Examination of Witnesses (Questions 302
- 319)
TUESDAY 13 JUNE 2006
BBC
Chairman: Having spent a large part of
the morning talking about the BBC, can I welcome our final witnesses,
Caroline Thomson and Ashley Highfield, to respond on behalf of
the BBC. Nigel Evans?
Q302 Mr Evans: You have sat through
the other two sessions so there you have it; you are fairly well
hated, are you not?
Ms Thomson: It is the first time
I have appeared starting off as the Angel of Death!
Q303 Mr Evans: Would you like to
respond to some of the things you have heard?
Ms Thomson: You will probably
want to ask some specific questions about it. I think there is
a lot of, perhaps understandable, suspicion about the BBC and
there is a lot of concern because undoubtedly the changes in the
media and in technology in new media do create a lot more challenges
for how we operate as a public service broadcaster, and in what
space we operate. Life used to be easy when it was only about
rationed analogue spectrum and it could all be highly regulated.
It is now very complicated. There are, however, a number of misconceptions
which I would want to correct. First of all, I can understand
why misconceptions may occur but it is a myth, it is a misconception
that the BBC is getting ever bigger. In a world where the range
of media revenues is expanding, the BBC is actually getting smaller,
and we are happy to provide the detailed statistics behind what
I am going to say to you later if you would like to see them.
Ten years ago we had 46% of media industry revenues; we now have
23% of media industry revenues. Even if we get the whole amount
we bid for in the licence fee negotiations we will decline, we
reckon, to about 20% of industry revenues.
Q304 Chairman: In terms of the fragmentation
that has taken place of online services and satellite services,
the dominant position the BBC has in terms of revenue must have
got greater because the rest of the cake is divided among many
more players than it was, say, 10 or 20 years ago.
Ms Thomson: That is true up to
a point, although everyone is moving into a converged world, so
ITV, for example—which you heard had problems with the rights
issues raised by it launching a range of spin-off channels in
the digital world—have acquired Friends Reunited as a part
of their multi-media strategy. Everyone is moving into this world
and is operating with a variety of the revenues. For ITV their
revenue source is no longer just advertising on ITV1, it is across
a range of channels, and they make increasing amounts of revenue,
for example, out of telephony charges. Then you have online and
the possibility of subscription services, charges for on-demand
services and charges for advertising there. The other thing I
would say is I think you have been presented with a picture of
a media industry that has somehow got this colossus of the BBC—and
if I am not the Angel of Death, I am an elephant—that is
squashing everything in sight. With me that does not sit with
my experience of what the media industry is like in Britain today.
We have seen an explosion in the number of television channels
in Britain over the last 10 years, quite rightly and it has been
a brilliant thing too because it has been very good for audiences
and very good for creative industry. We have seen an explosion
in the range of online services, a great growth in commercial
radio and indeed you had a very good example from the lady who
spoke from the local newspapers this morning about just how vibrant
they are. When they have had to compete with BBC local radio,
which has made a very heavy investment in local journalism and
has very big audiences compared with what you have in local television
service, nonetheless their advertising revenue, we were told,
has grown over the last 13 years. Even if it were true that we
were somehow this elephant, I do not see how it is realised in
the experience of the media.
Q305 Mr Evans: So your message to
the people you have heard earlier on is stop whinging; the BBC
is going to carry on investing huge sums of money into the new
digital services?
Mr Highfield: If I could answer
that one.
Ms Thomson: We are not in John
Reid mode here.
Mr Highfield: The online market
has gone from being worth zero to being worth something like £10
billion in the UK in the space of 10 years. It is now a bigger
industry than the television industry and those revenue streams
are split across service providers, access content, e-commerce
and so on and obviously the advertising market is in extremely
rude health online having overtaken now both radio and outdoor
advertising. The BBC spends around £73 million on its web
endeavours for BBC.co.uk out of a total market size of about 10
billion. The Philip Graf review concluded that it could NOT be
shown that the BBC had a belated market impact.
Q306 Chairman: What is the next highest
spend? What web site came second and how much did they spend?
You spent £73 million. What is the next competitor in the
market?
Mr Highfield: There are countless
players who spend a great deal more than that and their names
are Google and AOL and Microsoft with MSN. We are playing in a
converged landscape. If I can put a bit of context on what that
spend is. That spend we make is 3% of the licence fee (currently
£132.50) which therefore equates to about £4 a year
or 33 pence a month. That is what it costs currently for BBC.co.uk
and the proposed services in the White Paper would take that up
to around about 80 pence in today's value by 2030, ie the cost
of one download on iTunes.
Q307 Mr Evans: If you do not get
the increase that you are asking for, are you going to cut back
on the digital services or because it does not cost that much
money, will you still carry on doing what you are doing?
Ms Thomson: There is a second
point to be made which will answer that question but also in response
to the other points that were made earlier, which does relate
to governance, and I think you can absolutely argue, and I think
you have heard me admit it before, that the BBC was slow to register
in a converged world the necessity to be rigorous about its impact
on the market, but we are now operating in a different climate.
We have a different culture within the BBC about it and crucially
we are going to have a different governance structure. We have
a Trust which is obliged to represent licence fee payers' interests,
not just the BBC's. As part of that, they are specifically going
to be enjoined in the Charter to recognise that part of the rights
of fee payers' interests are in having a plural media market,
so they should not be taking decisions just in the interests of
the BBC but they have an interest in sustaining a wider media
market. They are going to do this thing of having service licences
and public value tests. So it is no longer the case that Ashley
and I can sit here and say to you that we want to do this and
we want to that, because we cannot do it without going through
a process. We cannot launch a local television news service without
doing a public value test on it and so on across a range of ideas
that we have.
Q308 Mr Evans: On that point, can
I ask if the BBC does not do these local television channels,
do you think the commercial sector will provide them?
Mr Highfield: It is a good point.
Ms Thomson: It is a very good
question.
Mr Highfield: We started piloting
this and came up with the idea, as indeed in a number of areas
where I think we can innovate, partly because of the way we are
funded, and if other people come on board, as ITV have done with
their trial in Brighton and Hastings, then to say actually you
should not now be doing it because you were first in the market
and innovative and created a market is a difficult argument to
make from the commercial sector. I do not think fundamentally
it is anything like the same kind of service. If you go to the
ITV service it is heavily driven, as indeed all the regional press
is, by the classified market. That is something that the BBC is
absolutely not in so we are not competing for revenue streams.
We are actually not really competing for the kind of audiences.
The kind of audiences using those services are going there to
find their next car, bike, holiday, or whatever.
Q309 Mr Evans: If you look at the
ITN news service which was taken off the air about six months
ago or however long ago it was, was not part of the problem that
the BBC's coverage, and Sky to a different extent, meant that
there was no avenue for it even though you could say the BBC was
not chasing the same sort of advertising that the ITN News Channel
was but still you came in and you provided so much and such a
wide coverage of news that there was no room for the ITN News
Channel?
Ms Thomson: I think the problems
of ITN go wider than just the competition with News 24 and the
News Channel. It would be completely wrong to suggest that competition
for audiences did not have any impact on ITN's continuous news
channel but they were last in the market and Sky was the market
leader until very recently, when News 24 has overtaken it, and
that is always a very difficult thing to do to enter as the final
entrant. Also of course you have got CNN and Fox and so on and
various other people.
Q310 Paul Farrelly: You will have
heard us talking previously, Caroline and Ashley, regarding the
new terms of trade that you have agreed with PACT and concerns
from the Satellite Broadcasters Group. As this is a recent development
could you explain to the Committee exactly what new rights and
freedoms you are offering independent producers to exploit their
rights during the period in which a series is being transmitted
and then after the final episode is shown?
Ms Thomson: I will give you a
bit of context and Ashley will tell you the detail. We were very
pleased to negotiate this agreement with PACT. As you will know
from our previous hearings, the BBC's relations with independent
producers have not always been of the best. Over the last 18 months
we have put a lot of effort into developing more of a partnership
approach to our relationship with PACT and we think being the
first broadcaster to reach a deal with PACT like this is a real
sign of that, and we are very grateful to them for the way they
have conducted the negotiations. It is a tough negotiation. There
is a lot of power on PACT's side nowadays, so this is a deal that
is fairly entered into on both sides and of course sits within
an Ofcom framework, as you were hearing from previous witnesses,
but Ashley might like to give you some more of the details.
Mr Highfield: I suppose the context
is that audience behaviour is changing and audiences increasingly
are not around at eight o'clock on a Wednesday night to watch
the programme that we choose to transmit. We understand that and
PACT understands that. It is in everyone's interest if the audience
gets the first opportunity to see a programme. Everyone wins.
The seven-day window that gives that first opportunity to see
a programme so you can stay with a series or catch up is a very
straight forward proposition. In the framework we have agreed
with the BBC, you can download from the BBC within that seven-day
window. You can then keep it for the duration of the series, a
13-week series, and then once you start to open that file to view
it, you have got up to seven days to view it before the file expires,
ie what we are effectively doing is giving you another chance
to see the programme for the first time. You are not downloading
it to keep it. We are not giving you ownership of the programme.
It reflects the changing ways of consumption of our programmes
to an "any place, any time, anyhow" society.
Q311 Paul Farrelly: Can you just
for the purpose of this inquiry explain exactly in which situations
the BBC will control new media rights, be it video on demand,
mobile or Internet broadband applications, and simply share revenue,
and where independent producers have the control and then have
to share revenue with you?
Ms Thomson: It is important to
say of course for the BBC that the majority of production is still
our own in-house production, so we are talking about the 30% odd
that are with the independents. What the arrangement gives us
is that we basically acquire a five year rights term for independent
production and then the rights revert to the independent producer,
and what happens to it after then is entirely up to them. It lets
us not only have the first showing in the UK, but there are essentially
two seven-day periods so that viewers can download the programme
in the first seven days and they can then hold it on their PC,
or wherever they want to keep it, for up to 13 weeks and then
they can view it. Once they have accessed it to view it, they
have seven days in which to view it. Those rights exist for us
for all of our independent producers. You were having a discussion
earlier about holdback periods. What we have done is tried to
make them more streamlined. We have not essentially changed the
arrangements we had on holdback which we have had for some time.
We made it an easier and more streamlined process on holdback.
The basic rule on holdback is that programmes can be released
as early as within six months of their first showing in the UK.
That is not the same for children's because repeats are a much
more important part of the children's mix and children's will
be held back longer. There is an element of discretion in it because
clearly some programmes are worth more to viewers than others,
but the principle we operate on is that the licence fee payer
has invested in these programmes, and it is very important that
they get good value out of them on the BBC, which is free to them
and universally available. We want to make sure that happens before
they can go elsewhere. Obviously also some of the programmes are
very important to us. We have invested in the talent, we have
developed the talent for us for the channel. We do not always
succeed in keeping them. Ricky Gervais from The Office
was wanting to exploit the new media rights and chose to develop
them with The Guardian and not with us.
Q312 Paul Farrelly: Can you explain
to us exactly where the five years applies?
Mr Highfield: We are still working
through that internally. This is one of the current debates. I
thought the previous conversation about collapsing windows was
pretty accurate. We are seeing that as well. So the three windows
we are looking at at the moment are the seven-day public service
free window, then the commercial window, when indeed both ourselves
and the independents have the right to the commercial exploitation,
and then the five years onwards. I think, again, most people are
starting to agree, that most of the commercial exploitation has
to happen pretty much up front because of the ability to illegally
pirate content and therefore the five year plus window is probably
post most of the commercial value in there. What we are looking
at is a model that would have those three windows and where the
five year plus window, the archive window, would be predominantly
public service but with the understanding that certain genre,
some comedy, might have commercial exploitability for 40 or 50
years, in the case of Dad's Army. This is an on-going debate
at the moment and indeed the archive proposals will come forward
to the Governors or; the Trust and be subject to a public value
test if they so decide.
Q313 Paul Farrelly: I am sure you
would agree that it is in the public interest as well as the licence
feepayers' interests if they wish to choose programmes through
other channels and pay for that, but it is important that what
I would describe as the creative tension that has existed between
the producers represented by PACT and yourselves and other broadcasters
does not transmute into a cosy club that freezes other people
out.
Ms Thomson: Absolutely.
Q314 Paul Farrelly: How are you going
to address the sorts of concerns that have been put forward today
by the Satellite Broadcasters Group, which includes UKTV, as you
adapt the codes of practice and agreements and understandings
you reach with other parts of the broadcast universe?
Ms Thomson: You are absolutely
right, we want to support a vibrant community, a range of broadcasters,
partly because of course we would like a good competitive market
for the rights for programmes, whether they are independent or
made by the BBC. I think that is quite an important point. We
do have to operate within competition law in the way we sell things.
You talk about cosy deals; we are not allowed to do cosy deals.
We have to work within a market but within that of course what
is perfectly legitimate to criticise us for is if we warehouse
stuff, sit on stuff, which historically we were accused of on
some occasions with some justification, and that is now much more
difficult for us to do, partly because of the growth of independent
production.
Q315 Helen Southworth: I am particularly
interested in how you are going to look at the new media third
window and how that will enable creative developments.
Mr Highfield: We have got two
strategies on this. If anyone tells you that they have cracked
this and know all the answers, then they are wrong. 99.9% of all
archive content is still stuck on shelves gently vinegaring away.
This is a new market. On the one hand, we have looked at a project
called the Creative Archive which allows clips (not full programmes
of the BBC) of our content to be downloaded on to the Creative
Commons licence framework which in answer to earlier comments
about educating people about intellectual property rights is our
initiative in that regard, that we make it very clear that clips
that people can download are theirs to edit, to keep, to create
new content but they must follow the rules and they must attribute
the content time from where it came. If they change it, they must
log that fact as well. It is right only within the UK and certain
other parameters around the Creative Commons licence. We have
run this across a number of initiatives. On the Radio One site
we allow people to download clips and experiment with it as a
youth-orientated audience. We ran the Open Planet archive
against some of the clips from Planet Earth and asked people
to see if they could come up with their own short film, submit
it back to us and then we have given a prize out for the best
original new content created. It was that which won the BAFTA
a couple of weeks ago. This is not an initiative just of our own.
We are working with Channel Four and the BFI and the Open University
to create this open rights framework, with very clear and careful
control. That is one extreme. At the other extreme is to be very,
very careful and protect rights' holders, particularly ones that
are commercially valuable, with digital rights management. So
at the other end we are looking at what we ran as an IMP trial
a product that has now gone to the Governors or; the Trust for
a public value test, the Sunday catch-up, with complete digital
rights management, and we are looking at an archive project with
the same digital rights management, ie we will protect it within
the UK so you could not access the content from the outside. We
would look at making sure that there are windows so you do not
get to keep the content forever, you just get certain rights to
view it at certain times and so on. We are taking a "yes
and..." approach to the archive but both these projects may
well be liable to a full public value test to look at potential
negative commercial impact.
Q316 Helen Southworth: Who is the
target user group for that?
Mr Highfield: It has been fascinating
to see that the Creative Archive has spanned right across from
the winner, a woman in her 50s I believe, who won the competition
the first time she had ever tried downloading and editing stuff,
to teenagers playing around with it for school projects (there
is a very heavy educational element to it) to a pilot that we
have put onto the local Where I Live site of local archive footage
that people can use as a local history project, for instance.
So there is no cliché as to who does this or who would
be interested in it.
Q317 Helen Southworth: In your evidence,
you were focusing on the ability to provide alternative legitimate
means of providing audiences with content. Is this going to be
a key driver in the education process of enabling people to understand?
I think in some ways I am taking a slightly different view to
Nigel. I do believe that there are large numbers of people who
do not understand and want to be able to understand. We do not
necessarily help them in that process. Do you think this is going
to be a key driver in changing things?
Mr Highfield: I do. We have had
literally hundreds of thousands of downloads through the various
pilots of the creative archive. Everyone who does one of those
downloads has to register and has to go through the process of
understanding what their rights are. It is a quick but quite thorough
education in digital rights.
Q318 Helen Southworth: Do people
actually have to read or just click at the bottom?
Mr Highfield: How much they take
in I do not know. We can only go as far, can we not, but we are
making, I think, some substantial efforts in this regard to make
people aware of the issue of piracy and rights management. I think
if you provide people with legitimate models for download, whether
it is iTunes or the BBC, that most people will want to go legit
and most piracy happens because there is no alternative.
Q319 Chairman: Do you think your
slogan "Find it. Rip it. Mix it. Share it. Come and get it"
helps to educate people about the need to pay for it or respect
the rights' owners?
Mr Highfield: Yes, actually I
think that phraseology is pretty common on the net, as you will
know John. iTunes themselves have exactly those words "rip"
"mix" "burn". In fact, Microsoft in their
download service in the media centre have the same words as well.
They are the common parlance of the Internet. To burn is just
a word for creating content on a DVD or a CD, so I do not think
they are in any way the language of piracy. In fact, I think they
help particularly with some of our target audiences, like on the
Radio One web site convey what is possible with our content.
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