Examination of Witnesses (Questions 20-39)
SIR MICHAEL
LYONS, MR
MARK THOMPSON
AND MS
ZARIN PATEL
3 JULY 2007
Q20 Rosemary McKenna: A much cheaper
one worked very well for Caroline when she was in the rail crash,
because we were all instantly able to see exactly what was happening.
Mr Thompson: When we talk about
user generated content, Caroline had the opportunity to actually
demonstrate it to the world. The big thing, we are trying to do
at Pacific Quay, which we are in the process of opening in Glasgow
at the moment—we will do it in Salford as well—is
what we call end-to-end digital work flow; in other words using
the new digital technologies from the moment we have an idea for
a programme, or the moment we are out on the field capturing the
content, all the way through production, post-production, broadcast,
archiving and so forth, and always with all of the information
about the content captured with the content—we call this
metadata—so that we and the public can find it when and
where we want it. So, there is a revolution to be had in how we
make content and how we broadcast it, and that should enable us
to achieve what we want to achieve.
Q21 Rosemary McKenna: Can I ask a
very specific question. Yes, your capital spend in Glasgow has
been wonderful, absolutely superb, but in terms of revenue spent
outside London, if you look on page 73, the actual spend in Scotland
has gone down considerably: £105 million in 2005-06 to £85
million in 2006-07?
Mr Thompson: We have had, as you
know, in this past year, not just a general slightly disappointing
run of network programmes for Scotland, but also one or two deliveries
of big programmes made in Scotland which, for a variety of reasons,
were not actually transmitted in the year; so I would expect the
network programme figures for Scotland to look much better in
2006-07 than in 2005-06. It is very important that we have an
opportunity for our colleagues in Scotland, not just to make great
programmes for people inside Scotland to see here and enjoy, but
also that they get a really good share of network commissions.
Q22 Rosemary McKenna: I had expected
it to go up because of the increase in the independent sector
that was recommended. It was agreed two years ago. Because Scotland
had the independent infrastructure to be able to use up that additional
money, I had expected the expenditure to go up.
Mr Thompson: The absolute commitment
by the BBC is to increase our spend and, in particular, network
productions from Scotland, Wales and Northern Ireland. As you
can see, the total national and regional spend has gone up over
the period, this year shows an increase in England, an increase
in Northern Ireland and an increase in Wales. Over the period
I am quite certain that we will get a significant and sustained
increase in Scotland as well, and Pacific Quay really is evidence
of our commitment. Pacific Quay is the most advanced broadcast
and content creation centre in Europe, possibly in the world,
and we are determined to get great programmes out of it, not just
for Scotland but for the whole of the UK.
Q23 Rosemary McKenna: I will be watching.
On another issue, which is separate, is it going to be impacted
by the reduction in spend, and that is the impact on plans for
services for disabled people and specifically the commitment to
audio description programmes?
Mr Thompson: No, our commitment
to what we call accessibility, making sure that our content is
accessible to people, our licence payers who live with disabilities,
will not be affected by the efficiencies. We are completely committed,
and what we are trying to do when we launch new services like
iPlayer is build accessibility in from day one so part of the
design of our new services builds in access of various kinds,
but specifically our commitment to audio description will not
be affected by this process.
Q24 Rosemary McKenna: So is anything
sacred?
Mr Thompson: I am saying that
is sacred.
Q25 Adam Price: I was wondering,
Mark, if a smaller BBC inevitably means another round of job cuts
in the BBC on top of the thousands of posts that have gone in
recent years and whether you are planning to make a specific announcement
about that shortly. Also, in terms of departmentally, where those
job cuts are likely to fall, whether because of convergence, which
has become the hot topic in news and current affairs, we can see
a likelihood that lots of journalists' jobs will go in the next
year or so?
Mr Thompson: The right time, and
I think the fairest time, to talk about this is when we have got
a complete picture. The BBC is a complex organisation. We are
talking about six years of licence fee spend, £20 billion
in the kind of model we are creating, and the right time to go
nap, if you like, on the consequences in terms of staff numbers
is when we have that model, and that is September/October. I talked
to BBC staff yesterday and what I said (because I have heard,
not for the first time, some completely wild rumours on this topic)
is that from what I have seen so far I do not believe that the
likely number of job losses, I do not expect the number of job
losses over this period, to be as great as the job losses we have
seen across the BBC in the current three-year programme. When
we get to the end of that programme the outturn will be somewhere
between 3,500 and about 3,800 job losses. I do not expect the
numbers over this next period to be as great as that. Where will
they fall? It does depend rather on the decisions we make. It
will vary across the organisation. There are some parts of the
BBC which are very lean in terms of manning already, particularly
in some parts of nations and regions. There are some parts of
the BBC in finance, the staff reduction—What percentage?
Ms Patel: 67%.
Mr Thompson: 67% staff reduction
in the current three-year programme, and we have been really working
hard and getting overhead and central parts of the BBC down to
size, as, I have to say, many people outside have asked for for
a long time. Having taken 67% out of finance, we are not going
to be able to take—. We have got a very lean financial operation
on the way, well under 1% of turnover going to pay for finance.
So, other parts of the BBC, I think, will be—. The other
thing is simply to say, where does the technology give us the
opportunity to make savings? We have to look at that. Having said
that—let us take journalism—what is absolutely critical
is that we do not allow this process to damage quality. I appreciate
that part of the way this often plays out is: is the BBC serious
about quality? We are totally serious about quality and totally
committed to all of our areas' output and probably centrally more
committed, if you like, to journalism than anything else, but
no part of the BBC, I would argue, should be immune from technology
change or from the need to find productivity savings if we can
find them.
Q26 Janet Anderson: Mark, you said
earlier that you thought the BBC will have to get smaller. Do
you think this will enable you to do fewer things better, and
do you think you should set out in a transparent way what you
will not do? I understand, for example, you have indicated that
the BBC will define areas of website content which it will not
cover, such as advertising content and some events in listings.
Do you think you need to give us a clearer idea now of what you
will not do?
Sir Michael Lyons: Can I just
offer a thought on that, because coming back to the Trust Report
and what we have learnt from our engagement with the public, and
I hope it is clear in our report, there are lots of reasons to
be satisfied with where the BBC is at this moment, but the one
area where there is the most profound gap between public rank,
the six purposes of the BBC and then where they feel the BBC's
current performance measures up is in this area of innovation.
Indeed, as you look through the Trust Report, coming back to some
of the earlier questions, you can see some of the elements on
which we will be challenging and demanding of the Executive in
terms of this reprioritisation exercise and the decision we eventually
make in the autumn. My first response to you, but Mark will want
to come in on the detail, is that I think the BBC, if it is going
to respond to its public, if it is going to respond to the unique
privilege of the licence fee and the certainty that gives, is
going to have to put even more emphasis on distinctiveness and
innovation, and that might mean less programmes, and certainly
the Trust would be anxious that any reductions are not spread
like salami slices across the whole organisation. Let us be clear
about purpose and the type of BBC we are trying to create for
2012.
Mr Thompson: I concur with that.
Can I also say that I think one of the things I felt really came
home to me during the Charter debate was the criticism from some
other parts of the media industry that you never quite worked
out what the BBC is going to do next; and I think there is an
advantage, and I think the autumn is the right time to do this,
in addition to saying what we are going to do, to have some clarity
about some of the things we are not going to do so that you do
not end up with, as it were, the equivalent of planning blight.
I do not think this can be absolute in every area, because if
the UK wants a really strong, relevant BBC, as media evolves and
as audience appetite changes, the BBC should respond, but I think
a bit more clarity in advance, as we look over the next three
or four years—what kind of new services is the BBC thinking
about? What kind of things has it ruled out?—would also
help the rest of the industry as well as also make sure that we
do concentrate the licence fee in a way which delivers really
outstanding content to the public.
Q27 Janet Anderson: Could I briefly
take you back to something you said earlier, Mark, about the growth
in the number of households which we had all assumed would mean
a greater income to the BBC. I think you said that you thought
this had been rather over-emphasised because of the kind of households.
I just wondered what you meant by that?
Mr Thompson: Because this is partly
Zarin's responsibility, I think I might get Zarin to respond to
that.
Ms Patel: Historically households
have grown by about 0.7% and 0.8% per annum, and that is worth
a significant amount of income, but what we are seeing in population
growth is that it is happening much more in urban areas and in
single person households, and those areas traditionally have much
higher innovation and they also move around much more, so they
are much harder to find and then retain in payment. Therefore,
it is getting harder to collect that population growth than it
was historically.
Q28 Janet Anderson: So it is about
problems with collection?
Ms Patel: Yes.
Q29 Janet Anderson: Thank you.
Mr Thompson: The point in economic
theory terms is that you can end up in a situation where the marginal
cost of securing the licence and maintaining the licence is much
greater than the value of the licence itself, so you get to a
point of diminishing and then, as with negative returns, at the
margins of evasion. So, actually monetising this next stage of
growth is going to be harder than it has been in previous years.
It does not mean we are not going to try extremely hard to do
it, but it does present more challenges for us.
Q30 Janet Anderson: So would you
perhaps prefer the kind of system they have in Canada where the
public broadcaster is funded directly by the Exchequer?
Mr Thompson: I can think of nothing
worse than the nightmare that my colleague Robert Rabinowicz and
others at the CBC have to go through every single year and the
vagaries of the politics of Canada, of the provinces and of the
federal government, and the way that plays directly into the funding
of the public broadcaster. If you do not believe me, do get the
CBC to come in and talk to you about that system.
Janet Anderson: We have met them recently.
Q31 Mr Sanders: They would like a
licence fee.
Mr Thompson: I think that is the
point. It is about political independence, above all, and about
certainty. You cannot make programmes like Planet Earth, which
take years to make, without the kind of certainty—. The
reason that the BBC makes them and very few other broadcasters
around the world make programmes like that is because of the certainty
of our funding, and it is very hard, although the CBC tries very
hard, to maintain political independence in your news and current
affairs, or elsewhere, if you know that you are never a few months
away from a debate about your own funding.
Q32 Chairman: But you would not accept
that the whole year that you were locked in negotiation with the
Government about the licence fee settlement that that had any
effect on your editorial independence.
Mr Thompson: What I say, Chairman,
is that the idea of a really thorough airing of everything, the
BBC mission, its charter, its system of governance and its funding,
in one go once a decade is so public, is so open to public scrutiny
and so open to Parliamentary, both through its committees and
on the floor of the House of Commons and, indeed, in the Lords,
that we have some protection. The system in Canada, where we are
just focusing on funding once a year, leaves an awful lot of power
to influence the broadcaster. I am not saying that the Canadian
system necessarily leads to that, but I think the risks are much
greater. If you look at different European models, I think you
can see the same thing happening.
Sir Michael Lyons: It is a magical
process, is it not, whereby money collected from the tax payer
instantaneously becomes government money, and that creates some
issues for us, not only in the BBC.
Q33 Chairman: I have to say, I am
not sure this Committee would regard the process you underwent
in the past year as particularly open, but on the issue of transparency,
I think Nigel wants to come in.
Q34 Mr Evans: And public money, indeed.
How much does Jeremy Paxman earn?
Mr Thompson: Firstly, I do not
have those facts to hand. Secondly, we have and we would preserve
with the overwhelming majority of BBC staff and employees a confidentiality
between them as an individual and us as an employer. Officers
of the BBC, and I am one of them, expect to have their remuneration
not just published but picked over with delight or disappointment,
or whatever it is, but with our employees, including some well-known
employees, we feel we have a duty of confidentiality towards them.
Q35 Mr Evans: I do not quite see
it in that way. Everybody knows the Prime Minister earns £187,000,
everybody knows that Jacqui Smith, as Home Secretary, earns £136,000.
A minister of state earns £99,000. Mark, your remuneration
package is £788,000, four times that of the Prime Minister.
I would see that as a badge of honour for yourself, quite frankly,
to say that you are earning a substantial sum of money. People
tend to know in round figures what Ronaldo earns, and Rooney,
so why are you so coy? Indeed, I think the BBC was angry when
some of the salaries of some of their top earners—Jonathan
Ross, for instance, and Terry Wogan—was leaked. Do not the
public have a right? With £3.5 billion pounds worth of tax
payers' money, does not the public have a right to know if people
are earning substantial sums of money?
Mr Thompson: I think the framework,
the strategy and the safeguards by which the BBC secures rights—sports
rights, programme acquisition rights and talent—should be
the subject of scrutiny and value for money studies. I very definitely,
absolutely believe—. The idea came up at the Public Accounts
Committee when I was giving evidence. I said at the time I was
not only content that there should be an examination of this but
actually enthusiastic. It is a good topic for a value for money
study. So I was taking that forward, the Trust was taking it forward.
I welcome scrutiny, but I think there is a world of difference
between: let us make sure a BBC is securing value for money, it
is not distorting the market, it is not driving inflation, it
is not paying over the odds for key talent, but I think that is
different from saying that the public have a right to know about
individuals. Public figures, and I recognise I am ex officio a
public figure, I think it comes with the territory, but I would
say our employers, including our presenters, have a right to confidentiality.
Q36 Mr Evans: Can I ask you then,
Sir Michael, on this issue as well. Everybody knows what the Prime
Minister earns and everybody knows what MPs earn, they even know
in round figures what our staff earns and, indeed, our travel
expenses, in round figures. They have got the costs, and, indeed,
journalists enjoy adding them all together and saying, "This
is how much an MP earns. MPs earn a quarter of a million pounds."
If only! The fact is we do not, there are distortions, but these
figures are made public once a year, so everybody can pore over
those. Do you not believe that people who are struggling to find
the licence fee every year, and some people do find it quite difficult
to find the licence fee—. I know it may be difficult for
you, Mark, on £788,000, but imagine a farmer in my constituency,
some of them earning £20,000 a year. This is a significant
amount of money out of their total pay. Do they not have a right
to know how such Jonathan Ross is earning or, indeed, Jeremy Paxman,
John Humphrys or any of the other big earners?
Sir Michael Lyons: First of all,
can I focus on what I think is the most important issue. I will
not dodge your question at all. The most important issue is that
all licence fee payers (and I absolutely accept your point that
for some it will be a struggle to make that payment) are confident
the BBC uses that money wisely, and there is no doubt that there
is public controversy about whether or not the BBC pays too much
for top performing talent. Members of Parliament have raised that
issue, it has been in the public domain and the Trust has responded
to that by saying, next year, one of our value for money studies,
carefully designed and drawing an independent head, whom we have
not yet identified, with knowledge of this area, will be to look
at the market for top talent, the BBC's policy; and amongst the
questions that we want to satisfy ourselves on is, is the BBC
responding to a market, set not only in this country but internationally,
or is there any danger that it is such a big player in the UK
that it actually becomes a market major? So, that is amongst the
questions that we will look at. It is not out of the question
that we might also look at whether there are dangers, and how
serious they might be, in greater disclosure about these figures.
I myself start from the position that the most important point
here is that the BBC gets the best value, and it may be (and I
just put this to you) that if we move to a world where all salaries
of performers were subject to the same rules that apply to my
job and your job, which is clear and complete public disclosure,
that we might actually find less people willing to work for the
BBC, and that would be to the detriment of the licence fee payer.
I think there is a pro and a con here. We need to be careful to
get the balance right. For me it is not an issue of principle,
it is an issue of what works best for the licence fee payer.
Mr Thompson: I think, on that
point of disclosure, if it is just the BBC that is required to
disclose and no other broadcasters do and its competitive effect
and also from the fact, I have to say, from one's own experience,
of the leaks, disclosure tends to be inflationary. As to any idea
that disclosure is going to reduce the costs—please! One's
experience is disclosure tends to be inflationary in terms of
the running rate. I suppose the last point I want to make both
about presenters and, more generally. Firstly, we recognise that
the licence fee is a real burden for many licence payers as a
proportion of disposable household income. It is going down rather
than up, it has been for some years, and it will continue to go
down over this period even for the poorest 10% of licence fee
payers. We recognise it is a real burden. We try and look every
single time, even though I know the sums of money can seem very
large, at value for money, and we walk away. We have had a couple
of recent examples with rights where we have walked away. With
Neighbours, a programme much loved on the BBC, where we
thought the price no longer made sense for the licence fee payer,
we walked away. We walked away from the FA Cup rights. There are
many examples where we decide it does not make sense to pay, and
I have to say—of course we will wait to see what the Trust's
study comes up with—I do not believe that the BBC drives
inflation. The BBC was trying to hang on to talent it already
had. It was not poaching talent, it was not trying to go into
the market with a cheque book to buy, it was trying to hang on
to the talent it had, and in the most notable cases the people
stayed at the BBC, turning down substantially bigger offers from
other broadcasters.
Q37 Chairman: Why do you need to
hang on to talent? The BBC is there to find new talent, to groom
new talent, but there may come a point where the talent is so
successful, let them go to the commercial sector.
Mr Thompson: Absolutely, and throughout
the BBC's history you will see that happening, from Michael Parkinson
back through Morecambe and Wise, Des Lyneham. The idea of established
BBC talent going to work for lucrative contracts with other broadcasters
is part of, in a sense, the system working, and it is vital that
the BBC across its main television and radio networks but also
with its new digital services is constantly trying to find new
talent. As it happens, I think the numbers of key established
presenters, entertainment stars, the BBC should try and hang on
to is very small, for that reason, and there is a walk-away price
in every single case in a sense, it should be a small number,
but when you look at the total economics of television, talent
costs are only one of the costs-lines. To every single significant
contract we apply various criteria, we look very closely at the
costs per viewer hour or per listener hour, we benchmark the particular
costs of the contract with other similar, and we make an investment
decision and then we go back and review those investment decisions
afterwards. We treat it like an investment and we often say no.
Q38 Janet Anderson: Could I turn
now to the question of repeats. It is clear from your report that
repeats in peak time on BBC1 are not popular and I think the proposal
is to reduce those. I wonder if you could set out for us what
your policy is in terms of repeats in the future, and, if there
is to be an increase, partly as a result of audience fragmentation,
do you expect to save any money as a result of increasing the
number of repeats?
Sir Michael Lyons: Can I, again,
start the response, and Mark will undoubtedly want to come in
on detail? Firstly, what the Annual Report clearly shows is that
the BBC's target of reducing repeats on peak time for BBC1 set
for it by the governors has actually been progressed; there is
a reduction in the repeats there. What the Trust's Report seeks
to do is, again, based on the research that we have been doing
with audiences over the last six months, to try to bring a desire
to open this debate up a little bit, because for some people a
repeat is just an opportunity to see something they did not see
the first time round, and it is very clear, with people having
busy lives, many choices, a wider range of output on both television
and radio that actually our public are saying very clearly that
they appreciate the opportunity to have a second opportunity to
catch up with something, particularly if it is part of a series
or an on-going serial. So, we are saying, look this is not as
simple as a simple index of more repeats or less repeats; what
we have got to try and do is to map the pattern to more clearly
reflect the choices that the public want, and so this is going
to be an issue that we take forward in the reprioritisation exercise.
Q39 Janet Anderson: Do you think
it will save you money or do you think it will cost you more money?
Sir Michael Lyons: I think that
is a very complicated question to answer at the moment. On the
face of it, it ought to be a way, if it is done skilfully, of
making the money go further and meeting our other objective of
concentrating investment on outstanding, distinctive programmes.
Then there should be an appetite for people seeing repeats, enough
for as wide an audience as possible to see it, but to not fall
into the trap of repeating so frequently that people get tired.
Can I share with you an anecdote which I shared with the press
this morning. I spent last week at a number of engagement events
with audiences and particularly one in Oxford where a group of
very challenging people were talking about what they wanted from
the BBC, and one particular participant said that they wanted
less repeats. Knowing that today was coming up, I listened very
carefully and I asked her what she meant by that, and she said,
"Well, too many episodes of Only Fools and Horses repeated
endlessly." I said, "What do you want to see in its
place?" And she said, "I want to see more Steptoe
and Son". I think that captured the complexity of responding
to the public appetite.
Mr Thompson: I think Michael has
more or less said it. We understand that peak time BBC1 is a particularly
sensitive area, and if people feel that there is too much on the
archive they get cross. This is a very British thing. Interestingly,
in the United States there is a presumption that typically most
of the pieces, the dramas and comedies, which are launched in
the fall, in the autumn, will then all be repeated from Easter
to September. So the summer schedules in the United States in
peak time on the main networks are basically largely repeats,
second showings of everything. Our public here like original programming
throughout the year. Even in July and August they want original
programming. What I want to say is, had we got the licence fee
we had asked for, I think that the idea of a repeat-free BBC1
peak time would have been possible. I am not sure we can do that,
but I think it is possible that you will see a pattern whereby
we are trying to move money to create more originations for BBC1
at peak time and to some extent paying for that by having slightly
greater repeats on some of our other networks. So in a way it
is more like a mixed change; it is more like shifting the resources
towards BBC1 peak time.
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