Examination of Witnesses (Questions 60-79)
LORD CURRIE
OF MARYLEBONE
AND MR
ED RICHARDS
22 APRIL 2008
Q60 Chairman: Having drawn that balance
it would be fair to say that you would not be happy if on Friday
further measures were brought in which would tip the balance in
one direction.
Lord Currie of Marylebone: The
judgment of the Ofcom Board is that the balance we struck was
the right one. Clearly it is possible for reasonable people to
take a different reasonable judgment on that question. It would
not be one that the Ofcom Board would have supported.
Mr Richards: We are due to review
this and the effect of our changes in July. The idea that the
problem in children's television has been caused by those changes
is complete nonsense. The reductions in children's television,
in commercial provision, began seven years ago—they have
declined every year since—prior to when the prohibitions
came in. You simply cannot equate the two things together; it
is disingenuous in the extreme. Our changes will make a £20
million to £25 million impact. The significance of the pre-9
pm watershed is that we estimated the impact on programming generally
would be somewhere in excess of £200 million and that was
one of the reasons we drew the line where we did. There is a very,
very substantial difference.
Q61 Philip Davies: You are doing
a review in July but we are debating this on Friday in Parliament.
It is a bit late in the day to be having a review in July if something
has already passed in Parliament beforehand. In terms of your
perspective, your view is that on Friday people should be very
reluctant to go further down the line of increasing restrictions.
Is that what you are saying?
Lord Currie of Marylebone: It
is very much a matter for Parliament to make its decision but
I would hope that parliamentarians would read the very substantial
body of evidence we have produced.
Q62 Philip Davies: Do you not think
that this whole episode has done a lot of damage to Ofcom's reputation?
In your annual report you make a big play that you will operate
with a bias against intervention, that you will seek the least
intrusive regulatory methods, that you will strive to ensure that
your interventions are evidence based. In the earlier session
with DBERR you were talking about how independent you are, but
the whole episode of the introduction of this ban—which
has no evidence behind it whatsoever, it was, as you were indicating,
because some people were banging on about doing nothing and some
people were banging on about doing lots of things so you found
a cosy compromise—all it has really done is to show that
Ofcom are quite weak and cave in under a bit of pressure and on
the whole are a bit of a government patsy and just do what government
wants to do. Do you not think that this has undermined the whole
of Ofcom's basis for existence?
Lord Currie of Marylebone: That
is a complete misrepresentation. We engaged in a very considerable
body of original research commissioned in order to get to the
heart of these sensitive issues. We then struck a balance. You
quote our regulatory principles; we do have a bias against intervention
but the second part of that principle says that where necessary
we will intervene decisively and this intervention was one where
we judged it was appropriate to intervene.
Mr Richards: I do not think we
have ever done a more evidence based piece of policy, to be honest
with you. The research and analysis that went into that was absolutely
extensive and I think the independent judgment that we made where
we were uniquely placed to make that independent judgment—it
is well known there are MPs of all parties who disagree with what
we have done from different perspectives—which is illustrated
by the fact that we were not willing to support a pre-9 pm watershed
ban and the reason we were not was because, even though we could
recognise the impact that this commercial advertising was having
on a broader concern for society (in other words childhood obesity),
we also had to bear in mind our duties in relation to quality
programming, including children's programming. That is why we
took the judgment that an impact of £200 million would not
be acceptable but a much more limited impact, which would reduce
the exposure of children to that advertising, would be a proportionate
measure. Indeed, the provisional data that we have already had
prior to the full review in July demonstrates that it has had
a very real effect. I think the reduction in exposure of children
to HFSS advertising in, for example, dedicated children's channels
is 49% and there are other examples of reductions as well.
Q63 Philip Davies: By how much has
obesity reduced?
Mr Richards: That is clearly,
as we said right the way through, not an outcome which we can
conceivably be held responsible for. When we embarked upon the
work in this area, at the start, the middle and the finish, we
made it very clear that all we could do was take a responsible
judgment in light of our duties and our responsibilities, but
the wider issue of obesity is clearly going to be influenced by
many, many, many different factors, the vast majority of which
are outside of our control. We were very clear about that right
the way through the process.
Q64 Philip Davies: In your annual
report you very helpfully produce a graph of all the activities
that children do whilst they are watching television: 30% are
using a mobile phone; 27% are playing computer games; 26% are
talking on the phone; 22% are on the Internet; 20% are listening
to music; 8% are listening to a radio station. Surely it is blindingly
obvious that if they are doing all of these things they cannot
possibly be taking note of adverts going on at the same time,
so how on earth can you possibly claim to be evidence based when
your evidence is completely at odds with what you have been trying
to do.
Lord Currie of Marylebone: If
that were the case I think the commercial advertisers would not
be advertising on those stations.
Q65 Adam Price: S4C has led the way
in prioritising children's programmes through the creation of
its new dedicated children's channel. You mentioned in the review
the possibility of an expanded role for S4C in producing children's
programming for the whole of the UK. Could you say a little bit
more about that and have you discussed this idea with S4C?
Mr Richards: We have provisionally
and I think there are two aspects to it. The first is that we
ask ourselves where could we go to try to address this challenge
in relation to children's programming and actually S4C are a substantial
commissioner of children's programming. I think they are possibly
the second biggest in the UK after the BBC; way behind the BBC
but second biggest. The question we asked ourselves was: is there
anything in relation to that investment that could enable it to
be used more widely for English speaking children as well? I think
that is an open question. In some cases I think it will be very
difficult; in other cases, particularly programming for younger
children again where it could easily be co-produced or reversioned
in English, that has to be an opportunity. What we would absolutely
not want to see is that idea convert itself into an idea which
in any way undermined or diluted S4C's central purpose. S4C can
only be successful and will only do what it is there to do if
it has a clear focus on providing a content television service
to Welsh speakers. It has to start there and then we have to ask
ourselves the secondary question: is there anything else we can
do to generate broader benefit as well? We pose the question in
that spirit really.
Q66 Adam Price: In order to make
it attractive for independent producers to co-produce or to do
reversion, would there need to be any change in the contractual
relationship, the ownership of the resale rights for instance
for wider markets?
Mr Richards: There could be and
that is where you could see benefit to S4C in terms of the cost
of commissioning. There is a scenario there in which it is a co-production
with an independent or another broadcaster, the costs therefore
are shared and you ensure that the core programme is what S4C
want for their channels but also it is enabled to be reversioned
and reused in English as well. I think that is potentially quite
an exciting area of exploration. As I say, we do not agree with
those who would see that as a way of trying to siphon off money
that is for S4C into something else. There is a great danger,
in my view, of confusing organisations in terms of their purposes.
If you try to get organisations like S4C to do other things as
well they will just flounder because they will not be able to
focus on what they are there to do. Let us keep S4C doing what
it does well, providing the service that it should provide for
an important community in the UK. If there are any other secondary
opportunities, let us explore them.
Q67 Mr Hoyle: Still on children's
television, programmes where there are game shows on where you
try to encourage the public to come on that programme, actually
the public do not get on, they are actually only taking children
from acting schools and it is a big con. Have you heard about
this?
Mr Richards: No, that is the honest
answer to that. We have not heard about it. We have not had any
complaints about it.
Q68 Mr Hoyle: Will you look into
it?
Mr Richards: Yes, we will look
into it.
Q69 Mr Hoyle: Somebody came back
to me and said he could not believe that CBeebies have been asking
for children to go on but everyone was from acting school except
one child from my constituency.
Mr Richards: We would be very
happy to look into it; we have not come across it. We are planning
a second seminar session with the broadcasters on the whole issue
of trust in broadcasting and that will actually provide a very
good opportunity for us to raise it very directly.[1]
Q70 Philip Davies: How important
is it for ITV to maintain its sub-regional news bulletins?
Mr Richards: That is something
we are going to consult on in the autumn, in the second part of
our public service broadcasting review. We are aware that ITV
wants to make changes and clearly we have set out the challenge
for commercial public service broadcasting. What we have found
in our research on this so far is that viewers value regional
news very highly and if we were to prioritise or be clear about
what the relative priorities of public service broadcasting from
the commercial sector are in the future I think our view is that
regional news would be very, very high up the list. We would enter
the consultation on their proposals with that spirit.
Q71 Philip Davies: What factors would
influence your decision?
Mr Richards: The value that we
identify that audiences place upon it, the costs associated with
the provision (which is very important) and the opportunity costs
in relation to the provision as well (in other words, what would
the value of that slot be if it was not regional news). The central
question that we will ask ourselves when we look at it in the
round will be: which components of public service broadcasting
do we think the viewers most value? Which are the most important
in relation to the duties we have been given by Parliament? What
is their cost? Which ones can we credibly expect ITV to deliver
in the future? As I say, I think regional news is very high up
the list indeed.
Q72 Rosemary McKenna: On the question
of support in terms of Scotland and the public service broadcasting
requirement where you are saying there is a real possibility that
the costs will not cover the benefits that are there at the moment,
you say that as soon as two years from now it will be in some
difficulty. How should the public service content be maintained?
It is very crucial in terms of the devolved settlement that there
is a plurality of provision. It is quite clear also at the moment
that STV are working extremely hard and are improving their content.
In two years' time are they going to be in such difficulty that
they are not going to be able to maintain that? How can we deal
with that?
Mr Richards: It is a very difficult
issue. We do think the challenge here will come in the next two
or, at best, three years. We have a two-fold approach to it. We
will look at the possibility of an evolved model, so how much
value is there in the licences? What can we expect the ITV companies—or
STV in your case—to deliver? What can we credibly impose
on them through licence obligations? Alongside that we will ask
ourselves if there is an alternative approach which we also need
to consider because of how stretched that model is. I think that
is where we get into the broader range of questions that we have
opened up in the PSB review where we ask ourselves about the model
of public service broadcasting that we want in the future. Is
it the evolved model that we have just described? Is it a BBC
only model which would mean that you would potentially lose plurality
in those areas? Or is there another model which might involve
BBC and Channel 4 with a strengthened PSB remit and some broad,
competitive funding, so some other funding which would be potentially
available for national, regional news or programming of other
kinds. That is the big debate that we are now entering. The reason
we brought the PSB review forward two years was because we saw
this problem coming and I think we—I am using the "we"
very collectively now, Parliament and government as well as ourselves—do
have to understand how we are going to answer those questions
in the next two or three years.
Lord Currie of Marylebone: Ultimately
it is a matter for government because the funding stream is something
that government will have to arrive at. We can help the debate
and identify options.
Q73 Rosemary McKenna: Surely in terms
of a purely commercial operation it is up to them to ensure that
they provide the requirement that is put on them.
Lord Currie of Marylebone: There
is a great deal of self-help they can do in terms of enhancing
the economics of their business, but ultimately if we are putting
regulatory burdens on them that they cannot sustain they will
walk away and that is the dilemma.
Q74 Mr Weir: I agree with Rosemary
about the need for plurality. I represent the northeast which
was covered by Grampian Television and became part of STV, but
what STV now do—I agree with Rosemary they are trying very
hard—is that they do a regional news programme that is broken
up with opt outs for both Dundee and Aberdeen covering the former
Grampian area. That is something the BBC does not do; we get one
programme reporting Scotland which is very much central Glasgow
based. I would be extremely worried if you were suggesting that
STV would no longer have to produce regional news programmes in
that way because that would seriously impact upon the plurality
and the news outside the central areas of Scotland.
Lord Currie of Marylebone: We
fully understand that. What we are saying is that there is a dilemma
here. It may well be that without an additional funding source
that is the position we will arrive at. We are not saying that
that is a desirable situation at all.
Q75 Mr Weir: What is the pressure
that is driving this?
Mr Richards: It is really important
to understand that we do not have infinite powers just to make
them do these things. This is the crucial change. In the past
that has been the case but that has gone. We have to now exercise
a judgment about what is economically possible to put in the licence
obligation. The question that we are just going to let them off
or something of that kind is not going to happen. We recognise
this as a very, very important issue, but the value of the licences
that they hold is declining, will decline further and has been
in decline for many, many years now. There comes a point, which
we estimate to be somewhere between 2009-2012, when, if we are
loading them up with obligations that involve costs or which require
them to show programmes and exclude another programme which would
raise far more money, they will simply hand the licence back and
say, "Get someone else to do it".
Q76 Mr Weir: You are not seriously
suggesting that a company being told they have to produce a half
hour news programme from 6 to 6.30 is going to hand the licence
back because it cannot fit another Australian soap opera in.
Mr Richards: Regional news is,
by some distance, the biggest cost to the ITV network of any PSB
obligation there is. It is very costly to produce; it secures
significantly lower audiences than they could secure with whatever
soap opera. It is a very serious question.
Lord Currie of Marylebone: I think
it is absolutely essential to make sure we grasp this point. We
see the value of regional news but we do have to understand that
its production is under huge pressure and we have to find a solution
to that if we want it to continue.
Mr Richards: Our view about the
centrality and importance of news is very clear and we have said
it on so many occasions I do not think we need say it again. The
research we have done supports our own view on the centrality
of news and we have argued very strongly for the plurality of
news. Do not misunderstand where we are coming from in terms of
desirability; we absolutely want to secure it, we absolutely want
to make sure it is delivered for many, many years to come. It
remains an open question about whether we can actually do that.
What we want to make sure is understood is that over the next
few years we may have to look at another way of doing it. That
is what we are doing at the moment. I hope that we will be able
to say that this is a central part of their obligations and actually,
when you look at it in the round, there is enough value in these
licences for them to do that and we can retain that model. However,
I cannot sit here in front of you today and guarantee that that
would be the case; that would be completely irresponsible of us.
Q77 Adam Price: You have estimated
that by around 2010 the costs of public service broadcaster status
will exceed the benefits in Scotland. Do you have similar outline
dates in mind for Wales, Northern Ireland and some of the English
regions as well?
Mr Richards: It is very similar
in Wales. Northern Ireland is slightly better placed because the
audiences tend to be higher and therefore the opportunity costs
associated with it are not as great. It varies slightly, but broadly
speaking the same challenge is going to be there in Wales as well.
Clearly, just as in Scotland, it is a very, very big issue in
Wales. Imagine Wales without regional news from ITV as an alternative
to the BBC, that is quite a significant issue.
Q78 Adam Price: Would you say that
because of the weakness of the print media in Wales that actually
the plurality issue is even starker?
Lord Currie of Marylebone: We
are certainly very aware of that. That is an important factor
that gives extra salience to this issue.
Q79 Adam Price: You identified the
possible need for additional funding and you have outlined four
potential options in broad terms. I think the Culture, Media and
Sport Committee in its Report also identified two of those options
which are the possibility of top slicing the licence fee and general
taxation. Of the two additional options that you have set out,
using regulatory mechanisms is one option but also introducing
industry levies of different kinds, are they realistic options
or are you merely adding to the list to give the impression that
you have not already made your mind up?
Mr Richards: They are actually
credible in the sense that regulatory assets exist. Free spectrum
will remain a possible choice. We can apply pricing spectrum or
we can waive it. If we waive it that is clearly a value and we
could consider that. There is an issue around the decisions we
make on advertising levels which has its own problems as we know,
but that is another form of regulatory asset which we could consider.
There are genuine decisions and genuine options in that area.
On the industry levy front, it is entirely credible in the sense
that some other countries use it. It is used in Canada, it is
used in Finland; President Sarkozy has very visibly floated it
as his preferred approach to funding public service broadcasting
in France. I think it is there, it is in play and I think it would
have been quite wrong of us not to have included it. Indeed, industry
levy is of course how Ofcom is funded so it is not that these
mechanisms do not exist or cannot exist; they do. The question
is what is the best approach to the nature of the problem or the
challenge that we have here? In other words, what is the best
approach for delivering public service broadcasting? Just to reiterate
here what David said earlier, the decision on that is very much
one that the Government will end up having to take. I think we
see our role as genuinely laying out the range of options—these
are the options and these are the pros and cons of them—and
then we will have to hand that set of options over to government
and Parliament and you will all have to debate it and decide the
answer.
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