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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 316-v House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE CULTURE, MEDIA AND SPORT committee
Tuesday 8 May 2007 MR GREG DYKE MR MIKE DARCEY, MR GRAHAM McWILLIAM and MR MARTIN le JEUNE MR MARK WOOD, MR STEPHAN SHAKESPEARE and MR ANTHONY LILLEY Evidence heard in Public Questions 386 - 519
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Culture, Media and Sport Committee on Tuesday 8 May 2007 Members present Mr John Whittingdale, in the Chair Janet Anderson Philip Davies Mr Nigel Evans Paul Farrelly Mr Mike Hall Alan Keen ________________ Witness: Mr Greg Dyke, gave evidence. Q386 Chairman: Good morning, everybody. This is a further session of the Committee's inquiry into public service media content, and we have a variety of witnesses before us this morning. First of all, I would like to welcome Greg Dyke who, as most people know, is the former Editor-in-Chief of TV-am; a former Group Chief Executive of London Weekend Television; the first Chairman of Channel 5; and Director-General of the BBC for four years; who I think, it is fair to say, is not going to be the Mayor of London! Mr Dyke: You cannot be that sure, can you! Chairman: It is a good guess though! Could I invite Alan Keen to begin. Q387 Alan Keen: Congratulations on the Brentford Manager you managed to secure as well. You said it was the BBC's job to make great British programmes. Is there anything different you would have been doing if you had still been there that the BBC are not doing, or are they following virtually the same programme as you intended to follow? Mr Dyke: No, I think it is pretty much on course really. I think the BBC gets a large amount of public money and the bulk of that money, it seems to me, should be spent on making British television. What has distinguished British television from many other countries, apart from America over the years, has been the amount of money that has been available to make both British popular television and British minority television. It was certainly the money the BBC spent in the 1960s and 1970s that forced ITV away from a position where it was running largely American programming onto a position where it had to invest large sums of money in making British programmes. I think the BBC today still gets a fairly good income, and most of that gets spent on a mixture of British programming. In my time there we took a decision, which is an interesting one when you look at Channel 4 today, although we ran American programming there was a price, and if it got beyond that price we decided we would just let it go and it was not for us. We let The Simpsons go to Channel 4; we let 24 go to Sky; because we took a view that you certainly should not be spending the sort of money you spend on British drama per hour to buy acquired material. Q388 Alan Keen: The BBC has also lost some more sport recently, has it not? It has lost Match of the Day. Do you think they should have bid higher for that? Mr Dyke: I always smile when sports rights come around, because it is always reported in the press that you lost. You can always win; it is just a matter of how much you are prepared to spend, and that is the judgment. ITV and Setanta have now won the FA Cup and the English internationals. The last time ITV did that they bought the rights to Match of the Day and lost, I think, £30 million a year for three years and pulled out. Clearly at that stage they had overpaid. Whether they have overpaid this time I have no idea, it depends on their model. There is a problem for the BBC who did not get a particularly good licence fee settlement; so it is: "Where do you spend the money?" I took a decision when I became Director-General that we would try to win back some of the sports rights which we had lost. We did that largely because when we asked the public what did they want of the BBC they wanted sport on the BBC. I always quote the figures, England v Wales at Twickenham was on Sky and got 300,000, and Wales v England at Cardiff was on the BBC and got five million; but there is always a limit to how much you can spend on sports rights. One of the criticisms I would make of what has happened in British television over the last 15-20 years is that the amount of extra money that has come into television via pay television has disproportionately ended up being paid to footballers - not at Brentford, I should say! Q389 Alan Keen: A few years ago the opponents of the BBC tended to oppose the massive money that went to the BBC, but that changed in probably three, four or five years. All the other broadcasters want the licence fee, in some cases for commercial reasons, for themselves; but the contentious issue is always the expansion of the BBC into new fields. How do you think that should be managed; and how far should the BBC be inventive? The web, for instance, would get people, who want to make money through the internet, to criticise the BBC, but it is such a wonderful sight it would have been a dreadful shame if they had not gone into it; so where would you draw the line? Mr Dyke: I think one of the geniuses of the BBC over the years has been to be a jump ahead and it is always looking for what is the next technology and what are the new ideas. I think one of the problems with the governance system they have now put into the BBC is that doing things quickly is going to be a very difficult number. I think that is almost the blueprint of the public sector. One of the great things about the BBC is it has been able to do things quickly. If you look back, we invented Freeview virtually and got it going in a matter of months. I suspect under the governance system you have got now you would be lucky to get it going in a matter of years, let alone months; and you would not get the licences and the rest of it and the public interest; instead of just saying, "This is a good idea, let's do it". That has been the great thing about the BBC. Oddly, it has acted much more like a commercial organisation over the years than most commercial organisations. It is the ability to spot opportunities and go. If you look back to John Birt's time, deciding that the BBC services on the internet would be a public service was, I think, a really good decision. Q390 Alan Keen: I agree with that very, very much, as you know. Will it be as easy to be inventive and act quickly now with the change in structure? When you and Gavin worked together Gavin acted, as I always said, as executive chair, as many commercial companies have, and you acted as chief executive; and you could take a decision and roll out ideas with each other and do it. Now the Chairman of the BBC and the Chairman of the Trust are quite separate; and that was done on purpose because of the problems which arose before. Is the BBC now going to be hamstrung? Mr Dyke: Yes. I do not like the system they have put in place at all; it will not work. Who is the Chairman of the BBC whom the Director-General works for who, at times, will give him a hard time, but at times can represent the interests of the BBC? It will not be the Chairman of the Trust; it cannot be the Director-General, who is also Chairman of the Management Board; so who is it? Who is now the person who comes here and, instead of talking about what the public want, just tells you want are the interests of the BBC; what do they believe should be achieved? I do not think it will work but then, of course, it should never have been replaced in the first place. It would have been far better to have gone to an outside regulator, and then you could have a Chairman of the BBC who could say dead straight, "I represent the BBC". Q391 Alan Keen: I am delighted in the first place you have actually with me; I have been pushing this for session after session. Mr Dyke: We did not win though, did we? Q392 Chairman: Could I just be clear, you would have preferred the BBC to have been put under the remit of Ofcom in terms of an external regulator? Mr Dyke: No, I would have preferred an outside regulator; whether it would have been Ofcom or whether it would have been an OfBBC is a different thing. Q393 Chairman: So the Terry Burns solution would have been ----- Mr Dyke: I think the problem of putting the same regulator in charge of the commercial sector and the BBC is quite difficult. I think you could have had an OfBBC which was outside the building, away from the BBC. I think at the moment the fudge they came up with, the one I think Michael Grade said he could make work and then left to go to ITV, will not work. Q394 Chairman: You have said in the past the BBC have been ahead of the game and that they have been visionary, but you have also said, I think in a previous lecture, "We cannot possibly afford to have a tank on every lawn or compete in every area of the marketplace". Mark Thompson's tanks seem to be sweeping across the whole media landscape, new and old. Are there areas where you think the BBC is going where they perhaps should not go? Mr Dyke: It is very difficult to know at this stage because the technology is changing so fast. The iPlayer, which I think has just got approved, was invented when I was there. That is my point; it has taken them four years. They could have been ahead of the game on the iPlayer, and should have been. I think you have got to try to understand where the technology is going next; and sometimes you are going to back the wrong thing, are you not, inevitably? Can you be on every lawn? No. Given the licence fee settlement you could be on fewer lawns probably, and you have got to make the decision of which ones matter most to the public interest; which is not necessarily the same thing as which matter most to the public. Q395 Chairman: Which lawns would you be withdrawing from? Mr Dyke: I would not come here and tell you. Literally I have been out of there three years and have not seen all the facts, figures, what is happening and the rest of it. There is no doubt, the way people receive television - in the time I was there even, but certainly looking over the years - the big increases in budget actually were on distribution. It used to be very simple: you beamed it up; it came down; and everybody watched it. Suddenly you have got about 19 and they are being invented by the day, so distribution became very expensive. When distribution becomes expensive, marketing becomes expensive at the same time. They are the two budgets that really went up. When you are one channel out of five, marketing is easy. When you are one channel out of many, marketing gets more difficult for both the commercial sector and the BBC. Those two budgets both went up, and will continue to go up, I have no doubt. In the world of internet television, in the world of downloaded television, I think the BBC has to be there. Whether it needs to be there exclusively on something that is only owned by the BBC and only delivers BBC programmes is another debate. I suppose I fell into it myself at times at the BBC; there is sometimes a belief that only you can you it. Of course, you discover pretty quickly it is not true. One of the things that is happening in television is you are now seeing the delivery mechanisms are tending to be advertiser-funded rather than subscription. If you look at what is happening in the States; if you look at what is happening on iPods and all the rest of it, that is a bit of a shame because there is another source of income there which could have come into television and is not; and now it is going to spread the same advertising cake a bit thinner. Q396 Philip Davies: You have just acknowledged that the BBC still gets a good income, but there are concerns about the revenue for some of the commercial public sector broadcasters. What is your view of the future viability of people like ITV, Channel 4 and Five; do you share some of the dire predictions about their advertising revenues, for example? Mr Dyke: I sit on the board of a company in Germany called ProSiebenSat.1 which is the second biggest commercial broadcaster in Germany, and we are just in the middle of probably taking over a large international European broadcaster, so I have been looking at all sorts of markets. What has happened to advertising revenue in this country has not happened right across Europe, so it is quite interesting. The collapse since 2000 did not happen right across Europe; there was a decline but it was nothing like as marked as here. I think some of ITV's troubles are of its own making. I do not think there were particularly good competitors in that period and all the rest of it. Channel 4 has done pretty well. If you look at Channel 4's advertising revenue compared with a decade ago you would say that Channel 4 has done very well. I am not sure I am as pessimistic about the future of Channel 4's income, say, as they are. ITV is a different matter, because what Channel 4 have got is that young audience which is so crucial to advertisers. Q397 Philip Davies: What have the commercial broadcasters here done wrong that the ones in Germany have not done wrong? Mr Dyke: Everybody suffered in the early part of this decade because of a downturn in advertising revenue. ITV then brought about the merger; to get the merger through they introduced restrictions on the sale of advertising; they introduced rules on the sale of advertising which have been pretty damning to ITV; and that has brought down the whole market. What is interesting is that some of people who wanted protection at the beginning do not want it now, because it has brought down the whole market. There is an inevitability, is there not? In a world where there are going to be more and more delivery systems, more and more channels, it is going to sustain the income on the traditional channels. We know that by, I presume, 2012 ITV will no longer regard itself as any sort of public service broadcaster. Once your analogue switch-off is complete and digital switchover, then I do not see that Parliament or Government is in any position to tell ITV what it should or should not do; it is just going to be like any other channel. Therefore, it will only do the public service broadcasting elements that it thinks are necessary to retain its audience. Q398 Philip Davies: You do not think they should be required to deliver on any public service obligation? Mr Dyke: It is not want I think. The one thing that is clear is, the influence and control that politicians have been able to have over broadcasters was rooted in the scarcity of spectrum. Once that scarcity of spectrum has gone you do not have that sort of control over Sky. No-one has demanded that Sky make X% British programming; and I do not see that you will be able to have it over ITV. Channel 4 is different because it is a public trust, and obviously the BBC is different; but I think the influence you will have over ITV post-2012 is very little. What do you say? What influence have you got as a society, as a parliament? You have got none. It is then a matter of what is valuable to them commercially. Q399 Philip Davies: If that were the case, what do you think they would see as being commercially valuable anyway; that they would do anyway? Mr Dyke: I would be very surprised if they did not see that both news and regional news is not valuable to them. Again, it is a cost benefit analysis. That is what I would have thought. If you go back into history, ITV was set up to do a regional service in this country. When I was at the BBC it was already pretty clear to us that that was not sustainable into the future; which is why we invested a lot more in regional news and we created two or three new regions. I was quite interested in the work they have been doing recently on local news, because I do think there is a very strong argument for local television news; but you have then got to work out how it is funded. I suspect the licence fee set-up the BBC has got means the BBC probably cannot afford to fund it. I do think there is an argument for more local television. Q400 Philip Davies: What do you think they would drop if they could do? Mr Dyke: Who? Q401 Philip Davies: The commercial broadcaster. If they did not have to, what would they drop? Mr Dyke: You are already seeing it - a lot of children's programming; religion; a lot of factual programming. ITV was always a trade-off, was it not? It was a trade-off brought about by different regulators that said, you can have a monopoly of commercial income, and you can make quite a good profit but in exchange you have got to do a whole range of public service broadcasting. That was the ITV I joined but that has gone; or it is going and it will be gone by 2012 unless the carrot and stick changes. If you want them to do it, it could well be that you are going to have to find ways of persuading them to do it; whereas in the past it was very easy. The old regulatory authorities could say, "The condition of getting your licence is you do this, this and this". After 2012 that is gone. Q402 Philip Davies: Do you think they should have to do it and, if so, how would you go about doing it? Would you give them some of the licence fee, for example, to do it? Mr Dyke: I do not think so. I would ask them, "What could you do to help? What is the swap?" They are still paying for licences, which seems pretty weird at this time. I would not mind at this stage going to them and saying, "Look, if we're going to let you off all the cost of your licences, could you in exchange please assure us this is your planning for public service broadcasting?" I suspect you are going to have to find some other means of funding for innovative things in public service. Q403 Janet Anderson: Greg, you said earlier you thought the BBC had not got a particularly good licence fee settlement? Mr Dyke: I thought the licence fee settlement they got was about what I expected. Q404 Janet Anderson: You thought their negotiating strategy was okay? Mr Dyke: I do not think it would have made any difference. I sat down when I was in my last months at the BBC with Gavin (not knowing it was my last months at the BBC, I should tell you) and we said, "What do you think we're going to get?" We both believed that if you could get inflation plus household growth, which is just under 1%, that was not a bad settlement. I thought you could manage on that. Q405 Janet Anderson: You do not think they will have to cut back? Mr Dyke: They will, because I do not quite understand how they are supposed to pay for digital switchover - not their costs of digital switchover. I think that was this bizarre part of the licence fee settlement. I think the BBC made a mistake even contemplating it. They should have said, "If as Parliament you want to switch off the analogue signal and switch everybody to digital, it's your responsibility; it cannot be the BBC's". I think the BBC made a real mistake in discussing that at all. It looks like an open chequebook to me. Q406 Janet Anderson: You think it should have come from the Treasury? Mr Dyke: Yes, but of course the Treasury did not want to pay it. Q407 Janet Anderson: You have stated that universality should remain one of the core principles of public service broadcasting; but do you think there is a role for subscription in the future? Mr Dyke: This is a never-ending debate really, is it not? I increasingly came to the view that what mattered about the BBC was that it was universally available. It was paid for by everybody (or by most people, because some did not pay obviously) but the important thing was that it was available to everybody; and once you turned it into a subscription service - which you could have done, and probably got at least as much money, if not more - you had lost what it was, which was, available to all. It was part of the glue that bound a nation together; and if everybody cannot receive it then I think you are losing out. That was one of the reasons why we got into Freeview in a big way, because we were doing five or six digital channels; and I remember coming here on a number of occasions and getting quite a lot of criticism about them saying, "How can you justify paying off these with a licence fee that is funded by everybody, and yet more than half can't receive it?" Freeview has changed all of that. Q408 Janet Anderson: Do you think the licence fee is here to stay? Mr Dyke: I recently made a documentary about Lord Reath, and one of the great things about the BBC and Lord Reath is that his portrait sits up there and everybody comes into worship once a day to Lord Reath; I actually discovered he did not think the licence fee would stay. The only problem with the licence fee, it seems to me, is its quite high collection cost. If someone could invent another way of getting that sum of money to the BBC, that did not have the dangers of political interference and all those things we know about, then you would do it, because it is the collection costs which are so high. What does it cost, about 8%, so that is £240 million a year to collect the licence fee, which is quite high. Q409 Mr Evans: Greg, what do you think the BBC is for? Mr Dyke: I think the point of the BBC is to give us a radio, a television and an internet presence which reflects our culture and our society and, by doing so, sometimes in a very popular manner, means that others have to compete to do the same thing. Why does ITV spend twice as much on original programming as any other commercial channel in Europe? They do it because they have to compete with the BBC. They would complain, "Why should we do that?" I think that is the decision we took in this society; that actually we wanted a broadcasting system that reflected our culture. That, I think, is the purpose of the BBC. At times that means doing popular programmes; at times it means doing programmes that are aimed at minorities; at times it obviously plays a part in the democratic process; bust-ups that have gone on with all governments are probably quite healthy - that is one of its roles. Q410 Mr Evans: Bust-ups with you? Mr Dyke: The bust-ups with me - I did not see that as one of its roles, personally! The bust-up with me was a set of governors who lost their nerve. I understand exactly what they thought on the day, but it was the wrong decision. What they were doing was to try to protect the long-term interests of the BBC on that day. That was not their job that day. Their job that day was to protect the integrity of the BBC's journalism, but that has all past. Q411 Mr Evans: I am glad you are over it, Greg! Mr Dyke: You clearly still remember it! Q412 Mr Evans: Looking at the BBC, how much of it percentage-wise do you think is public service content? Mr Dyke: You have to define what you mean by "public service content". Q413 Mr Evans: Do you want to have a go at it because you were in charge of it? Mr Dyke: I think it has changed over the years; but when you asked me what was the purpose of the BBC, if you believe the purpose of the BBC is about reflecting this culture and our society then quite a lot of the BBC comes into the public service. Michael Grade promised not to do repeats, which seemed a bizarre thing to promise because, firstly, you cannot afford not to; and, secondly, in a world when, say, 20% watch the first run as opposed to what it used to be, 60%, it seems silly to say you are never going to repeat it; it does not make sense to me. There was never enough money in BBC1 to run a service about repeats. It is: what are the interests of the British public? The danger of the definition of "public service" is I get a slight feeling that the Trust is getting into "We'll ask the public what they want and that's what we'll give them". That is not public service broadcasting as far as I am concerned. Public service broadcasting includes broadcasting programmes which the public do not even know they would want or not want; and it involves somebody making a judgment on broadcasting programmes that ought to be broadcast; regardless of whether there is great public demand they ought to be broadcast and matter in our society. Q414 Mr Evans: If you had been in charge, would you have perhaps struggled to have kept Neighbours, for instance, on the BBC, or do you not care that it has lost out in a bidding war? Mr Dyke: Has it lost? Q415 Mr Evans: I understand it is losing. Mr Dyke: I think negotiations are still going on. I think it was exactly the same position as we had with The Simpsons; there is a price at which you will pay and there is a price at which you will not and you let it go. Q416 Mr Evans: Looking at it now with a limited budget which you have just talked about, because they have not got what they wanted (or maybe they did get what they wanted), what do you think about that? Do you think they are quite happy with the settlement that they have got - they just asked for a lot more? Mr Dyke: No, but I suspect they got what they expected! It is not what they wanted and I think there is a difference. Q417 Mr Evans: Getting rid of channels, for instance, which hardly anybody watches, both radio or TV? Mr Dyke: The one that gets listened to the least is Radio 3. Are you going to propose getting rid of Radio 3? Q418 Mr Evans: I am asking you what you would do? Mr Dyke: When I became Director-General I knew there were certain things that you touched at your peril, and one of them was Radio 3. Does the BBC need to have orchestras? Probably not in this day and age; but is it a good thing that the BBC has orchestras? Yes, it is. Did the BBC need to invent the new channels? Everybody has done new channels in this world. You had to realise what was happening. If I look back at the time I was there, the thing I feel proudest of is CBeebies, which I think is quite brilliant. I think it is a wonderful programme for little kids; I think the website that goes with it sensational; but, more than that, I remember when we were proposing it, we had all the commercial interests coming at us - the Disneys, the Viacoms - saying, "You can't do this", and we went to the Secretary of State and said, "It's your decision. Are you going to say that the British parents shouldn't have the right for their little kids to watch what they feel is safe television, with the BBC's mark on it, without ads?" I thought it was the easiest battle of them all because it was straightforward. I think there are moments when you sit and make those sorts of decisions. I am sorry, I have forgotten your question! Q419 Mr Evans: I think the important thing is now, as you look back over your four years when you were there, is there anything you would have done differently, looking back? Mr Dyke: Yes, I am not sure I would have dealt with Mr Campbell in quite the way we dealt with him. Q420 Mr Evans: What do you mean? Mr Dyke: I think at the time of Hutton, as I told Lord Hutton, we should have set up an inquiry and kicked it into the long grass for a long time. I am not sure I would have changed anything. We did not have many battles with Government. The battles with Government were largely over Iraq and I think they were perfectly justified from our perspective. There are obviously some things which you would do differently. I was quite lucky, I got there when there was quite a good licence fee settlement, and there was a bit of money around. I also took the decision that we should separate a lot of the assets and sell some of them, so that we could use that money to improve the service to the public. We sold BBC technology; they have since sold BBC Broadcast; all of which I took out and made them as stand-alone units that you could sell. I think there is more opportunity for the BBC to do that. It seemed to me if you did not get an inflation-based licence fee that was the way through the next ten years; because broadcast inflation always runs above inflation, I do not know why, so you had to find a way of getting extra money to get you through that. There are two things which really drove me: firstly, this was the beginning of the digital age and we needed to be in there, and be in there fast. One of my criticisms of ITV is that they completely failed to do anything for five years. I thought that meant spending money that we did not have, which we did; which we were going to pay back by selling off some assets. Secondly, I thought it was very important that the digital television arena was not dominated by Sky. I thought actually that was not in anybody's interests, and certainly not in the BBC's interests and, therefore, out of that came Freeview when the opportunity came; which said, "Look, let's have some competition in this. There are a lot of people our there who don't want pay television, but they do want more television". When I look back, they are the driving things: firstly, producing more television, more radio in the digital world; and, secondly, let us not let Sky dominate the digital world so that we are all, in the end, beholden to Sky. Q421 Mr Evans: Do you think that the channels which are on Freeview should be able to broadcast in high definition television so that people can get it through Freeview; there should be spectrum given there? Mr Dyke: With switchover you are going to get a fair amount of spectrum. There is going to be an incredible drive from the Treasury, I suspect, to maximise the income from that. I think there is a real argument to say of course some should be; but it is not only HD; I think local television comes into there as well. Without HD Freeview could be a transitionary technology and not a long-term technology, which I think would be a shame. Secondly, I do think there are opportunities for local television to come out of that as well. I think it is probably worth making an argument as a Committee for some of the spectrum to be used for them but, of course, the spectrum is going to be incredibly valuable. Q422 Mr Evans: Do you think HD TV is a premium product and it does not really matter if Sky has a monopoly of it in the end? Mr Dyke: No, HD TV will be everyday television at some stage. All new products are premium to start with; but there is a tipping point, is there not? There is a tipping point when people will expect to see movies, sport and drama on HD. Q423 Mr Evans: Sky should not have a monopoly of HD TV? Mr Dyke: Personally I do not think so, no. It depends what happens to Sky in the meantime. It depends whether it is just a platform or if it is also a programme provider, but that is a different argument. I think Freeview showed a demand; our expectations were pretty high and it took off faster than that. It showed that there were a lot of people who wanted more television but did not necessarily want to pay for it. I think it would be a shame if some of the spectrum is not available for HD channels on Freeview. Q424 Mr Hall: Mr Dyke, you said the BBC got it right over Iraq, I actually agree with you because Caroline Thomson, a senior executive, said before the Hutton Report, "Truth and accuracy are the gold standard of the BBC and the Gilligan report fell far short of it". I agree with that statement. Mr Dyke: "And the ...", which? Q425 Mr Hall: The Gilligan report fell far short of it. Mr Dyke: I do not think it did fall far short of it actually. Q426 Mr Hall: That is what she said and she was your senior executive at the time. Mr Dyke: She worked for us. I do not remember her saying that. Q427 Mr Hall: This is a direct quote. Mr Dyke: You would have to give me when she said it. If she did, she did not say it when I was there, that is for sure. A lot of things were said after I had left. Q428 Mr Hall: When did you leave? Did you leave before or after the Hutton Report? Mr Dyke: I left about the day the Hutton Report came out. Q429 Mr Hall: This was before the Hutton Report actually came out. Mr Dyke: Look, in all journalism there are mistakes. Journalism is not a science. If you talk to Jon Snow, Jon Snow is very interesting talking about the Hutton Report because he says if any of the journalism he had done in television over 20 or 30 years had been scrutinised to that level it would not stand up to that level of scrutiny. There are mistakes, it is inevitable, but look at the basic theme of what it said. Q430 Mr Hall: I want to look at the very specifics of what was said in the Gilligan Report, and why your senior chief executive said it fell far short of the gold standards. Mr Dyke: No, she was not a senior chief executive; she was the head of government relations, if I remember rightly. Q431 Mr Hall: She was a BBC senior executive. Mr Dyke: Journalists call everybody who can talk at the BBC a senior executive if it suits them. I am not arguing about Caroline; she is a very talented executive. I am only arguing about Gilligan. She must have said that after I had gone because she certainly did not say it while I was there. Q432 Mr Hall: This is before the Hutton Report, so it is while you were still there. Mr Dyke: I doubt it. Q433 Mr Hall: What do you mean you "doubt it"? Mr Dyke: I doubt she said it. I think I might have noticed. Q434 Mr Hall: "The Gilligan Report fell short of the truth and accuracy of the gold standard of the BBC". Mr Dyke: What date have you got on that then? Q435 Mr Hall: I have not got a date on that, but that is actually what she said. You had actually said the Gilligan report was alright. Was it? Mr Dyke: The Gilligan report, no, there were mistakes in Gilligan's report but overwhelmingly right, yes. You are the only person I have met in recent years who does not believe that they sexed up the dossier. Q436 Mr Hall: This is what the Gilligan report said, and this is a specific quote ----- Mr Dyke: I presume you are a member of the Labour Party? Q437 Mr Hall: What you ought to presume is that I am a Labour Member of Parliament. Mr Dyke: Yes, I presumed that because you are here. Q438 Mr Hall: Then I would be a member of the Labour Party, would I not? That is just crass on your part, is it not? Mr Dyke: No, you are here as an MP. I am afraid I do not know you, Mr Hall, so I do not know you are a member of the Labour Party. Q439 Mr Hall: It is quite obvious you do not. Mr Dyke: Yes, that is right. Q440 Mr Hall: On 29 May 2003 the Gilligan report on the radio said that the dossier published in September 2002 was sexed up by 10 Downing Street - wrong. Do not take my word for it; take Hutton's word for it; take the Security and Intelligence Select Committee; the Foreign Affairs Select Committee; and the Butler Report. All of them concluded ----- Mr Dyke: If I knew we were discussing this today I would have brought the Butler report because there is nothing I would like to read you more than what the Butler report actually said, because it confirmed everything that Gilligan said. Q441 Mr Hall: No, it did not. Mr Dyke: You good old Labour loyalists sit there banging the thing. Go and read Butler. Q442 Mr Hall: You can attack me personally if you like but that does not actually deal with the issue. The Hutton Report was quite clear ------ Mr Dyke: You asked me to come and discuss public service broadcasting and you want to go through the Hutton report. Q443 Mr Hall: I was not actually going to come in, Mr Dyke. I was not going to cross-examine you but you were the one who mentioned Iraq. Mr Dyke: If you would like me to send you the parts of the Butler Report that make it very clear the Government sexed up the dossier I am quite prepared to do that. Q444 Chairman: I think we are going to have to accept we are not going to agree on this point. If the two of you want to continue this another time. Mr Dyke: I will send you the marked-up parts of the Butler Report. Mr Hall: The same with the Hutton Report; the Security Intelligence Select Committee; and the Foreign Affairs Select Committee; that would be very helpful. Q445 Chairman: Just before we move to the next session, and as an introduction to it, we have talked about public service media content plurality, and you mentioned news provision particularly. What is your view of the Sky stake in ITV? Mr Dyke: I do not think in terms of plurality it will make any difference at all. It was pretty clear why Sky bought the stake in ITV. They bought the stake in ITV to prevent any possibility of it being bought by Virgin Media; that is why it was done. Personally I cannot see it makes any difference to plurality. If Sky sit on the board of ITN clearly it will make a difference. If Sky sit on the board of ITV it could make a difference. If they are not going to do any of those things it is a financial investment. I am not sure that it makes any difference to plurality. Whether it is wise, whether it is a good thing for British television, is another discussion. Am not sure it makes a thing about plurality of news. Q446 Chairman: But in terms of the effect on competition? Mr Dyke: I would have thought if ITV now decided to change its news provider and move to Sky that would be quite a serious discussion; but of course they have just signed up with ITN I think for another five if not ten years. That is not to say that that alone is a threat to plurality of news supply. Chairman: If we do not have any more questions, could I thank you very much. Memorandum submitted by BSkyB Examination of Witnesses Witnesses: Mr Mike Darcey, Chief Operating Officer, Mr Graham McWilliam, Head of Corporate Communications and Policy and Mr Martin le Jeune, Head of Public Affairs, BSkyB, gave evidence. Q447 Chairman: Could I welcome the representatives of Sky for our next session: Mike Darcey, Chief Operating Officer; Graham McWilliam, Head of Corporate Communications; and Martin le Jeune, Head of Public Affairs. Mike, we are disappointed you have not come with props this time! Mr Darcey: I have not come with props; I have brought an analogy instead to try and entertain you. Q448 Chairman: I know you would like to make a short opening statement, so please go ahead. Mr Darcey: Thank you, Chairman. We at Sky welcome the Committee's interest in public service content, and we do so because we believe that the area is subject to a great deal of unwarranted hand-wringing, with many commentators taking what we would regard as an unhelpfully narrow view of the issues. Put simply, the coming of age of the multi- channel sector and now the growth of high speed broadband internet access means there is already more content with public service characteristics available to more people than ever before, and there is a lot more to come. Sky itself is very proud that it has led and enabled the expansion in choice and diversity of use available to British viewers. The number of TV channels has grown from four when Sky launched in 1989 to around 400 today; that includes 14 news channels; 26 children's channels; over 40 channels catering to foreign and ethnic interests; and more than a dozen dedicated to religion. We have transformed the way that sport and news are covered on television in the UK, raising standards across the board, which others have sought to imitate. We invest hundreds of millions of pounds a year on screen, including in genres traditionally thought to be the preserve of public sector broadcasting - including original drama, arts programming and, of course, news. We do this without a penny of public subsidy, and with no licence obligation to do so. The contribution from Sky from the wider multi-channel sector, and from the wider internet, as it stands today and as it can be expected to develop going forward, we think should be the starting point for a discussion about the future of public service content. This contribution should be seen as to create a strong presumption that further public intervention is not necessary. Ofcom we think should look at outputs; that is the quality and diversity of content actually available to viewers across the board; but so far Ofcom has tended to focus on inputs and this leads them to fret that the amount of public subsidy is in decline, and to contrive solutions, such as the PSB, to problems that do not actually appear to exist. For me it brings to mind an analogy with the selection of the English cricket team. The position adopted by Ofcom appears to us to be the equivalent of continuing today to select players like David Gower and Ian Botham. They were great players in their time, but when you have promising youngsters like Alastair Cook and Monty Panasar on the scene most agree that you have to look to the future and give them a run in the team even though they do not yet have that same Test pedigree. We at Sky would like to see Ofcom show a little bit more faith in the up-and-coming multi-channel sector; make a bit of room for us in the team; and spend a little less time trying to shore up some of the old-timers. Perhaps they should even think about the internet, as the brilliant 17-year old in India would be selected today and, after a slightly rocky start, would blossom into the next Sachin Tendulkar, but we are rarely that bold in England. Chairman: Thank you. Thought for the day! Q449 Philip Davies: Both Ofcom and the OFT believe that your purchase of a stake in ITV should be referred to the Competition Commission. In fact, the Chief Executive of the OFT said that "Sky's shareholding means that ITV is no longer fully independent". How do you respond to the view that your purchase is reducing media plurality? Mr Darcey: We do not agree, obviously, with the finding and the recommendation that the OFT has made. Where we are at the moment, just to be clear, is that the OFT and Ofcom have made a recommendation and that now sits with the DTI, and we await the DTI's conclusion on that. We hope to have things to say to the DTI, and if we ultimately end up at the Competition Commission we will have quite a lot to say there as well. Q450 Philip Davies: Greg Dyke just said that it was pretty obvious that your purchase of the stake in ITV was simply to prevent any possibility of Virgin buying ITV. Is that true, or not? Mr Darcey: It is certainly true that Greg Dyke said it, and I have heard many people say that and I have read that in most newspapers; but not many of those people were in the room when we took the decision to do what we did. The reality is that ITV is an extremely attractive asset. On a European scale it is almost unique in terms of its position as a broadcaster and as a producer of content. It is an extremely attractive asset that for many years had been managed very poorly. I think Greg also mentioned that it did not really have very much of strategy for five years. At the time it did not really have a chief executive; and it had somewhat lost its way. It is a situation that we had been watching for many years; and we had often wondered (given that we had confidence that eventually they would get leadership sorted out and they would eventually get a strategy and there would be a turnaround) whether that might be something we might participate in financially but we never really did anything about it. I guess to some degree it is true that the events leading up to our move in the market did trigger our move. There were substantial rumours around that Virgin was having a look at it. There were also rumours around that RTL was planning a bid, and several private equity groups had certainly looked at it in the past; and we rather expected that if anything started they too would come out of the woodwork. I think people were expecting Virgin to start things. I think it was far from clear that if something kicked off Virgin would actually end up with the asset. Our motivation was really not so much that it might end up with Virgin but that it might end up somewhere; and if it disappeared, either into the hands of Virgin, or into the hands of RTL, or private equity, then we thought that whoever it was was going to do very well because it appeared ITV was at a low ebb, it would turnaround and somebody would do well out of that. We thought to ourselves, "Well, if somebody's going to do this, if we have confidence it will turnaround, it's time to either do something to reflect that view or stand and watch it happen". We took the view that we would like to participate. Q451 Philip Davies: You were concerned that it would become a fierce competitor and you did not want it to be a fierce competitor with it not in your ownership? Mr Darcey: No, that is not what I said at all. I do not think it would become a fierce competitor, just that there would be a financial turnaround at that company and that was something we would like to participate in. That is why we made the move we did. Q452 Philip Davies: How much involvement do you plan to have in ITV? Are you going to have a seat on the board? How much involvement are you going to have in their decision-making? Mr Darcey: We are not going to have any involvement at all. We do not have a seat on the board. We had not sought a seat on the board. Our intention is simply to be a supportive shareholder, but in a passive way. It is for the board to do what they have done, and we are very happy that they have appointed new management and they are getting on with things, and things seem to be moving broadly in the right direction. It is up to management to set the strategy of the company in the end; and it is up to the board to hold management to account and we are simply a shareholder. Q453 Philip Davies: If the ITV Board decided to do something, such as a rights issue, an acquisition or a disposal, you would happily go along with whatever decision they made and you would not ever seek to block any proposal that they made? Mr Darcey: I do not think we have got an ability to block anything. Obviously if there are matters that come to a vote of shareholders then we would look to vote our shares. I think we will look to our interests as shareholders as all other shareholders would do. Q454 Janet Anderson: You have taken your channels off Virgin and you propose to start charging a subscription for your channels on Freeview. How would you respond to criticism that what you are doing is attempting to stifle other platforms? Mr Darcey: I guess I have to take issue with a number of steps of the question. We have not taken our channels off Virgin. What we have is a situation where Virgin operates a closed platform and is able to deny carriage to channel providers if it chooses to do so. That gives it a very strong position in negotiation. We have invested very considerable amounts in our portfolio of entertainment channels over the last few years; that amount has increased 68% over the last five years or so; because we believe it is important to continue to invest in content. I think the broad situation we are in is, having invested a great deal in content, we are hoping to be able to conclude a carriage agreement which reflects that investment. I think we have somewhat clashed with the fact that Virgin is in a position with a closed network and it is trying to get its content costs down and it, at the moment, is saying it is not willing to pay what we think is a reasonable rate. I know some people have sought to characterise it as we have withdrawn our channels from Virgin; I think we choose to characterise it as they have denied us distribution. Q455 Janet Anderson: Are negotiations continuing? Mr Darcey: Our last offer remains on the table, and we are very keen to secure carriage and we are available to continue negotiations. There is not a lot of direct activity at the moment. Most of Virgin's activity just at the moment seems to be directed at court actions and regulatory attack. They seem less inclined to devote time to getting round a table, but if they are willing to do so then I am very keen. Q456 Janet Anderson: You think a deal could be possible? Mr Darcey: I hope so. That is very much our preferred outcome; that we get back on that platform and get back to having our channels in those 3.3 million homes. It is a very substantial commercial opportunity that we would rather not be doing without in the long-run. When they are willing to have a conversation then we would like to do that. Q457 Chairman: Could I just ask you about your plans for Freeview. You are intending to turn the channels you have on Freeview into subscription channels; my understanding is that you will require subscribers to have set-top boxes with proprietary conditional access systems within them, and that those conditional access systems will not be available should your customers also want, for instance, to view Setanta channels. Is that not a restriction of competition? Mr Darcey: I should probably lay out what we have said. The position is that we have taken the view that the best use of our DTT capacity that we have access to is not to offer a series of channels free-to-air, but instead to move to a pay service over DTT. The plan we think is very enhancing of choice and will provide a new option on the DTT platform. We plan to offer sports, including premier league content, movies, Sky One and Sky News and these sorts of channels. When you are thinking about a channel like Sky Sports and premiere league content where we, for example, recently concluded a deal at around £1.3 billion for the next premiere league contract, we are talking about very expensive premium content; and in that environment you have to be very careful about the security of that content. It is a very important part of your pay subscription operation on satellite, and it would be on DTT. You must have great confidence in the security of that; that it cannot be had. We prefer, as we have always done, to use conditional access technology provided by NDS, which I think around the world has shown itself over many years to be by far the most secure, and most other systems have had problems at various times. That is what we want to do to ensure the integrity of our content. The next step in your argument, however, I think is not correct. Of course it would be open for Setanta also to use the same encryption technology. If they wanted to come and do so we would be happy to make that available to them and to retail them over that same box. There are in fact many other options available to them. They have chosen a different conditional access technology. I think the key part of what we are doing is that we are not proposing to specify entirely a Sky box that has only NDS conditional access in it; rather what we are doing is taking the horizontal market approach that has characterised the DTT platform saying that these are the components that need to be in a box in order to receive the services that we want to put out there; and while we will initially work with one or two manufacturers to get the market going, we will then be opening things up and any manufacturer will be clear to build whatever box they like. They key thing there is that if there is consumer demand for a household that wants to take Sky services over DTT, and Setanta's services over DTT, then the manufacturer is free to build a set-top box with both conditional access systems in it and then that customer will be able to receive both. Q458 Chairman: You would be happy to make available for NDS the conditional access system to any manufacturer even if they were going to also incorporate Setanta? Mr Darcey: We are not proposing to place any restrictions on what manufacturers build. We will say, "This is what needs to happen for the security and the reception of our content. If you want to go and build it into a toaster, you can do so. If you want to build it with a DVD recorder, you can do so. If you want to build it with Nagra CA for the reception of Setanta channels then you can do that. If you think there is a market demand for it then go ahead". Q459 Mr Evans: How many subscribers have you got? Mr Darcey: How many subscribers? Mr McWilliam: Just under eight and a half million in the UK and Ireland. Mr Darcey: The exact number that we quoted last week was 8.4. Q460 Mr Evans: When you pulled off Virgin, did you notice a big increase--- Mr Darcey: When we were denied carriage on the Virgin platform! Q461 Mr Evans: Since you came off virgin, has there been a big increase in the number of subscribers? Mr Darcey: What we announced last week was our Q3 results (so the results for the period January, February, March of this year), and what we announced were, I think, some pretty strong numbers. The gross subscriber additions in that period were considerably up on the same period a year earlier. The challenge is that there are many things going on in the market place at the moment, and I think the most significant event during that period was that, having more than 18 months ago embarked upon a path to enable us to offer broadband services as well, in that third financial quarter before us we started marketing, for the first time, a combined offering of television broadband and telephony, and that has proved to be very successful in the market place and we think has been a substantial contributor to the strong numbers we have shown. Trying to isolate precisely the contribution of not being on the Virgin platform is pretty challenging, but I would say that we came off the Virgin platform on 1 March, so there are only 31 days in the period in which that was the case, and many cable customers are probably under a requirement to give 30 days' notice before they quit the platform, so it is hard to think there was an enormous impact from that in those numbers and most of the strong numbers we did report are probably down to a series of other factors. Q462 Mr Evans: You do not think it is going to have a huge impact at all on your subscription numbers? Mr Darcey: I do not think it will have a very substantial impact, no. I think some people will move. There are many reasons why it is quite hard to move from the cable platform, particularly if you are a broadband customer. It can be quite administratively burdensome trying to change your Broadband provider starting from cable, because the first thing you have to do is to go back to BT to get a BT copper line reconnected to your home before you can then make the second hop to the broadband provider of your choice. Even if it goes through people's minds, I think there are many reasons why there are barriers to switching from cable. So, in a sense, they are insulated from some of that competitive pressure and I think they probably know that. Q463 Mr Evans: What is the timescale for charging for Freeview? Mr Darcey: For launching a new pay service? Q464 Mr Evans: Yes. Mr Darcey: The position at the moment is that we have made an application to Ofcom to vary our licence, which we think is the key step that we need - permission, in effect, to change the line of the channels that we broadcast on our capacity - and that is now entirely in Ofcom's hands. Q465 Mr Evans: What is your prediction? When people want to see Sky News, for instance, on Freeview, when will they have to start paying to see it? Mr Darcey: I think it is an area when they are interested in Sky Sports, Sky Movies and Sky One. I would hope that that opportunity will be available to them later this year, but we really are in Ofcom's hands. We cannot make much further progress until they opine. Q466 Mr Evans: Are you a supporter of public service broadcasting? Mr Darcey: Yes, we are. This is a fairly complex area in terms of what precisely people mean by public service broadcasting, and people use it to mean different things in different contexts. I think everyone does. If public service broadcasting or public service content is meant to mean content that has particular characteristics relating to quality and distinctiveness and that sort of thing, then, yes, of course, we are a supporter of that. Q467 Mr Evans: You would probably include Sky News as part of that? Mr Darcey: I think when people talk about the characteristics of what they call public service broadcasting, we hear various people's lists of characteristics which they think are important and we tend to observe: "We think that Sky News exhibits those characteristics", as do many of the other services that are provided by the multi-channel sector from Sky Arts, from Sky to various children's programming, to factual programmes on Discovery and National Geographic. Q468 Mr Evans: I would agree with you, but I am just wondering. Do you think you have any moral duty at all to allow Sky News, for instance, to be broadcast free of charge? It has got advertising in it, after all, has it not? Mr Darcey: No, I do not think we do see a moral duty for it to be free of charge. I guess at Sky we are a little perplexed about the apparent pre-occupation with: "It all must be free." Q469 Mr Evans: It is what people thought they were getting when they had Freeview? Mr Darcey: I doubt really that it was really heavily in people's minds actually. Q470 Mr Evans: The word "free" is in Freeview, for goodness sake, that is why people get on to it? Mr Darcey: I am sorry, I thought you were referring to Sky News. Q471 Mr Evans: No. As part of the package when they were buying Freeview, Sky News was part of that, and then all of a sudden they are being--- Mr Darcey: I do not think it was a major element in people's decision to take Freeview. The facts are that Sky's three channels comprise around 1.5% share of viewing in Freeview homes, which is a pretty modest return on five years' of effort of trying to succeed in that environment. Overwhelmingly, the strongest driver, I think, of the take-up of Freeview has been the very heavy cross-promotion on the BBC, and the BBC has mainly spoken of its digital channels; ITV1, similarly, with its very large audiences, is able to cross-promote the availability of ITVs two, three and four and Channel 4 has spoken at length of E4 and More 4. I think those are really the channels that were in people's minds when they thought, "Oh, yes, I must get Freeview." I think Sky News was a very small part of the consideration. We, regretfully, have to look at that situation and admit that, after five years of trying, we have not really done that well in the Freeview environment. We find that the cross-promotional advantages that the terrestrials enjoy we have had trouble competing with, it is a pretty tough environment, and we have had to have a look at it. Yes, there is some advertising revenue from Sky News, it is pretty modest to tell you the truth, and we have had to have a good, hard look about what is the right way to deploy that Sky News asset of which we are very proud and in which we continue to invest greater and greater amounts. We have taken the view that giving it away head-to-head with BBC News 24 is not the best thing we can do with it and that it is a quality product and we think that a better approach is to look for it to make a greater contribution to persuading people of the merits of taking a pay television service, and you cannot do that when you are giving it away for free somewhere else. Q472 Mr Evans: Public service clearly does not necessarily mean that it has to be free, but you have a public service responsibility, being a broadcaster. I am sure that you have got a lot of areas where you are involved, Sky would boast, in communities up and down the country, where you show some sort of social corporate responsibility to the wider society in which you are broadcasting. Sport is a big driver for Sky. Looking at pubs up and down the country and the subscription that many of them have to pay which is huge, it is very high for pubs and it is all based, as I understand it, on old rateable values of pubs, which means that a lot of smaller pubs simply are not able to afford to have Sky Sports in their pubs because they do not have the customer through-put that you find in a lot of small, rural pubs. Why, after all these years, have you not been able to at least address some part of that which means that people in smaller pubs, even suburban areas where they have got a small footfall, are able at least to offer that product to their community? Mr Darcey: There are a number of points there. The pubs and clubs market has been very important to Sky. We value it enormously. It provides a wide distribution of our content. Many people who choose not to have Sky in their home have a pub or a club nearby available to them where they can see the odd bit of Sky Sport that they value, but that is not enough for them to want to get a subscription year round, and we think that is an important element of it. I think I generally have to put push back on the statement that our rates are very high. The availability of Sky Sports in pubs has been a very substantial driver of revenues in pubs, and I think an objective analysis of the footfall that it drives in pubs and the beer they then buy, and so on, would show that we are taking quite a modest proportion of the value that we think we are generating. The real challenge in pricing to pubs is the point that you are alluding to (and you are absolutely right, it is a tricky area) that the value created by a pub of having Sky Sports is a function, in part, of its size and the number of people it can potentially bring into the pub as a result of having that attractive content in there. We worked out fairly early on that it was not going to work to have one flat rate for Sky Sports in pubs in the same way that we do in homes, and that if we did that and we pitched that at the middle, then some big pubs in affluent areas would make an absolute killing and many other pubs would be excluded because they would not find it economic to do so. So we have looked for a mechanism to objectively produce a different rate that we hoped would be reasonably correlated with the value potential within a pub, and what we reached for in the end was the rateable value that we thought was proportionate to scale and affluence and would be the best correlated variable we could come up with to set charges against so that the pubs who derived the most value from Sky Sports paid more but it allowed a lower rate within pubs that derive less value because of their size. It is absolutely not perfect, and we recognise that. I do not know what the position is. A while ago there was a discussion about whether those rateable values were all going to be reviewed, because obviously, if they are not reviewed for a long period, potentially they can go out of date in some pubs. Q473 Mr Evans: Can I ask you to look at it. You understand the problem, do you not? There are some small pubs there, they have hardly got any customers at all, it may be the only business in a community, and the fact that they are not able to offer Sky Sport to their customers simply because of historic rateable values means that you could actually be helping communities up and down the country to keep their local pubs alive? Mr Darcey: Do you know what the situation is on the review of rateable values? Q474 Mr Evans: We are all waiting on business rate re-values? Mr Darcey: That would probably help. I can have a look at that, but the nervousness I have is that the position that Sky is in is such that it is quite challenging to start making departures from a rate card. We constructed a rate card which we reached for this variable that was out there, that was the objective - we could debate what it was that the rateable value was - as soon as we start making departures from that, I would be nervous that we will start being accused of being discriminatory and everybody will want a departure from the rate card and then we enter a world of great complexity. Q475 Mr Evans: In the end we would say that at the moment the current card rate is discriminatory against a number of smaller pubs that are not able to give that offering to their customers and, if you looked at it from a community-spirited point of view, you could be doing an awful lot to keep some of these pubs that are going to the wall open? Mr Darcey: I will take that away and see if we think there are any improvements we can make. It is an issue we understand. Chairman: We seem to be ranging far and wide. Perhaps, to return to the subject in hand, I can invite Alan Keen to come in. Q476 Alan Keen: With my heavy interest in football I have always regarded Sky as one of the main public service broadcasters. I was not clear following the answers to the Chairman's questions. We are all looking to this weekend, the end of the football season, but if I look forward to next season--- Mr Darcey: For some of us it has already ended. Q477 Alan Keen: ---were you saying that the public will be able to watch the whole of the premier league through one box by next season? Mr Darcey: They can do so. They will be able to do so on satellite and they will be able to do so on cable. Sky Sport is obviously available on both satellite and cable. Setanta have entered into an arrangement with Sky where they have procured a technical access service to the satellite platform, as they did today. They will be making that channel, their suite of channels, in fact, available to satellite connected homes through the same box. You have to ring Setanta to get the subscription, because they have chosen not to appoint Sky as the retailer, so we cannot sign someone up, Setanta have chosen a different path there, but it is all available through that one box. The position on cable, I think, is broadly the same. I think Setanta are not able to be their own retailer on cable because of the closed nature of the platform. I think they have no choice but to invite Virgin to retail the service for them, and I expect that that deal has been done. The position on DTT is that at the moment we do not have permission to launch a pay service on DTT at all. We would like to be able to do so, and ideally it would be nice to be available in time for the start of the football season, but given that we are in May and Ofcom seems likely to have a careful think about these things. We may not be available on that platform at all, which is regrettable but we will get up there as soon as they will allow us. Beyond that, in terms of once we are up on the platform, in terms of the creation of a box which allows the reception of both services, that is really in the hands of manufacturers and whether they see a demand for it or not. I think we have taken the policy view that, rather than trying to tell manufacturers what to do and potentially be criticised for telling them the wrong things, we are going to take a step back and say it is their job to make a call as to where they think the market demand lies and what products they want to bring to market. Q478 Alan Keen: I think everyone spent a lot of time trying to ensure that there was exclusivity for the premier league with one provider, but at least more money has come into football, which is not what we thought would happen when it was brokered. Anyhow, we are running short of time, so I will press on. Sky Television - 98% of what I watch is football. Have you got plans to do other than just buy in programmes from the US? Are you going to start producing? We thought when you employed someone who was used to providing programmes that that is what you were going to do. She has left now, of course. Have you got plans to develop? Mr Darcey: We do commission a significant amount of content. Highlights this year have included Hog Father, which was the highest rating non-sport multi-channel programme ever and there are many other examples. It is something where we have ambition to do more, and it really comes down to the economics. The multi-channel sector started at a significant handicap, I suppose, in terms of commissioning home-grown drama, because if you are only available in five million homes, then it is hard to compete with the terrestrial free-to-air channels who are available in 25 million homes. If you are competing for the best ideas and competing for the best talent to commission drama and programming like that, you tend to face the same basic fixed cost per hour. If quality drama costs £500,000 an hour, then it costs £500,000 an hour, and if you are only in one-fifth of the homes of the analogue terrestrials, then it is going to be hard to make those economics add up. What we are seeing at the moment is that the "homes reach" of the multi-channel sector is increasing, and when we get to digital switch-off, in principle, for those who do secure Freeview carriage, it will be possible to be available in all 25 million homes. I think we are in a transitional period at the moment. We have come from a world where the economics were very, very challenging and we are improving, and I think you are seeing more commission content from the multi-channel sector and the conditions are continuing to improve; and that is the basis of my optimism that we will see more commissioned content from the multi-channel, and that is certainly where our ambition lies, notwithstanding the departure of Dawn Airey. Did you want to add anything more? Mr McWilliam: I would add that we already spend just as Sky, let alone the wider multi-channel sector, something like £250 million a year on production and original programming, and that is not just in Sky 1, in drama and that sort of area, but do not forget news and sport. We invest a lot of money in the creative economy there. We think our contribution is already substantial but, as Mike says, our ambition is to continue to increase that. Q479 Chairman: In your submission you have said that if some aspects of public service broadcasting come under pressure, you believe that the right approach is to "ensure that the very large sums of public funding given to the BBC and the revenues of Channel 4 work harder to produce PSB". What do you mean by "work harder"? Mr Darcey: I guess when you look at the BBC, there was an interesting exchange between yourselves and Greg about whether they had a good settlement or a tough settlement, I think the fact remains that they have very, very considerable sums of money. My dealings with them at the moment suggest that they are really grappling, perhaps for the first time, with what most of us deal with regularly, and that is a budget constraint, and that is a word on which you have to make choices, you have to prioritise, and that, I think, is the key thing that we will need to see more from the BBC. In a world where, with only three billion pounds to spend, you have to make choices about what to spend it on, I guess we would hope that they would prioritise in a way that the services that have the highest PSB characteristics are prioritised highly and they have a hard look at the range of things that they are doing and the things which have the lowest PSB characteristics are the ones that do not make the card. They have considerable resources and it is really about prioritisation and focus. I think there is plenty of money there to assuage people's fears, whether it be about regional news, children's programming, or those sorts of things, as long as they prioritise and give the focus that seems to be appropriate. Q480 Chairman: So you see the total revenue from the licence fee as potentially better used by the BCC to produce public service broadcasting; you do not see it as offering an opportunity to fund other broadcasters through the licence fee for public service programming or, indeed, a new vehicle like the PSP? Mr Darcey: I guess we get nervous about the PSP because, as soon as people start talking about that, it inevitably seems to move round to the subject of more money, more public investment, more public intervention, and that, I think, as I laid out in my opening remarks, we do not think is warranted. If the PSP was wholly restricted to a reallocation of the existing degree of subsidy, I think that is a different question, although many other issues are raised in terms of whether that money just ends up being used to fund things that were already going to happen anyway. Mr Le Jeune: The other issue with the PSP is that it has been a fairly slippery concept as far as we can see. As you know, having started originally as a tool to tackle market failure - let us assume for the sake of argument, that market failure genuinely did exist - it has now evolved into a commissioning arm which would create public sector content on the Net, of which there is no shortage whatsoever. In fact, there is probably more now than there has ever been in human history. Therefore, we consider it to be a very puzzling concept at the moment, verging on the bizarre. Q481 Chairman: Leaving aside the PSP and just focusing on tradition broadcasters, would you see some merit in making available a proportion of the licence fee funding on a contestable basis for perhaps other channels that currently broadcast on Freeview or satellite? Mr Darcey: In principle I think that is an interesting idea, but, as I said, I think there are areas which make us nervous. One, as I said, is how you deal with the extreme likelihood that broadcasters who were already considering doing something because they found it commercially attractive to do so manage now to characterise that project as something needing public subsidy and money is simply moved to fund something that would in fact have happened anyway. I think that is quite challenging to deal with, and I guess we could put our hands up and say, "We would like some money for Sky News." I doubt that any would be sent in our direction, because people would say, "You already do Sky News, so you do not need any public subsidy", but if things are being considered like that, you can imagine that broadcasters will create departments whose jobs will be to repackage such proposals and bid for such money, and I do not really know how you deal with that. The other issue that I think would concern us is when you start mixing public subsidy, financial subsidy like that, in with a broadcaster who is also funded by advertising. When you have a mixed funding world like that, I think you enter into a complex world in which you have the potential for distortion of competition and state aid type concerns where there is cross-subsidy between the public funding and the advertising funding competition. Q482 Philip Davies: Martin said "if there were a market failure", if there happened to be. Do you believe there is any area of genuine market failure that warrants any government intervention, or do you think that a free for all--- Mr Darcey: Over and above what is the situation by the BBC? Q483 Philip Davies: Do you think there is some need for some Government intervention? You do not think that a commercial free-for-all without any licence or anything would deliver the right kind of broadcasting? Mr Darcey: At the moment we tend to take three billion pounds of licence fee money. That is taken as read. We are not really debating whether, were that to disappear in a puff of smoke, there would be market value? That is another big debate. We did quite a lot of that over the last few years, but for the foreseeable future that that is in place, that is part of the back-drop. I think the question is: with that in place is there unaddressed or unaddressable market failure where you need to bring to bear more public subsidy, and I think we find that hard to crack. Chairman: I think that is all we have. Thank you very much. Memorandum submitted by ITN
Examination of Witnesses
Witnesses: Mr Mark Wood, Chief Executive, ITN, Mr Stephan Shakespeare, Director, Doughty Media Limited, and Mr Anthony Lilley, Chief Executive, Magic Lantern Productions, gave evidence. Q484 Chairman: For our final session we have three witnesses representing different interests. Can I welcome Mark Wood, the Chief Executive of ITN, Stephan Shakespeare, the Director of Doughty Media, and Anthony Lilley, the Chief Executive of Magic Lantern Productions. The last time Anthony Lilley gave evidence to us he wrote in The Guardian afterwards, "I would like to suggest that we buy every MP a Playstation 3. That would show them the impact of new media on the creative industries." I am rather disappointed you have not arrived clutching a box load, but I will suppress my disappointment. Mr Lilley: We are not wallowing in a jacuzzi of cash, John! Q485 Chairman: I believe Mark Wood would like to say a few words before we begin. Mr Wood: Thank you very much, Chairman. I would like to say that ITN does welcome the work of the Committee, because this is a thorny and tricky area to look at in the future of public service content. ITN stands on both sides of this discussion to some extent. We are a provider of public service news content to ITV and to Channel 4 and their news programming, we also have growth businesses which are in the new media area, such as providing video news on mobile phones and on broadband, so we have a kind of perspective which covers both areas. We are an independent company. We have just signed new long-term contracts with Channel 4 and ITV and in both cases one has seen a very strong commitment to high value news and public service broadcasting values in news and a big investment in news coverage and news infrastructure. So, public service broadcasting is very healthy to that degree and, indeed, one has seen ratings for news programmes holding up, despite the changes in the ratings for the channels generally. Otherwise, we also see a very vibrant, creative media economy emerging in which we want to play a part, and, of course, that is where we have concerns about the BBC and its role; not that we do not want the BBC to be innovative and deliver its content to different markets, but we do want it to be properly regulated in a way which means that it does not stifle the creative economy which is emerging by overwhelming markets with its content at no cost, and we do have concerns right now about their activities. That is my brief summary. Thank you, Chairman. Chairman: Thank you. Can I invite Alan Keen to start. Q486 Alan Keen: Can I first ask Anthony, will you give us some examples of delivery of public services on new media? The room has just filled up with lots of young people, so that should be particularly interesting to them. Mr Lilley: I think it is important to think about the delivery of public service in a very wide context when you think about new media. It is not just about public service broadcasting and the extension of the way public service broadcasters deliver their core remit, although that is a part of it. If you look around there are a number of categories, including effectively, the direct delivery of public services in education and health which are increasingly moving towards the use of new media, whether that is digital television channels for teachers, as we have already, or NHS.co.uk, which is one of the biggest, most popular and heavily visited websites in Europe. If you go a step further you end up very quickly in the cultural and arts sector where we have, for instance, the Tate Galleries, who now have our wholesale television and interactive media production unit inside the Tate, and the Tate's websites get greater traffic than the actual footfall through the doors of the Tate. From a standing start, in five or ten years there are now more people coming to the online property of the Tate than turning up through the door. The same is true of a number of our arts organisations, our cultural institutions, our museums and they are delivering public service and using media to do that. Then there is an incredibly burgeoning community and the NGO and not-for-profit sector, which is a combination of existing not-for-profit type organisations and it is fitting to be in this room and talk about a project called "They work for you", which is a fantastic web property which has probably done more, in my opinion, for participation in democracy and people knowing what their elected members are up to and what you speak about and what expenses you draw - all those kinds of things - than any number of articles in newspapers or any number of television documentaries, and that is just one example of an area where people are actually out their creating services using the new media, using the potential of the new media to deliver public value. I am saying it is a very wide definition. I am not ignoring the public service broadcasters, we can talk about them, but I want to make sure that we consider the widest possible space. Political parties are increasingly using online. The 2008 election apparently is going to be the MySpace election in America - that is what they are saying -- and it is a very significant part of the way public debate is being carried out, through media and new media, not just through our traditional institutions. Q487 Alan Keen: Stephan, is 18doughtystreet.com so popular because it is on new media? Has that made a big difference? Mr Shakespeare: It means we can do something very different, which is that we do not have the business model, obviously, that the broadcasters do and we can do pretty much anything that we think is interesting. I would like to say it was so popular. We have audiences as small as 50 and as large as half a million (our biggest success is half a million), and that suits us fine. We do not have one audience that we have to go for; we have lots of different types of audiences that we can go for in lots of different ways. Q488 Alan Keen: That sounds impressive. As Members of Parliament, we would be delighted to have an audience of 50 listening to us! What are the next developments going to be? The on-going developments, not the next developments. What is it going to move on to and what is going to be the increase in demand? How do you see the media future rather than trying to look too far ahead? Mr Shakespeare: I have not got any idea at all. One of the things I find every time I go to the Edinburgh TV Festival is that nobody there, including the controllers, has any idea and it changes from year to year, and I think that is a really important part of this, that we are guessing what we are doing and we are trying to be responsive to an audience that is changing very rapidly. I think the advantage that we have is that we can do that, whereas, as we heard from Greg Dyke, the BBC, for example, has to move very slowly indeed. I would not want to predict what the changes are, except to say that my children, who watch almost no broadcast media at all, tend to watch programmes that they find, very often things that have appeared on broadcast media but have now been passed around on files or on uTube.com or on DVDs, or whatever, and this younger generation is going to look at media in a completely different way, and to plan PSB in terms of really the habits of the older generation when it ought most to be aimed at the younger generation, I think, is a big danger. Q489 Alan Keen: Mark, what about news? News is obviously to me the one thing I can say that I would take advantage of - using new media to receive news on the spot wherever I am. What sort of public service stuff will go out that way as you see it? Mr Wood: Already we are seeing the delivery of news in different ways: on to mobile platforms, on broadband, but also, if you like, the traditional media is adapting too. Channel 4 News is getting good audiences for its programme that we produce, but it has also got a very strong web presence, broadband presence and on-demand presence. It does podcasts, it has a daily blog called Snowmail that John Snow writes, which is incredibly popular, which is basically trailing the programme and is getting people to consumer news in different ways. ITV News is about to do something which is very interesting, which is a project called "Uploaded", using user-generated content, and this is a way of getting the viewers, the public, to contribute both news and comment in multi-media form, but it then goes through the filter of an editorial process and will be flagged, used on the programme and then strongly available in large quantities on the ITV News website or part of the ITV.com website, so in that way we are also engaging with a younger demographic which wants to consume news in a different way and one is maintaining traditional news values and getting high quality news out to a very great audience, and I think that is how the new media is helping. We are taking advantage of new media to change the way we deliver news. Q490 Alan Keen: The private sector will drive this. It has to move quickly, so it is, indeed, for the private sector, but does government have to have any input into it at all, apart from stopping the undesirable? Mr Wood: I think, honestly, the regulation around quality of content is important. Government intervention - I suppose it comes under the discussion we were having before about future funding. What happens after digital switch-over in a commercial environment which is changing very rapidly? Channel 4 is arguing that its funding will not suffice for it to meet its current remit within a few years. ITV has flagged concerns about its ability to maintain, for example, regional news. I think those are legitimate areas for discussion in the future about where should the funding come from for those. High quality public service broadcasting level news is costly. We have a very high standard here, partly set by the BBC. For example, we have opened reporting bureaus in China in the past year for both ITV News and Channel 4 News. That is an expansion of news coverage. It has been incredibly valuable to have that news coverage because we are getting fantastic insight into some of the issues which are affecting China's expansion, both in an economic sense, a social sense and, of course, an environment sense. The whole question around global warming has such a big Chinese dimension and suddenly we are getting better information. Could you fund that kind of expansion if you had a fiercely competitive purely commercial news environment? It would be tricky. There are complex issues here. I think there are arguments on both sides, but I can see there is an argument in the future for that. Mr Lilley: I think it has become important not to get too idealistic about what the Internet is doing to news. I think there are actually only five news agencies in the world, and if you do a Google search for any given story you will find the same story showing up time and time again in lots of different news outlets/ So, there may be multiple news outlets; there is a rather interesting question about whether there is any plurality of news - they will be Headline Reuters, AFP, PA, BBC, sometimes ITN - but actually the big concentration is into news gathering - fewer and fewer organisations news gathering - and at the same time we have got this incredible explosion of what I will not call "user-generated content" - people who witness things which are interesting which turn out to be the news. We had a fascinating example at Virginia Tech a few weeks ago where a terrible story was happening amongst those people on that campus where they were talking to each other using new media, using mobiles, using social networking sites like Facebook or MySpace which Alonzo were using, and they found it intrusive of the mainstream media to come in and find out whether these guys were telling the truth. There were lots of blog entries complaining about how their people, who were participants in the story, had had 15 attempts by international journalists to find out whether they were a real, authentic news source or not when they were telling the story because they were there at the time. There is this fascinating sort of duplicity going on, sort of consolidation of major organisations and this huge explosion of conversation going on whenever we have anything newsworthy. It is also an interesting question what we mean by news. There is a political and international bias in a lot of news coverage that is not necessarily what more and more people are interested in and there is a fascinating question as to how you balance those things out. It is very difficult for television to do. It is absolutely natural on the web; it is what the web does really well. Mr Shakespeare: I think Andy is right that there are these two extremes, but I would hope that, as time goes on, we fill in the gap in between and that these are not necessarily two different things like oil and water, and to have something in between, some sort of structured citizen journalism, some sort of greater openness or access to making news or producing news programmes, I think would benefit. If you have the concept of subsidising public service broadcasting, why would it only be one of those models? It ought to be across the board and it ought to encourage, therefore, quality across the board. To say we have got to maintain the traditional news values that Mark talks about, and rightly - I think it is important that they are maintained - but you need to encourage quality in the other areas as well; so there should be non-commercial options within the whole breadth that we are hoping to achieve. Q491 Mr Evans: I suppose, Mark, if you had been able to access some extra funding would your 24-hour rolling new station still be on the air? Mr Wood: Possibly. It was a commercial decision by ITV and, I think, really based on their requirement for band width; so possibly it would have been. I am not sure in a changing environment how important it is, because people are accessing news in a variety of different ways now. News channel audiences have not increased enormously, but usage of news on phones and on the Internet has grown and is growing hugely, so I think people are accessing news in different ways. We have been quite interested in seeing the use of news on digital channels. More 4 News at eight o'clock that we produce, for example, gets an enormous audience by digital, over 100,000 at the moment, which is a sizeable audience of people coming at news programming from a totally different direction. So, I am not sure. I think 24-hour news will become more and more ubiquitous on different platforms and we do produce ITN channels on mobile phones, which are rolling news channels effectively. Would it have made a difference? Possibly, because ITV might then have said we can fund the difference, but at the time it was difficult to justify given the size of audience. Q492 Mr Evans: Stephan, you talked about audiences of half a million. The Chairman thinks that was the time when I was on 18doughtystreet. I fear it was when you had 50 that I was on. Do you know anything about the make-up of the people who are watching? What was it when you reached half a million? Mr Shakespeare: That was a little short piece we put out called "World without America", which was very controversial, and that was actually picked up across the traditional media in America and reached probably an estimated 20 million ultimately. We do not know enough about our audience. We do know that they are highly interactive and they write to us a lot and they speak to us during the programme, and we are finding more and more ways of dealing with that. What I think is valuable in what we are doing (and I should say that it is moving across from being a conservative to being something more like Seaspan, I think) is what we are looking at developing into, spread across lots of different voices, rather than what it has been heretofore, which is rather conservative in delivery. What we are able to do is to have longer discussions, more detailed discussions, more exploratory and discursive discussions, which is why, in fact, every single person that we have ever asked to come on to doughtystreet, with one exception (and that was a government minister), has come on, irrespective of the size of the audience, because it is the one place that they can talk at leisure, they can explore what they are thinking about, what they are doing and there is really very little limit on what they can talk about and how long they can talk for, obviously within reason, and this thing lasts beyond the moment. So they go off with a link to it, they can put it on their websites, it can be put on uTube and all the rest of it and get a wider audience, and I think this really serves a very important purpose. It creates a different platform for discussion and interaction between public and politicians, for example, that you can never get from mainstream because it must jealously guard its real estate, as it were, its short-time. So, there will never be a discussion on anything, however important, that lasts more than 15 minutes on a normal station, on Newsnight or on the news. Q493 Mr Evans: I would say you were centre right. In the plans that you have got, do you mean you are going to come off centre right and be more a voice for whatever happens to be the politics of the day? Whether it is centre left, communist, whatever it is, they will have a voice on 18doughtystreet? Mr Shakespeare: Yes. We want to provide a platform for as many different voices, and not consensus voices necessarily. For example, trade union leaders used to be a big part of the news and the discussion. You very rarely see them on the BBC or on Newsnight any more, but they are still a very important part in politics and in the social fabric of this country. So, we are creating a programme that is for trade union leaders, and it may have an audience of several thousand only but, nevertheless, that can grow as more people realise it is there and it can do something that you just could not get on mainstream media. Q494 Mr Evans: How are you getting your presence out into the public? How do they know 18doughtystreet exists? Mr Shakespeare: Really at the moment they do not. We went forward saying we are going to find our feet, as it were, in public, and I think in about three months' time you will see a big push as we refashion what we are doing, make it better and then market it. At the moment you would have to find it rather than being told about it. Q495 Janet Anderson: BBC News has successfully expanded online and it now plans to trial a service for mobile television. Of course, ITN already produces a new service for mobile phones. You mentioned earlier your concern about the BBC. Do you believe that BBC News should expand further into new media? Mr Wood: I think they are right to want to do so, but I think it should be managed quite carefully. These are quite fragile markets. The commercial returns are still relatively low, take-up of paid-for services on 3G is not huge, although there is a lot of content, but a lot of content providers and operators are still looking for successful commercial models. So, the sudden availability of a lot of content cost-free could destroy a market really, or certainly cause serious damage. Our concern about the BBC is it has announced, I think, a year-long trial, and that seems to me to be an excessively long time for a trial. If you are doing a commercial trial, it is normally a month or two; it is not normally a year. You create a kind of fait accompli if you do it for a year, because you will then say, "Well, it is there and it can keep going." These are just some of the concerns that we have. The bigger issue is how the BBC itself manages this and how the trust manages it. The BBC has, I think, nine separate licences for its broadcast channels and I think 16 for radio. It has one for all its multi-media activities. That was probably fine when it was just a website, but now, as it expands into mobile phones and broadband, one licence looks to me to be an inadequate way to monitor what the BBC is doing and I think needs attention. Q496 Janet Anderson: Do you believe that public service content on new media needs to be linked to a traditional media provider or is it okay just to leave it to the newer entrants into the market? Mr Wood: I think you can have both. The traditional providers, of course, have the leverage of being able to cross-promote and do have to adhere to very clear editorial standards, but, no, I think we are going to see a very vibrant new media market, and we should do, we should welcome different providers, as long as things are clearly labelled and customers know what they are going to get. We are working with, for example, newspaper publishers to help them develop their multi-media content on broadband and on mobile phones, and if you have Telegraph Television, Times Television, Guardian Television, I think all these would emerge and they may well have certain political slants. Does it matter? I do not think so. Alongside that you may have start-ups who are doing something entirely different. I think, actually, we are in a fortunate position in the UK in that we want to have a creative economy as a world leader, and I think we have got tremendous strength of creativity and innovation and a pretty good technical infrastructure now, so we should welcome new players coming into the market. Q497 Chairman: Anthony, perhaps you are best placed to tell us. Traditional broadcast television, which could be defined as public service broadcasting, covering drama, light entertainment, documentaries, is extremely expensive to make. Having distributed, the companies that are likely to remain as those who able to commission that type of programming are likely to be the main broadcasters with whom you are familiar. You cannot see new media companies, certainly for a long time to come, spending half a million pounds to commission a television programme. Mr Lilley: No, there are two reasons why that is certainly true and likely to remain true for a little while yet. One is the reason you are describe there. I think it is more to do with the skills and the aptitude than it is just the economics. The economics are big and difficult, but there are movie studios, there are games developers who could be in the original content business. It is the attitude that they share, the ability to take creative and commissioning risks, which I would not say is an anathema to people in the new media business, of course it is not, they take different kinds of risks. The second reason is that business models in certainly the large new media players do not require that kind of innovation in risk in content; people do not need to fund stuff to help people find it. I recently described this as you cannot just make a business out of your archive because Google are doing it for you; because that is what they are currently doing a wonderful job at, as are companies like Yahoo. Will there be a time when they start to come together? Probably. Would I like to put time on it? Not at all. It will be some time yet. But that does not necessarily mean that public service content has to come from public service broadcasters. I think there are very legitimate arguments around, as Mark is saying, as to precisely how PSBs are investing in new media properties, and I would say in certain areas they are under investing in creative innovation and over investing in distribution. They are worrying about producing video players or websites that are designed for the distribution of television programmes when maybe the long-term value is in new kinds of innovation and less in new forms of distribution. I think that is a fascinating question about public service broadcasters but I come back to where I started. Huge amounts of public money, vastly more than is spent in the broadcasting ecology, are spent in areas of the economy which are gradually moving into the use of media - the arts sector, the education sector, even the health sector. There are huge amounts of regional development agency and national government money being spent in the promotion of creative industries and the digital economy generally, a lot of it spent on infrastructure or equipment, not a great deal of it spent terribly intelligently on innovation in the creative industries, so I think we can look much more widely at the impact of new media across public services than just public service broadcasters. It is common for PSBs to try and stop us doing that, to try and make us believe they ever had a monopoly on the notion of public service media because we have newspapers and we have all sorts of institutions already. It is not as simple as that; it is much more complex than that in this new space and that leads to great benefits for the consumer and, more importantly, for the citizen that are not just about minimising the market impact on broadcasting or on media but can also be about public benefit. Public service entities start there. They do not start at minimising market impact; they start at maximising public value, and I think it is important we think that way round. Q498 Mr Hall: A lot of the debate is about should the Government intervene in new media to ensure that we have got public service content. Evidence presented to the Committee and published elsewhere says that there is a huge amount of valuable material available, barriers to enter into it are low and therefore there is not any need for the Government to intervene further. Mr Lilley, what is your view about that? Mr Lilley: There are two categories of answer to that. One is that the Government - the Government very widely conceived, by the way local authorities, all kinds of public bodies - is spending huge amounts of money on new media content. Are they doing it effectively? If they are not, could they do it more effectively by investing that money differently? I would start with the first question: how is the Government already spending this money, and then I would come to a second question about public service broadcasters: are they investing this money for maximum public value or not? I would say not yet. I think the suspension of the BBC Jam service, the education service, is a fascinating question about what we mean by public benefit because there is nobody else investing that sum of money in our children's education on-line. It is not happening and yet there is great difficulty and furore over that service. The third is: should there be new money? I do not think there should be new money. There are huge amounts of money already. I think rather a lot of it needs to be challenged about whether it is being spent in the best way. Is the best way to spend this money to have another television channel? Four hundred channels are too many channels. How do you get better quality, not more distribution? I would be asking that question of the BBC and Channel 4 and of public bodies generally that are spending this kind of money. Are they spending it well? Are they spending it efficiently? How will we know rather than just should we have more. More is not necessarily better. Q499 Mr Hall: You are talking about the quality of public sector content in the new media. How do you judge that? Is there a set of criteria that you use or is it just something that you have a feel for? Mr Lilley: It is interesting that there are significantly better statistical methods for measuring, for instance, what the reach of new media services is. Stephan can know a lot more about his audience per se than any broadcaster can by definition, so we are moving in a direction where it is possible to get the data. More significant and much more difficult to measure is the impact of what changed as a result of investment in public media. To take an example, there is a very fine health website which is run by survivors of cancer to support people who have just been diagnosed with cancer. The numbers in terms of brute numbers would never chart on a broadcast map but the impact and the benefit to the individuals concerned is absolutely huge. We have to move into a much more sophisticated model of measuring impact rather than how many bums were sitting on seats when a television programme was on in this new space. Thankfully, so do a number of the commercial players, so do the advertising entities want to know more about what their money is doing, so I think we are going to learn a great more but we need a mature debate than simply how many people viewed this. It is really about that impact. There are a lot of examples of services run by communities for communities where you really see that impact in small numbers. Q500 Mr Hall: So you are making a very strong case to say that impact is far more important than this just being universally available on the internet? Mr Lilley: I am not sure whether it is feasible to make arguments for universal availability of content. I think it is difficult. As for the question that Stephan was asked, "How do people find you?", I am assuming from experience that people found the piece about A World without America because of the subject matter and because it resonated with something they were interested in and there ways of searching for it on Google or they were recommended it by friends. Otherwise he would have had to have one hell of a marketing budget to achieve it any other way. I think people do find really valuable, really important information and experiences and they share them with each other. For instance, the cancer website that I am talking about has no formal marketing budget at all, but why would it need one because everybody who experiences a benefit from it tells everybody else? Q501 Mr Hall: Stephan, I put the same question to you. Is there a need for government intervention or should we just allow the market to lead us wherever it is going to take us? Mr Shakespeare: Let me slightly reverse that and say that if you are going to spend taxpayers' money to try and create quality in the media why would you spend it in one place only, which allows that place, obviously, the BBC, to continue to make the same mistakes and not suffer the consequences? When the BBC had its big navel-gazing exercising and was saying, "How do we make our political current affairs programmes more accessible to the public?", the answer they came up with was inane programmes, more really foolish visualisations of things, less real discussion, because they were aiming at a theoretical audience that was not there rather than serving the existing audience for current affairs better. That they were able to get away with that, do very poor experiments and really not suffer any consequences from that was because they have a monopoly on that money and therefore they have a monopoly on that experimentation. I think if there are others that are getting that then there is competition for the BBC, not on its own terms but on other terms. Q502 Mr Hall: Would you make the case therefore that the licence fee should not be exclusively for the BBC but should be used for wider programme content? Mr Shakespeare: I have some questions about a licence fee but if there is going to be a licence fee, if there is going to be public money spent on it, it ought not to prop up the monopoly. Q503 Mr Evans: Mark, were you at all concerned when Sky bought a stake in ITV? Mr Wood: When it bought the stake I had a frisson of concern but since then none at all. The reason for the slight concern at the beginning was that we were in the process of negotiating a new long-term news contract with ITV and on previous occasions we had faced a very tough fight with Sky which competed with us head on. This time around ITV did not put the contract out to tender because they were pretty happy with what we are doing and we have just signed a new six-year contract. Of course I had some concerns that it might suddenly have an influence but it has not. There has been no indication at all of any influence by Sky on that process. Q504 Paul Farrelly: I am sorry I am late, Chairman. I have a big redundancy situation in my constituency and I had to meet with senior management of Woolworth's and the local trade unions. Mark, you and I have known each other for a long time since we were at Reuters together. I see Reuters' independence is now compromised. Nothing is bid-proof these days. Mr Wood: No, so it would seem. Q505 Paul Farrelly: Can you just update us on where ITN stands with respect to ITV's previous inclination to try and bring the whole operation in-house? Is that still live or is it something that has been shelved for the meantime? Mr Wood: I do not see any sign of it at all at the moment. They have signed a new long-term contract with us as an external supplier. We have a very close working relationship with ITV, as we do indeed with Channel 4, and we have a very strong partnership with ITV Regional News which is owned and managed by ITV itself. Right now I do not get the sense that it is on ITV's agenda to acquire ITN. Also, growth businesses are largely B2B businesses, for example, in the archive image sales business which we are growing globally. That is not necessarily a perfect fit. It is possible that one day it might come back on the agenda but it is not a live issue, I do not think. Q506 Paul Farrelly: Clearly you support plurality in news provision. There are yourselves, the BBC and Sky. Sky News does a very good job as well. Mr Wood: Yes. Q507 Paul Farrelly: Yet you supply news to more than one channel. To encourage plurality it could be argued that you should be encouraged not to supply news to so many channels. What would you say to that? Mr Wood: I think our model is based on trying to get the best of all worlds in that you get the economic and commercial benefits of an integrated infrastructure because costs of news-gathering and news production are still pretty high, and Channel 4 News and ITV News share things like satellite paths and the in-house servers and studio equipment and studio staff, so you get those economies but they are managed editorially separately and so they have a difficult agenda. There is co-ordination on use of logistics and crews. They are asked to share crews as well, but essentially they are driven by separate editorial managements and that means that you do get very different news services. ITV News and Channel 4 News are not the same. As you know, they are very different beasts. Q508 Paul Farrelly: From what we have read in your submission, in the multi-channel digital future you say that there may very well be many news providers and there is no guarantee that "PSB values and news will survive". What do you mean by that? What do you mean by public service broadcasting values and news? Why might they not survive? Mr Wood: I come back to the point I was making earlier that there is a certain degree to which some dimensions of news coverage are quite expensive to provide. For example, ITV News recently did a week on global warming anchored from Antarctica and sent Mark Austen down there and it had a report on the Cartaret Islands, which is a group of islands in the Indian Ocean, which are disappearing beneath the waves. They brought the theme of global warming to life and conveyed it in a very interesting way to the viewer. Channel 4 News has had "weeks from", such as Week from Iran, which was a tremendous success in just giving a different perspective on the news coverage of Iran, and indeed it led to a very strong relationship which was of value when the sailors were being held captive. Channel 4 News got an interview with Larijani who suddenly said they were open to negotiation. You suddenly see that there are different dimensions. Could you fund that with a purely commercially based system? Probably not. I think that is where you get the different shades of argument, that there is a funding issue around depth of quality of news, and I think if we want a highly informed society then that is where you see the price being required, if you like. That is the price you have to pay. You get it from the BBC but if you have got some PSB funding around other competing news providers you get a richness of coverage which I think does inform debate. The person I heard waxing lyrical on this last week was Tina Brown, who came over from New York and said that the problem in the States is that they have got a very weak PBS system. There is a dearth of strong broadcast news analysis in the way that you get it in the UK. Q509 Paul Farrelly: There are obvious current situations such as the abduction of Maddy in Portugal and the deaths of the people who have come back from their stag evening on the M25. Those events would always be covered in a reactive sort of way. What you are saying is that where it takes more effort to explain that may not survive? Mr Wood: Yes, I would say that is right. It is trying to set an agenda and also to inform the public. As I said, the funding we have received from ITV and Channel 4 News as part of our contract to open up news reporting in China I think is going to be of enormous benefit in the way we have added a dimension to our news provision in that China now features regularly and it is done in an engaging way to really bring home the pace of change in China, the social aspirations and the environmental impact of its fast-pace industrialisation. That helps to shape thinking here about issues like global warming in a way which may not otherwise happen. I think that is where the value is. That is trying to define it and then you have to ask how you fund it. I think you can argue that ITV will always want a strong news service. Particularly we are seeing under the current ITV leadership that they are very committed to a strong news service, so it is probably a channel differentiator, I would say. Whether or not funding were available they would carry on doing it, and Channel 4 News, I think, has said it will struggle to fund its news provision in the same way if it does not get some kind of public support. Q510 Paul Farrelly: I am going to open the next question up to the other members of the panel so I suspect I may get different answers, especially from Stephan, on this. The argument you have made though is a completely distinct argument from the issue of regulation of broadcasting to make sure it is as politically neutral as possible so that people do not have the same sort of filter for political news and opinions as they have with the newspaper industry. One of the reasons that people wish to support ITN and BBC News is to make sure, to coin a phrase, that we do not go down the Fox-isation news route as they have in the United States. Do you think that regulation from a public service point of view should remain or should we just deregulate? Mr Wood: I think the answer is probably both. There is an argument for having public service broadcasting labelled "news" which is demonstrably and is guaranteed to be independent, reliable, balanced and regulated in that sense, but I think we are going to see probably an explosion of Fox-type services because publishers can do it. As I was saying earlier, if the Daily Telegraph wants to launch a Telegraph TV channel - and we have worked with The Telegraph and we would be delighted if they did - why should it not have a Telegraph slant to it? As long as it is clearly labelled what it is I do not think that is going to damage the ecology. I think people are quite sophisticated in this country and will know what they are getting but they will want to know that BBC News is reliable and they will want to know that anything else which is labelled public service news is balanced and delivers what it promises. Q511 Paul Farrelly: Stephan, my friend Iain Dale did me a great service in publishing a book for me, a politico's, a few years ago, and he has been trying to tempt me onto 18 Doughy Street. As a Labour politician I have so far resisted it, strangely. Should you not be regulated, even though you stream over the internet, in the same way that ITN and BBC are? Mr Shakespeare: I do not think we should because ITV and BBC and ITN I think have rather narrowly defined what "unbiased" means. They could be much freer in the use of different voices so long as those voices were balanced. Before you came into the room something I was saying that we are going to broaden our offering considerably, not by not doing the things that we are doing now but by bringing in a lot of different voices from different parts of the spectrum, and I think that is another model. Going back to your previous question, I think it is right to look for quality in traditional news values and traditional models of news, but why not also look for quality in new models which do not look at saying, "I am the voice of tradition or authority" about what is happening in Iraq, say, but instead of sending a team out there you get a whole lot of people who live in Iraq making their own films in a structured citizen journalism way? So long as you had a variety of voices and you platform them appropriately you could get a much better picture of what is happening out there through the eyes of a particular reporter. I think there are other models of balance, that is to say, I do not think anybody ever can be balanced. I do not think the BBC is balanced, I do not think any individual reporter is ever balanced. All you can get is a balance of voices. Q512 Paul Farrelly: Some would say that you are particularly unbalanced. Mr Shakespeare: I am sure I am as unbalanced as everybody else in this room. I think that is absolutely right. My take on world events would be from my corner of the world and I think the pretence that it can ever be different is very dangerous. The idea that the BBC is untainted by bias is obviously ludicrous. The idea that Jon Snow presents a balanced picture of the world is obviously ludicrous. I do not have a problem with that so long as there are plenty of other voices as well. Q513 Paul Farrelly: Mark has taken a middle position and you cannot get more independent than that, but as an independent producer what is your take on this, in particular with the streaming of services on the internet and the mainstream television news broadcasters? Should there be more plurality and how can you justify treating the internet, which is different, differently? Mr Lilley: I think I am probably unbalanced in a different way from Stephan's unbalanced. I think it is rather comforting, this idea that anybody is impartial and that anybody ever was impartial or that institutions are impartial. It rather depends on where you look at them from, does it not? There is a great deal of research, for instance, in minority ethnic communities that perceive the BBC to be extremely partial and other institutions and other organisations. Obviously, I am not picking on the BBC. I think it is rather a comforting, mass-media myth that there was ever balance and that there was ever impartiality. I think we are only seeing that now that we have a vast number of other institutions and organisations and individuals telling us about the news. More important now is whether things are authentic, whether you can tell in some way whether things are authentic, whether they are true, whether they are reported fairly. That means that we require serious media and literacy skills as individuals and we require serious labelling, as Mark was saying, and understanding of what somebody is purporting to be. I think those are urgent challenges rather than illusory notions of whether individuals are impartial or whether the given number of minutes in party-political coverage gives you balance. I am not sure it necessarily does give you balance. It gives you a sort of notion. For me it really comes down to whether or not people know what they are getting and whether they have the skills and understanding of the process of creation and also of the process of manipulation that may be going on to really understand what is underneath those stories. It is very different across generations. If you look at the way in which stories are interpreted by those who are native to this new participatory world, they go and look for sources that are very esteemed. A colleague of mine, a gentleman called Professor Stephen Heppell, who is an educational theorist and may have appeared before this Committee; I am not sure, describes this by saying that the key skill of the 20th century was to write an essay which assimilated all the sources and the key skill of the 21st century is to go out and check whether they were true. It is a very different way of viewing the world and that is what it is increasingly about, not one source but the ability to go and check, find and verify sources, and sometimes that is done for you by media brands and sometimes it is not. Paul Farrelly: I was terribly old-fashioned in coming through Reuters on the one hand and on the other accuracy is all. I will not carry on now because I hear my colleague Nigel Evans straining in my ear to come in. Q514 Mr Evans: No, you did not, but I will anyway. Stephan, you would like access to some of this money that is not there yet. How much would you like? Mr Shakespeare: Of course I would not like any of it because I think we can do it on our own. I think it should be the other way round. I think it should be what are you trying to achieve with this money and then you go out and find people that can do that for you. It seems to me that we are a long way from having a clear idea of what we would like to do with this and therefore for us to claim it or for others to distribute it seems to be still rather early. I guess I would suggest taking a small part and doing a few experimental dispersements here and there and seeing what comes of it Q515 Mr Evans: You are doing that now, are you not? Mr Shakespeare: We are not receiving any money from anybody. Q516 Mr Evans: No, but you are doing experimental stuff. Mr Shakespeare: We are. For example, we wanted to send three or four people out to France following the French election to get a two-hour job on the future of France rather than a ten-minute job on it, which is all you will ever get from the mainstream broadcasters. There will be a small audience for that but it will be something that we will refer back to as well and use in different ways. That was beyond our funding so we would probably have come to you and say, "This is what we would like to do. Do you want to help out with this?". Obviously, I will always be asking for more but I think it is early days yet. Q517 Mr Evans: Also to Anthony and to Mark, have you any idea as to what you would do differently if you were able to get access to any public service broadcasting money? What would be the carrot to give you the money? Mr Wood: You raised the question earlier on: would you provide a 24-hour channel? We could do. That would be one way of ensuring that you have got a greater range of offerings of 24-hour news if that were available. Otherwise, the way that PSB has been approached I do think there is an argument for channelling it through existing broadcasters and also for using some money to look for innovations, but sometimes the market does provide innovations. We are a partner and shareholder in a company called Espresso which has a digital education system, which is in more than 50% of all English schools now and that is a commercial enterprise. Of course, it is being paid for out of the electronic learning credits which are provided in schools but it is a business which is growing without any public subsidy whatsoever as a commercial enterprise and is very successful. You can see that with determination, good ideas and good management you can achieve quite a lot in the current world. I think the example that Stephan gave us is a good one, that if there were funding available to help start up new businesses to add dimensions to what they do, why not? It is a good idea. Mr Lilley: I did quite a lot of work on the public service publisher for Ofcom and in that thinking, just as a paper to provoke consideration really, there were ideas around services like Stephan's or the cancer society I was talking about earlier which find it difficult to reach scale. You have got relatively small, relatively niche projects which are supportable at a certain level but to jump up a scale, to really achieve the service that the cancer site is doing across every borough and every town in Britain, is going to be expensive or at least risky to begin with until you achieve the critical mass that you need for these new media services. Quite often getting them started is a lot easier than it was in television, so, going back to John's point about how expensive is drama, the barrier to entry is incredibly high with drama. The barrier to entry with a community-driven website is not terribly high until they work. The barrier to entry is not high; the sustainability and the management of something that grows to scale is really quite difficult, and so you end up suddenly in a very different kind of funding model where you are trying to work out how to bring that public value on a very large scale. Then there is the innovation point which I think is really central. I would use public money in a non-commercial way. I would ensure that you were investing that public money for public benefits and if commercial players could build a commercial service on top of it, so be it; let them do that, rather like we do with basic scientific research. We invest in the basic research. When it is turned into technology and sold as products, marvellous, well done, everybody benefits, the economy improves. I think there is a cultural model there for saying innovation at the base which allows that kind of growth should be for public benefit and anything that can be built commercially means you do not have a negative market impact because you do not operate in markets; you operate in a public sector space and you prime markets. You have to look at state aids, you have to look at how you do that, but we do it in aerospace, we do it in biotech; we do it in a number of other sectors. We do not do it so much in creative industries, which is 8% of UK GDP and rising. We do it through public institutions. We do it through the BBC and the museums and the galleries and the art schools, et cetera. I think it is a more active way of doing something we have been doing rather well, frankly, since Victorian times, but that moves into the new economy and the way in which we have got this much more open, much more networked, much more democratic potential in these new networks. It is how you prime them so that they become the best they can be rather starting from the assumption that something they have not got to do is hurt commercial markets. It is best public value with least commercial negative impact. I think there is a win-win situation rather like there is in basic science. Invested properly the boat rises for everybody. Q518 Philip Davies: Mark, following Stephan's comment, do you think that Jon Snow is impartial? Mr Wood: Yes, in his own way. Jon is very active in a number of different arenas apart from Channel 4 News, but Channel 4 News actually does strive very hard to be surprising, which it manages to be, and to be quite tough on just about everybody that it interviews. There is a good tradition there of it being rigorous and good in its investigations. He is a recognised personality. I think people to some extent take that as part of the character of the man and the programme, but I think if you look at its track record of coverage you will find that it is pretty balanced. Q519 Paul Farrelly: If you asked Alastair Campbell whether he thought Jon Snow was impartial what do you think he would say? Mr Wood: I think he was given a pretty hard time and I think most government ministers would say much the same. I think Channel 4 News is quite feared in its rigour and its approach and there have been some quite severe punch-ups. I do not have a worry in that sense, that it has got a party-political or one-sided bias at all. Chairman: On that note we will say thank you very much. |