
channels—the Artsworlds, the Community Channels, the Discovery
Channels, the Sci-Fi Channels—so it does not have a deleterious
effect on their business. That goes for the BBC and for the incumbent
terrestrial broadcasters with their immense wealth and privileges,
especially in the case of ITV and Five whose actual contribution
to public service is in rapid decline.
Q298 Alan Keen: You just mentioned
the wealth the BBC have but the point I was making goes further
and I would like the others to answer as well. If the BBC were
restricted so much, I would be paying £72 for Arts World,
X amount for football, and it would cost me a lot more than paying
the BBC licence fee. I am sympathetic to what you are saying.
That is why I asked the question how do we get the balance right.
I do not want to restrict the BBC. I do not want to stop them
producing a wonderful web site because we would have to pay other
people for it and for the public it is value for money. How do
we get the balance right?
Mr Hambley: I will let my colleagues
answer but I would say again that the BBC's place in the broadcasting
economy is secure. I can see that you are someone who believes
that the BBC should be limitlessly funded and limitlessly expanded.
We believe that that would be damaging to other sectors of broadcasting
and indeed the new media economy.
Mr Perkins: One mechanism that
is on the table in embryo form is Ofcom's public service publisher
proposition for the future of PSB support on TV. That has been
debated and that debate is still on-going. What is crucial about
it is its recognition that there are still aspects (which in many
respects we have lost sight of) of broadcasting which deservedly
should be public service broadcasting supported, and the BBC is
almost certainly not best placed to be the sole provider of those
and indeed with the technology developments such as we now have
need not be at all and should not be. There is surely scope for
saying let us draw back and say what is it that it is absolutely
crucial that the BBC continues to be allowed and encouraged to
do and develop, ring fence that, and then have a marginal extra
area for leadership, innovation and exploitation, but then outside
that there is a whole new industry growing in new areas that deserves
some support.
Q299 Alan Keen: What about Nick;
you do not want to reduce it to weather forecasts and social security?
Mr Hambley: Nobody does.
Mr Betts: From my perspective,
I do not think I can add a huge amount. I am a huge fan of the
BBC. I worked there for many years and I absolutely understand
why it there. I think it plays an important part in the broadcasting
ecology in this country and across the world. I think it has to
continue that going forward. I do not want to see it being marginalised
or anything like that. I do not know where you draw the line but
there has to be a line because you cannot follow the argument
that it is being paid for by the public therefore it can do whatever
it wants because you could not just follow that and say the public
should pay for all creative industries in this country and be
done with it and then everything is free.
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